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Articles

The Professional Advisory

  1. Is it Time to Move?
  2. Staging A Dental Practice
  3. The High Cost of Dying
  4. Deal-Busters
  5. Patients - Attract and Retain
  6. Should I Stay or Should I Go?
  7. Is There a Buyer for Every Practice?
  8. Good, Better, Best - The Market has Spoken
  9. Smooth-Sale-ing
  10. Buying Time
  11. Patients, Patience, Patients
  12. A Real Patient
  13. Why Do a Practice Valuation? I'm not Selling
  14. Irrational Exuberance or The New Normal?
  15. Do dental equipment and dental technology affect a practice value?
  16. Finding and Being a Mentor
  17. Bigger is Better
  18. Daves Top Ten List for Buyers (Vendors should read this too!)
  19. How Well Do You Know Your Practice?
  20. Dave
  21. What will happen to dental practice Values in the next 10 years?
  22. Your Premises Lease is an Important Asset
  23. What are Associates Thinking?
  24. There is Life Outside the GTA
  25. When Is the Right Time to Sell My Dental Practice?
  26. Mergers are a Viable Option
  27. Is Your Associate an Asset or a Liability?
  28. Has your Practice Facility Kept Up With Your Billings?
  29. The 100 per cent of Gross Myth
  30. The Past, The Present and The Future
  31. Caveat Emptor
  32. Overpaid Long Term Staff
  33. Selling your Practice in Stages
  34. A Potential Pitfall of Selling Shares
  35. Value in Your Practice Through Balance
  36. Only Trusted Staff Can Defraud You
  37. To Own or Not to Own Practice Real Estate? That is the Question.
  38. Coping With A Large Patient Base
  39. Successful Dental Practice Transitions
  40. Taking Care of Business
  41. The Investing Dentist Phenomenon
  42. Two areas to focus upon that could negatively impact the value of your practice
  43. Organize your Debt in Order to Sell your Practice
  44. Having a Better Team
  45. How Do I Prepare My Practice For Sale
  46. How Do I Prepare My Practice For Sale? Part 3
  47. How Do I Prepare My Practice For Sale? Part 2
  48. How Do I Prepare My Practice For Sale? Part 1
  49. Advice to My Son or Daughter Graduating from Dental School
  50. Transition - What to Expect
  51. Discussion on Digital X-Rays
  52. Partnerships and Shotguns
  53. Strategic Planning - How to Get Started
  54. Calling All Vendors - Practices have Gone Up in Value
  55. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
  56. Matrimonial Practice Valuations
  57. Purchaser's Guide to Affording a Practice
  58. Location Improvements Throughout Your Career
  59. Small Practice Valuations
  60. Partnerships – The Best and The Worst
  61. Changing Location When the Opportunity Comes Along
  62. Visual Presentation of Your Practice
  63. Presentation of Charts
  64. Your Premises Lease Can Be Your Worst Enemy
  65. How to Select an Appraiser for Your Practice
  66. How Are Your Billing Ratios?
  67. It Pays to Invest in Your Tangible Assets
  68. The Importance of Separate Financial Statements
  69. Five Time Frame Levels to Sell a Practice
  70. 12 Suggestions to Safeguard Computer Data
  71. How to Buy a Visible Practice
  72. Why is there a shortage of good practices today?
  73. The Importance of Equipment in the Purchase of a Practice
  74. The Balanced Practice
  75. Will My Practice Be Saleable in The Future?
  76. Buyer Be Aware
  77. Excess Profit - The Second Key
  78. Patients and Profits are the Keys
  79. Plan Ahead

Volume 71: Smooth Sale-ing

Download the PDF version now!

My three children have all been involved in a sailing camp near our cottage for many years. They have all been students, racers and instructors there over the last 15 years. During this time the club has had about five different Commodores and new Head Instructors every two years. Despite this, enrollment of students has remained strong and the sailing community is very vibrant. What does this have to do with dentistry and the buying or selling of a dental practice? The parallel is that while the leadership and instructors at the camp change, the membership and students continue on, just as it should be when the leadership or principal dentist changes in a dental practice.

One of the biggest concerns expressed by both our buyers and sellers during the time they are considering buying or selling a practice is “what will happen to the patients?” The sellers worry whether they will stay with the new owner and whether they will be treated fairly and compassionately. They also worry about the team. Will they be treated respectfully, and will they stay with the new owner? The buyers worry about attrition and will they be able to retain a healthy percentage of the patients. Given that the goodwill component of the purchase price of a practice is averaging around 80 per cent of the value, these are very valid concerns. 

In order to make the transition from seller to buyer go smoothly and in order to transfer the goodwill successfully, there are several important steps to take before, during and after the sale. Before the sale, the seller must recognize that while we are in a very good market, buyers are smart and well advised, so nothing will be kept from them. There is no point in trying to paint a picture that is not real. Your practice will be assessed on its merit, and will be based on what has happened over the last three years, not what might happen in the next three years. What you can do is de-clutter, purge your charts, make sure the office looks fresh and clean, and have good competent staff members who are paid reasonably. You also should decide fairly early in the process if you will stay for a transition period. If the practice is large enough to allow for a transition, this is the best way to insure maximum goodwill transfer. I will write further about the stay or go decision in a future edition of The Professional Advisory.  

During the sale process, remember that your practice will be analyzed meticulously. Keep the practice vital, and the new patients flowing. Remember that everything you do or don’t do will be looked at. Try to keep the practice in a steady state, do not “have one foot out the door” until the deal closes. Assuming you are working with a broker, inform them of your wishes for timing, transition and let them know the kind of person that would be an ideal fit. The fit is determined by practice philosophy, protocols of treatment care, and patient expectations. The best chance for a successful transition is by putting a round peg in a round hole. Both buyers and sellers should be supported by an experienced team of experts during this process.  
Buyers should be flexible in their desires but have a clear vision of what they would like to buy. Become educated on the market and get to know all the brokers. When the time is right, act swiftly and confidently and be prepared to be aggressive. Think about your practice as a 20 plus year investment 
and make an offer with that time horizon in mind. During the purchase process, be prepared to spend time analyzing the practice financial metrics, patient charts and demographics and the geographic area. Utilize experts in the field for help in this analysis and remember that nothing is perfect. You may find the perfect patient base but the practice is not digital. Things like that should not stop you. What should stop you is if you determine that you have major philosophical differences or a large skills gap with the vendor. Those differences would be hard to overcome and a successful transition would be difficult. After the closing, remember that what you bought was not broken. You do not need to fix it! Resist the temptation to put your stamp on the practice immediately. The most important things to do are treat the staff with the utmost respect, you need them to help you with the goodwill transfer and, treat the patients gently and with kind compassion. You will have lots of time to make the changes you want over time. During the first year, the fewer changes, the better. 

If you follow those steps both buyers and sellers can enjoy smooth “sale-ing”, just like my kids sailing club does! 

David Lind is a Principal and Broker of Record in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices.  He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: david.lind@ppsales.com

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