Volume 71: Smooth Sale-ing
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: email@example.com
The Professional Advisory
- One Year Later
- Dealing with Unsolicited Offers
- Covid-19 Practice Sales Update
- When is the Right Time to Sell Your Practice and Why?
- Partnership Pitfalls
- The Real Cost of a Dental Practice Set-up
- Smaller Practice Realities
- Dental Market Update - 2019
- Creating Your Own Most Valuable Practice (MVP)
- Small Practice Economics
- The Market is Very Efficient
- How Can Dental Practice Values be Rising and Declining?
- Hygiene as a Value Driver
- The Value of a Good Team
- Is it Time to Move?
- Staging A Dental Practice
- The High Cost of Dying
- Patients - Attract and Retain
- Should I Stay or Should I Go?
- Is There a Buyer for Every Practice?
- Good, Better, Best - The Market has Spoken
- Buying Time
- Patients, Patience, Patients
- A Real Patient
- Why Do a Practice Valuation? I'm not Selling
- Irrational Exuberance or The New Normal?
- Do dental equipment and dental technology affect a practice value?
- Finding and Being a Mentor
- Bigger is Better
- Dave's Top Ten List for Buyers (Vendors should read this too!)
- How Well Do You Know Your Practice?
- Dave's Top Ten List for Vendors
- What will happen to dental practice Values in the next 10 years?
- Your Premises Lease is an Important Asset
- What are Associates Thinking?
- There is Life Outside the GTA
- When Is the Right Time to Sell My Dental Practice?
- Mergers are a Viable Option
- Is Your Associate an Asset or a Liability?
- Has your Practice Facility Kept Up With Your Billings?
- The 100 per cent of Gross Myth
- The Past, The Present and The Future
- Caveat Emptor
- Overpaid Long Term Staff
- Selling your Practice in Stages
- A Potential Pitfall of Selling Shares
- Value in Your Practice Through Balance
- Only Trusted Staff Can Defraud You
- To Own or Not to Own Practice Real Estate? That is the Question.
- Coping With A Large Patient Base
- Successful Dental Practice Transitions
- Taking Care of Business
- The Investing Dentist Phenomenon
- Two areas to focus upon that could negatively impact the value of your practice
- Organize your Debt in Order to Sell your Practice
- Having a Better Team
- How Do I Prepare My Practice For Sale
- How Do I Prepare My Practice For Sale? Part 3
- How Do I Prepare My Practice For Sale? Part 2
- How Do I Prepare My Practice For Sale? Part 1
- Advice to My Son or Daughter Graduating from Dental School
- Transition - What to Expect
- Discussion on Digital X-Rays
- Partnerships and Shotguns
- Strategic Planning - How to Get Started
- Calling All Vendors - Practices have Gone Up in Value
- Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
- Matrimonial Practice Valuations
- Purchaser's Guide to Affording a Practice
- Location Improvements Throughout Your Career
- Small Practice Valuations
- Partnerships – The Best and The Worst
- Changing Location When the Opportunity Comes Along
- Visual Presentation of Your Practice
- Presentation of Charts
- Your Premises Lease Can Be Your Worst Enemy
- How to Select an Appraiser for Your Practice
- How Are Your Billing Ratios?
- It Pays to Invest in Your Tangible Assets
- The Importance of Separate Financial Statements
- Five Time Frame Levels to Sell a Practice
- 12 Suggestions to Safeguard Computer Data
- How to Buy a Visible Practice
- Why is there a shortage of good practices today?
- The Importance of Equipment in the Purchase of a Practice
- The Balanced Practice
- Will My Practice Be Saleable in The Future?
- Buyer Be Aware
- Excess Profit - The Second Key
- Patients and Profits are the Keys
- Plan Ahead