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Articles

Volume 71: Smooth Sale-ing

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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

The Professional Advisory

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead

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