Preparing your dental practice for sale can be an extremely daunting task. While you are navigating this process, there are many important factors that you should consider. One of the first steps in selling your practice is to consult an experienced dental broker who can provide guidance throughout your practice transition. If you do not feel quite ready to engage a practice broker, there are some simple steps you can take to be better prepared. Keep the following suggestions in mind to ensure a smooth transition.
1. Make a Game Plan.
Before you list your dental practice for sale, ask yourself the following questions: When do you want to retire from dentistry? If you own the real estate, do you plan to sell it or lease it to the buyer? Would you prefer to sell to a corporate group or an individual dentist? Would you consider working back for the buyer? As you consider these important questions, discuss each outcome with an experienced advisor.
2. Look at Your Taxes.
An important aspect of any sale is to consider the tax implications, and this is especially true as you sell your dental practice. Before embarking on this transition, you should consider how a sale might impact you financially, especially if you are planning to retire soon. If you choose to work with a dental broker like Watson Brown, we have an in-house tax lawyer who can guide you through your options.
3. Organize Your Records.
As you proceed with your practice sale, ensure your financial statements, tax returns, and other important business records are in order. The practice’s financial documents are essential to complete the valuation and will be reviewed carefully by potential buyers, so maintaining accurate and current records will help to maximize your sales price.
4. Confidentiality is Key.
It is critical that your staff and patients are not aware of the practice sale in the early stages. By finding out too soon, your patients may begin looking for a new dentist, and your staff might be on the lookout for a new job. Without your staff and patients, the value of your practice will be significantly reduced for any prospective buyers.
5. Continue Marketing.
If marketing campaigns are a key part of your business strategy, you should continue to maintain these efforts. The most important part of sales price is the cash flow. Keeping new patient numbers up will strengthen profitability in the practice.
6. Don’t Buy New Equipment.
While this advice may seem counterintuitive, new equipment will not add value to your dental practice dollar for dollar. Purchasing new equipment will not increase the current collections or bring in new patients, and so it is better to simply make repairs and ensure that your current equipment meets all maintenance requirements. Much like when you’re selling a house, you don’t want to put any money into the practice that cannot be recouped in a sale. If equipment needs to be replaced, consider purchasing used equipment.
7. Increase Hygiene Production.
A common tendency for many dentists preparing to sell their practice is to reduce the practice schedule. This typically slows down hygiene production and decreases the value of your practice. To maximize the value of your practice, you should increase your production and efforts to bring patients in for hygiene recall.
8. Update Your Dental Office.
The sale of your dental practice is just like the sale of a house: you want everything to be neat and provide prospective buyers with a good first impression. This does not mean that you need to update your equipment, but you can stage the practice to look clean, organized, and in good order. This can include anything from a thorough cleaning of offices and storage rooms to a fresh coat of paint, replacing worn out furniture and decorations, and changing burned out light bulbs or damaged ceiling tiles.
9. Use A Dental Broker.
As you prepare to sell your dental practice, you should consult a dental broker early to receive an accurate appraisal. While you may receive offers from corporate private equity groups to purchase your practice, these are often below the value of your practice, and so it is important to secure a private valuation to ensure that you get the best sale price.
The sale of your dental practice can be an extremely complex and dynamic process. As you proceed with your practice transition, there are a countless number of things to consider. Yet, if you keep the above suggestions in mind, you will be able to navigate your practice’s sale and maximize the sale price with the guidance of a trusted dental broker.
Frank Brown, JD, LLM, is a tax attorney and accountant who limits his practice to practice transitions. Mr. Brown has helped dentists with sales and appraisals since 1990. Reach him at 469-222-3200 or 888-419-5590, ext. 469, or frank@ADStexas.com.
Terry D. Watson, DDS, and Frank Brown, JD, LLM, are with ADS Watson, Brown & Associates, a dental practice transition consulting and brokerage firm in Dallas, TX. They are members of American Dental Sales and can be reached on the Contact Page.