Top 5 Reasons to Hire a Practice Broker
Selling a dental practice is a complicated process. Don’t go at it alone.
Selling a dental practice is a complicated process that involves numerous steps including determining the market value of your practice, finding the right buyer, negotiating the purchase price, purchase agreement and lease assignment, and facilitating the transition of ownership (just to name a few). Employing the services of a trusted professional can make a tremendous difference in the success of your transition. Here are the top 5 reasons to hire a practice broker when selling a dental practice:
1. To formulate a transition strategy to meet your individual needs
Not all practices and all doctors are the same. A good dental practice broker will listen to your specific needs and goals to develop an individually tailored transition strategy that fits your situation. There are many ways to structure a practice transition, including a walk away sale, associate to purchase, phased sale, and partnership arrangement. When selling a dental practice, choosing the right transition strategy for you and your practice is the first step towards a successful transition.
2. To confidentially market your practice to find a buyer who is the right fit
Utilizing the services of a practice broker will provide you with the opportunity to market your practice to a broader range of potential buyers, thereby increasing the likelihood of finding a doctor who is an ideal fit for your office as well as shortening the time frame required to complete the sale. The broker will oversee all communication with potential buyers and their advisers, which can take a significant amount of time and effort. Delegating this responsibility to a seasoned professional will allow you to focus on the operation of your practice and enjoy your personal time rather than spinning your wheels talking to countless potential buyers. To protect the value of your practice during the marketing process, the broker should require each potential buyer to complete a confidentiality agreement prior to receiving any information regarding your practice and show your office only after business hours.
3. To maximize the value you receive for your practice
Your dental practice is one of your most valuable assets and the proceeds of the sale will likely be used to fund a significant portion of your retirement. Therefore, it’s crucial that you maximize the value of your office at the time of sale. Determining the market value of your practice, articulating the practice value to potential buyers and their advisers, and maximizing the price you receive at closing are key responsibilities of a practice broker. Practice brokers are typically paid a commission based upon a percentage of the practice sales price. It is in their best interest to get you the highest possible price for your practice.
4. To represent your best interest during the transition process
A dental practice broker’s goal should be to structure a win-win transaction for both parties. Rather than trying to force a square peg into a round hole, they work to ensure that the needs of the buyer are met through the opportunity that the seller is presenting. The broker also serves as a buffer between the buyer and seller to preserve the goodwill of the practice and relationship between the parties during negotiations.
5. To provide a structured closing process to ensure a smooth and timely transition of ownership
Navigating the closing process is often the most tedious and stressful part of selling a dental practice. Once you have identified a buyer for the practice, there are numerous steps involved in completing the sale, including negotiating the practice purchase price, letter of intent, asset purchase agreement, assigning the lease, securing practice financing, announcing the sale to the staff and patients, etc. A dental practice broker will walk you through each step of the closing process to ensure a smooth and timely transition of ownership.
These are just a few of the reasons to employ the services of an experienced practice transition consultant when selling a dental practice. Planning in advance and building a strong team of advisers will ensure that your practice transition is a success.
-Rod Johnston, MBA. CMA
When Buying a Dental Practice
When buying a dental practice, there are several essential reports you absolutely must have in order to evaluate the practice. The reports are as follows:
- Minimum of 3 years Tax Returns and Financial Statements
- Minimum of most recent 3 years annual productions, collections and adjustments
- Most recent production by procedure code report
- Fee Schedule
- Patient demographic information
- Accounts receivable and insurance receivable aging
- Employee census information
- Copy of the lease
- List of included equipment and furniture
- Outstanding treatment plan report
Now that you have these reports, it’s essential you understand what they mean. If you don’t know how to read financial statements or tax returns, be sure you have a knowledgeable OMNI accountant on your team. If you need help with the practice management reports, hire a consultant or third party practice broker, like myself and my OMNI colleagues. We can help you evaluate the practice.
In the long run hiring OMNI experts to evaluate the reports will more than pay off.
-Rod Johnston, MBA. CMA
How Omni Dental Practice Group Helps Practice Owners Prepare Their Dental Practice for Sale
By working with trusted industry specialists, dental practice owners can ensure a swift profitable sale for their business. The team at Omni Dental Practice Group has many years’ experience within the dental practice marketplace. They have helped hundreds of owners understand the sales process and worked with a range of clients to ensure their practices are sold with a seamless precision for lucrative returns. In this article, their experts explain the business sale process and how Omni Dental Practice Group prepares business owners for the sale of their dental practice.
1. Financial Reporting
A critical element in the sale of any business property is financial reporting. Buyers will complete due diligence on the company they are purchasing and it is important all financials are in order and ready for review. Omni Dental Practice Group helps business owners complete the financial reporting process. They gather the required documents and ensure the documents are completed accurately and according to the strict standards within the industry.
2. Consolidating Business Resources
During the search for a local dental practice for sale, buyers will be reviewing the market for practices that are lean and do not have excess resources to manage and pay for over the long term. After assessing the finances of the practice, Omni Dental Practice Group works to consolidate the business’s resources, removing unnecessary expenses related to vendors, staff, and equipment and helping business owners understand the resources that are important to their company and potential future buyers.
3. Remodeling Work
In consulting with dental practice owners, Omni Dental Practice Group will advise them on potential remodeling requirements. They will guide owners on the paintwork and property upgrades required to ensure the practice is sale-ready. This process is completed alongside trusted building inspection teams that analyze all areas of the property to determine whether any upgrades are required before placing the practice on the marketplace. Any issues in the practice will be highlighted by the buyers’ representatives during their due diligence on the practice, and so sellers that finish remodeling work proactively and ensure all problems are resolved can showcase their commitment to the sale.
4. Analysis of Practice Value
When getting their dental practice ready for sale on the marketplace, owners must consider the optimum value for the company and how they can harness this valuation to attract the right types of buyer for the organization. Omni Dental Practice Group has significant experience in this area of the marketplace. They can help business owners detail the most important elements that determine a practice’s value. For example, they know that margins are more important to buyers than gross production levels. And so they can use this knowledge to value the practice at the highest rate possible according to market demand.
Omni Dental Practice Group is a clear leader within the local industry. To learn more about the company and its services, contact their offices directly today at 877.866.6053 or visit their website at omni-pg.com.
When Am I Ready to Buy or Start a Practice?
I get the question a lot, “do you think I am ready to buy or start a new practice?” I’m probably the wrong person to ask as I’m somewhat of a serial entrepreneur. I tend to live by the quote “Fortune favors the Bold”. Maybe I can answer better by giving you a few real-life case studies.
Case Study #1 – I helped this young dentist locate a practice right out of school. He was a typical new graduate. He was clinically sound, somewhat slow with procedures as expected, and not confident at all in managing a practice. However, he found a decent practice that I helped him evaluate. It was not great, but it was producing $45,000 per month. He struggled for the first six months to make ends meet. He had to dip into his working capital to keep things going for a couple of months. We continued to work with him and help him ramp things up. He said he felt more and more confident as time was going on. His hand speed improved and he worked through a few management issues that helped him get respect from the staff. Fast forward 3 years later and he’s now producing $125,000 per month, has low overhead, and is well on his way to a potential early retirement.
Case Study #2 – A dentist had been out of school for about 4 years. He kept looking for that perfect practice in King County. I showed him a number of practices, but nothing fit his model. He finally decided that if a practice wasn’t going to come up on the market that fit his needs, he would need to create one from scratch. We found him a nice location in the heart of the area he was looking. He went from $0 to $40,000 per month within 9 months. Five years later, he’s comfortably doing $80,000 per month.
Case Study #3 – A dentist searched for several years for the perfect practice. There were over 20 practices in a five-year period I have shown this person. We even looked at starting up a practice. We put letters of intent on a number of practices and new start-up locations, but nothing stuck. This dentist is still looking and still has yet to find the perfect practice. By the time they find the perfect practice, their friends will have owned a practice for 7 years and be well ahead of them in terms of building a practice and being in a better financial position.
The moral of the story is that you are never 100% ready to buy or start a practice. Dental schools do not spend enough time teaching you to manage or own a practice. If you have been out of school for a few years, have a good number of associate jobs under your belt, and have a desire to own or start your own practice, it’s time. Find a good practice or location, do your due diligence, get good advice from your advisory team and go for it.
-Rod Johnston, MBA. CMA
Due Diligence – Buyer Beware!
Caveat Emptor is not a garnish at your local Italian restaurant. As you go through the steps in buying a practice, you should be cautious while going through due diligence. Due diligence is the thorough, in-depth analysis of the practice charts, equipment, systems, computers, and everything else in the practice. If you missed our buyers’ seminar last month, you would have received our very lengthy due diligence checklist. There is a lot to cover and a lot that can be uncovered in the process of due diligence, and there is a lengthy checklist involved, embezzlement, fraud, misstatements of numbers including active patient counts, faulty equipment over and under-treatment are just a few things that can be uncovered during the due diligence process. Do not take the word of the seller or broker, dig in and find the information yourself. Caveat Emptor is prudent advice when shopping for a practice.
-Rod Johnston, MBA. CMA