Why You Need a Broker When Selling Your Practice
TIME – Time is money. I’m not sure who came up with that quote, but boy is it right. It’s especially true when selling a practice. We have done studies and found that it takes over 200 hours to sell a practice. We have had several practices that took over 500 hours. This includes doing a valuation, putting together a prospectus, posting ads in various publications, receiving phone calls from prospective buyers, emailing them a non-disclosure agreement, sending them the information on the practice, meeting them at the practice during off-hours, following up with them after the showing, possibly showing it to them a second or third time, helping put together a letter of intent, sitting through due diligence with the buyer for hours, reviewing the purchase agreement, following up again with the buyer, cancelling ads, meeting with staff and finally closing. Hopefully closing. Attorneys and bankers that specialize in dental practice sales have told us that when a broker is not involved with the sale of a practice, the transaction is 50% more likely to fall apart prior to closing.
EXPERTISE – You have to be a jack of all trades to complete a practice sale. A sale involves understanding legal contracts. You have to know how to write and post effective ads for your practice. You must also be able to read buyers and talk about the practice in a positive manner discussing the opportunities in the practice. Understanding numbers in your tax return and profit and loss statements is a must. Buyers and their advisors are always asking detailed questions about the numbers in your tax return and profit and loss statements. Be a good negotiator, from the price to how long you will help with the transition -these are just two of the terms that are negotiated. Other items will come up as well. And, of course, you need to know the practice management system, what the reports are saying and how to interpret them. A good broker will have some level of expertise in all of these areas.
MEDIATOR – Quite often there will be a dispute that arises. It may be taking over an advertising contract, working back as an associate, or the final price of the practice. On occasion, the dispute may get heated and the buyer will get upset with the seller or vice versa. The broker acts as a buffer in maintaining the peace and diffuse the dispute. Often the broker will keep things under wraps and dissolve the dispute before it becomes a dispute. This can save the transaction from falling apart.
TRANSACTION ENGINEER – Everyone involved in practice transitions, from the brokers to the bankers, CPAs, and attorneys will tell you that getting the buyer and seller to harmoniously cross the closing finish line is a difficult task. The broker keeps everyone on task. The broker ensures the buyer gets approved by a bank, hires the right dental attorney and CPA. If something is needed, whether for the buyer or seller, the broker is there to get it done.
Let us be the time-saver, the expert, the mediator, and the transaction engineer so that the sale of your practice is a success. Contact us today to schedule a no-cost, no-obligation planning meeting.
info@omni-pg.com
877-866-6053
Why You Need a Transition Specialist On Your Side
The Seller May Not Receive Full Practice Value
A broker can help their client to achieve full value for the money they’ve placed into their business over the long-term. They can then work to obtain viable selling opportunities and to locate qualified buyers within the marketplace. Without this type of guidance, the seller may find their selling opportunities restricted. They may discover that they can only achieve a small proportion of their total Veterinary practice value in the sale. With corporate buyers in the mix, this can mean losing out on potentially a million dollars or more.
Sellers are unable to Handle the Legal Aspects Alone
The legal aspect of a practice transition is often a critical element within the Veterinary practice sale process. Buyers will have their lawyers review the business’s paperwork and any issues they find must be analyzed closely by experts in the legal field. Brokers often have significant legal experience or have a legal team on their side and can help handle any challenges that arise during the transition process, while keeping the seller’s needs as the foremost consideration. The broker will be available at any time via phone or email to answer the seller’s or buyer’s questions and move the transaction process along. This can help prevent the seller from making poor choices and becoming embroiled in legal challenges.
The Seller Doesn’t Have Marketing Experience
When bringing a Veterinary practice to the marketplace, the seller must be able to highlight the advantages of their business in a way that attracts qualified buyers. Brokers are often experts in this area. They can use their experience to craft compelling marketing materials for the seller and use their experience in the marketplace to build target buyer lists and send out high-value content to these buyer lists.
Sellers Cannot Handle Mediation with Buyers Alone
The buyer will likely have a lawyer driving their purchase process. The lawyer will be negotiating with the seller on all elements of the transaction, including the final price. Having a broker on-hand during this process ensures the broker can handle all mediation, negotiating on the seller’s behalf to get the right price and the ideal structure for the purchase.
Working with a qualified broker can help Veterinary practice sellers reduce their transaction challenges and secure a seamless sale. To learn more, speak with our team at OMNI Veterinary Practice Group at 877.866.6053 or visit our business website at www.omnipg-vet.com.
Buying A Practice – You Don’t Know What You Don’t Know
Evaluating a practice involves understanding what you’re looking for. You need to make sure you can do the procedures the current owner is performing. You also need to look for opportunities to add procedures in order to grow the practice. Understanding the reports is also important. If a practice has 50% of its production from the hygienist, is that normal? Is it because the hygienist is great? Is it a good thing or a bad thing? Why are there very few fillings being done and a lot of crowns? The same for implants. Why are there no SRP’s being done? How about the lease? What do you look for when you are reviewing the lease?
Then there are the financial statements – tax returns, balance sheets, and profit and loss statements. What do all the numbers mean? Staff salaries are 25% of revenues, is this too high? The rent is 20% of revenues and the owner owns the building. What does this mean? What’s the depreciation schedule used for? Do I care? Why are there travel charges, automobile expense, and clothing charged to the practice? What are add-backs? How was the practice price determined? Who did the valuation, how was it done and is it right?
If there was an associate dentist who worked in the practice and left two months ago, should I ask to see an associate agreement to make sure there is a non-compete provision? What do I do if there was not an associate agreement? What do I do if the lease has a teardown clause? What is a teardown clause? The seller claims there are 3,000 patients in the practice collecting $525,000 per year. Does that seem right? How do you perform due diligence and what do you look for? What’s a chart audit?
How do you evaluate the staff? How do you credential for insurance? Can you continue the seller’s retirement or health plans? How do I set up a corporation? What type of corporation should I set up? What types of business licenses do I need? How do I get the x-ray heads certified?
The list of questions goes on and on. The point is if you have never purchased a practice before, or even if you have, there is so much that you don’t know what you don’t know. Throughout the last 20+ years that we have been assisting in practice transitions, we have developed an expertise in knowing what a good practice looks like and what skeletons in the closet look like. We also have developed our own 72 point checklist of items to ensure your transition as a buyer into the practice is successful and it goes smooth. We are experts in transitions and have answers to the above questions and more. Don’t go it alone and hope you get it right. We can assist -you as a buyer in evaluating the practice and getting it closed. Whether you are buying a practice from us, from another broker, or directly from the owner dentist, we can help you. Call us to learn more about our Practice Buyer’s Program – (877) 866-6053
Practice Transitions Seminar
Friday, February 1, 2018 – Seattle Midwinter Practice Transitions Seminar, Bellevue Club in Bellevue, Washington – Register here
Friday, February 8, 2018 – Portland Midwinter Practice Transitions Seminar, MAC Club in Portland, Oregon – Register here
Are There Skeletons in the Practice’s Closet?
The first one to look out for is staff embezzlement. You can tell if there is embezzlement by comparing the tax return numbers to the production/collection reports — and if you want to go further, you can look at bank statements. If the collections reports say there’s $700,000 in annual collections and there’s only $650,000 showing on the tax return, where did the other $50,000 go? Staff’s pocket?
The second skeleton could be that the Doctor is under investigation and you don’t know it. I’ve had a couple of practices where the doctors said they wanted to sell their practice to retire. As I was listing the practice and doing some research, I found out that the doctors were under investigation for insurance fraud. I have also had other listings where I discovered the dentist’s performance was being reviewed by the Dental Board. You can typically find this information on the State Dental Board’s website.
There can be terrifying things with leases as well. Is there a “tear-down” clause in the lease? These clauses allow the landlord to give you notice and a certain period of time to move your practice. That can be frightening, especially if you are thinking about selling and the landlord does decide to tear the building down and not renew your lease. The value of your practice would go down to nearly nothing.
You will also want to know if any associates have left the practice in the last year. If they have, was there a non-compete clause? If there was not, are they opening a practice down the street and going to try and take patients or staff? Ask the seller if they have associate contracts to review.
Is the selling dentist a bit aggressive with their treatment plan? Is all the dentistry that has been treatment planned completed already by the seller? This leaves you with nothing to work on except hygiene exams, which is not going to pay the bills. Do chart reviews, social media reviews, and other research to figure out how aggressive the seller was in the practice.
These are just a few of the scary things you can look out for when getting ready to purchase a practice. Its buyer beware, so be sure and do your due diligence when buying a practice. Contact us for buyer’s representation so we can ensure you have someone helping you on your side.