Choosing the Right Broker
- How many dental practices has your broker sold? If your broker just started selling practices and has sold between zero practices and ten practices, you may consider finding someone with more experience. Every transaction is different in the practice transition world. The seller, buyer, staff, patients, clinic, location, lease, building, attorneys, bankers, and others are all different for each practice. You must be able to manage different personalities, different types of leases, different building sales, loans, etc. It’s a complex mix to try to do with little experience.
- Who does your broker represent in the sale? Dual representation, where the broker represents BOTH the seller AND the buyer is illegal in several states and I question the ethics of it in all situations. You want a broker who will represent your best interest as a seller. Not the best interest of both the buyer and the seller. If a negotiating point comes up, how is the broker going to ethically work through the conflict by representing both sides?
- Is the broker licensed to sell a practice and real estate if the real estate is included in the sale? Some states require a broker to have a real estate license to sell a practice or any type of business. All states require a broker to have a real estate license to sell real estate. Check with the state department of licensing to see if your state requires a license and if the broker you are interviewing is licensed.
- Does the broker have any certifications or designations to perform a practice valuation? Designations may include a certified valuation analyst, accredited business appraiser, etc. Having a designation means they have spent the time to learn the ins and outs of a valuation and not just a simple rule of thumb. Certifications and accreditations require weeks and months of training, rigorous testing as well as review by a peer group of valuations.
- How does the broker perform their valuation? Do they do a site visit? Do they just use a rule of thumb valuation, which can be misleading? Do they use a cap rate, book value or production acquisition value? There are various types of methods and doing the valuation. Understanding how they get their numbers is important in the process.
- Has the broker sold practices to corporates? If so, have they been compensated by the corporate group in addition to being paid by the seller? This may be a tough question for some. Receiving compensation from both the seller and a corporate buyer can be illegal in some states. At a minimum, it should be disclosed to the seller that they are being compensated by the corporate buyer.
- Does the broker have a list of buyers ready to go? Having an active list of buyers will speed up the process of selling the practice.
- Where does the broker advertise the practice for sale? If they say “our website and the state association website” then you may consider moving on. A good broker will go above and beyond and advertise across the nation on many different websites and publications.
- Is your broker local, or at least familiar with your market? National brokers will sometimes sit from the comfort of their recliner while having you show your own practice, meet with buyers, send you documents and do most of the work. Local brokers will meet you at your practice, show the practice themselves and do what they are good at – selling practices.
- Are you comfortable with the broker’s personality and style? You’re going to be working closely with your broker through the transition process. The amount of time maybe up to 100 or more hours. Be sure you are comfortable with that persons’ style, demeanor and philosophy. Ask them questions about how they show the practice, what they look for in a buyer and how they determine a good match for your practice.
Choosing the right broker is an important decision. You spent a good amount of your time, money and emotional value building your practice. Your staff and patients have become like an extended part of your family. Wouldn’t you want to choose the best broker to look at for your best interest? Asking these questions of your broker will help ensure that you have the best broker in your area.
Why You May Want to Consider a Practice Sale in 2019
Happy New Year! We hope that 2018 was full of health and happiness. We helped over 60 doctors buy, sell or start a new practice. Those that sold are now free from their duties of managing a practice. They no longer have to do their books, manage staff, clean toilets, or do whatever most business owners have to do. I speak from experience as I am a business owner and do all those things myself as well. You may not have sold your practice in 2019, but I thought I would give you some things to think about that may have you considering selling in the coming year.
- The potential change in capital gains tax. You may have read that Washington state is proposing adding a capital gains tax of 9%. California already has a capital gains tax of 13%. Other states are also considering either implement or increasing their capital gains tax rate. I don’t know if this is going to happen or not, I don’t have a crystal ball, but I suggest you talk to your advisers and get their thoughts on capital gains.
- Interest rates are starting to go up. The Federal Reserve just had an increase in interest rates. The interest rates on practice loans typically lag home loan rates by six months or so. We have had a nice run of low interest rates that have been below 5%. I expect they’ll be going up over 5% and probably end up between 5.25% and 5.75% on the high end.
- Corporate practices are becoming more active. We’ve been getting calls from some of the corporate practices such as Heartland and a couple others. They have entered the market and buying practices. They bought 10 in Washington and 7 in Oregon last year. They will be more active in the coming years. We have not sold a practice to them yet, but more buyers will help drive the practice prices up.
- Change in family leave law. This is a minor effect, but it’s an added tax to small business owners. They can choose to pass it on to the employees. I admit I haven’t studied this one to any extent yet, but it’s something to keep in mind.
- Uncertainty. Uncertainty is a scary thing. The economy has been going well, but how long will it sustain itself? The stock market is up and down like a roller coaster lately. In addition, we don’t know what the insurance companies will do with reimbursements.
These are a few things to consider if you’re on the fence about selling your practice. We are always happy to sit down and buy you a cup of coffee or tea and discuss your individual situation. Talking through different options always helps in making your decision. Best wishes for an extremely happy and healthy New Year!
info@omni-pg.com
877-866-6053
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
You haven’t missed the boat… yet!
If you were contemplating a practice sale in 2018, but didn’t get started, you haven’t missed the boat… yet! In 2018, consider the following:
- Interest rates on practice loans were between 4.75% and 5.25%
- 50% of dentists are now over the age of 55
- The economy has been strong
- Consumer spending on dentistry has increased
- Practice values were up 5% to 10%
All of these factors have contributed to a growth in the number of dentists deciding to sell their practices. Dentists have seen their retirement accounts increase thanks to the strong economy. Dentists love the clinical aspects of dentistry but have grown unhappy with the business of dentistry. Insurance company reimbursements have been cut. Managing staff has become more and more of a burden with other industries competing for workers. Finding qualified staff is a major undertaking. Rent in metropolitan areas has skyrocketed. The combination of the good and bad has given dentists the motivation to sell their practices opting for retirement, or harvesting their equity and going to work as an employee for another dentist. The timing couldn’t have been any better for sellers with many of these factors creating a perfect storm to sell a practice and receive an optimum value.
But, it’s not too late and you haven’t missed the boat – – yet. There is still a strong demand for practices, interest rates are still comparatively low and practice values are currently still going strong. If you are considering a practice transition within the next year, now is the time to act. At no cost to you, we can help you formulate a plan to determine the time, the price and even potentially the person to whom you will be selling your practice. We will spend as much time with you and your significant other to ensure you are comfortable with an exit plan that fits your timing and your desires.
We are not like other transition consultants. We know that you care about who you will be selling your practice to. We are experts in matching sellers and buyers. We have a combined 30 years of experience selling hundreds of practices. Our personalized service enables you to relax while we do the work needed to get your practice sold. Our marketing team provides expertise in getting the word out with a goal of every dentist knowing your practice is for sale while keeping your name confidential throughout the entire process.
Contact us today to schedule your no-cost transition planning meeting. You have a lot to gain and nothing to lose. We guarantee you will walk away from the planning meeting much more educated and confident about your practice transition.
info@omni-pg.com
877-866-6053
Preparing Your Practice To Sell
Whether you are approaching retirement age or just thinking about a transition, there are several things you can do to prepare your practice for sale. Doing these things may help eliminate headaches, increase your sales price, or reduce your costs. Here are a few tips:
- Assess your equipment. Upgraded practices sell faster. If you are more than five years away from retirement, I recommend a few upgrades such as digital x-rays, recover your chairs if needed and freshen up the paint. If you’re closer than five years, you will not get the tax benefit of major upgrades. Just stick to updating the paint and carpet.
- Clean up your accounts receivable. Reimburse patient credits, collect old accounts and keep the A/R current.
- If you have an associate, make sure you have an Associate Agreement with a non-compete.
- If you have an employment agreement with your corporation and you are a C-Corporation, you may need to terminate yourself a few years before retiring. Consult your tax accountant.
- Consult your financial advisor and tax accountant. How much do you need to retire? How much do you have? What are the tax consequences?
- Get a practice valuation to see what proceeds you will get from the sale.
- Be realistic in the time it takes to sell. In remote areas, it can take a year or two. Metro areas, much less.
- Keep your production up as you near retirement. I see dentists slow down all the time in their last few years. Work the same number of days.
- Assess your staff. Do you have too many staff? Do you have one that should have been let go seven years ago?
- Have a practice assessment performed by a qualified consultant. Many will do it for free or a small fee. This may help show you some areas to improve over the next few years.
By focusing on these items in the coming years as you near retirement, you will avoid having your practice production and thus the price of your practice go down in your later years. Call me for a free consultation. I would be happy to take a look at your practice and give you my thoughts. Or, if you are thinking about transition right now, we have a database of buyers looking in your area.
877-866-6053