Are You Considering a “Dental Practice For Sale By Owner”?
Many dentists will seek to sell their practice by themselves, presumably to “save money”. Sometimes the grass is greener on the other side so we do things out of emotion instead of “doing the math”. If you have a couple of hundred hours of spare time and love working with intelligent, challenging people, and showing your dental practice to strangers on evenings and weekends, you are going to love the process of selling your practice.
For most dentists, their practice is one of their most valuable assets, so if that sounds like you and you would like to go “For Sale by Owner” then now is the time to start to prepare. Probably a good time to study a little law, accounting, marketing, advertising, sales, and perhaps negotiations. Think about how you are going to tell your staff or decide to wait until they figure it out. Be sure not to lose them or your practice may become more difficult to sell (and you could lose more in practice value than the commissions you are saving). If your practice has seen better days you might consider sprucing it up a bit or maybe a little remodeling? As a do-it-yourselfer, you will save even more money.
Ask yourself “how do I value my dental practice” and balance that with what the market will bear. Keep in mind that the buyer will always think they are paying too much and the seller thinks they are selling too low. Once you’re ready to go, write your ads, contact (play phone tag with) the various media vendors to figure out how to best execute your marketing plan. Piece of cake, pay the man and place your ads. Soon your phone will be ringing, don’t forget to follow-up with the inquiries in your new email address.
Schedule the viewings after hours, on your day off, and on the weekends. Don’t be too disappointed when something happens and the person doesn’t show up or when the “tire kickers” don’t give you feedback. Soon if all goes well you will receive a Letter of Intent. There will likely be a number of things you’ll need to do to assist the buyer with their due diligence so be prepared to assemble all the information ahead of time if possible. If you are leasing the office, do whatever you can to negotiate with the property owner for as smooth as a transition as possible with the buyer. WARNING: half of all deals fall apart because of landlord conflicts with the seller or buyer. If this happens to you, and there is a 50-50 chance it will. Be prepared to start over and keep your emotions in check.
Is it worth it to “Do It Yourself” to sell your dental practice? It depends upon how many hours it takes, how much distraction you are comfortable with, and how much quality of life you are willing to sacrifice.
The legal community has a saying, “He who represents himself has a fool for a client”.
Building Your Team
The first team member you need to bring on board is someone who can help evaluate a practice. That can be an accountant, consultant, or broker that specializes in dental practices. Those last four words of that sentence are critical. Specializes in dental practices. They have to know what they are doing and how to analyze and value a dental practice. I once was representing a seller who had a practice collecting $800,000 with a net income of $300,000. The buyer’s consultant put together an offer of $280,000 when we had it valued at $550,000. The consultant ruined the deal. The seller was so upset with the buyers low-ball offer that the seller refused to even work with that buyer even with a higher offer.
The second team member is the attorney. Again, use an attorney specializing in dental practice transitions. It’s critically important. Do not use your cousin, friend, neighbor etc., who are divorce, bankruptcy or personal injury attorneys who took a contract class in law school. I’ve seen “friends” charge the dentist $25,000 for a review of a contract where a dental attorney would charge around $5,000.
You also need a dental CPA to help you with the numbers. They can help with the valuation, analyze the payroll and tax returns, help with the purchase price allocation and set up your legal entity.
Fourth is your banker. There are a number of banks that finance practice acquisitions and startups, and they all have their pros and cons. It’s important you work with someone you trust who will give you a fair deal. Sure, banker B may have a slightly better rate, or a cool toaster give away for new accounts, but go with someone you like and can build a relationship with. They’ll be there in the good times and the bad times to help you out.
If you need some names of good team members, let us know. We work with a lot of CPA, attorneys, consultants, bankers and brokers. We have a good feel for who will be looking out for your best interest and will do a good job for you. Give us a call and we’ll help you build your team for your practice acquisition or startup.
Are Solo Practice Owners Going the Way of the Golden Toad?
When I talk about corporate practices, I’m primarily speaking of the non-dentist owned corporate practice. There are dentist owned practices where a licensed dentist owns 3, 5 or more practices. He or she has full and legal ownership of their practices. I call these small group practices. Corporate practices tip-toe down the legal sidelines of practice ownership by having a dentist own the clinical aspect of the practice, called Dental Services Organization (DSO) and the non-licensed dentist corporation owns the non-dental management aspects, called a Management Services Organization (MSO). Note that this structure can also occur in small groups, but in the small group, a licensed dentist owns both the MSO and DSO. The large corporates include Aspen, Gentle Dental, Pacific Dental Services and others. Both solo practices and corporate practices have their pros and cons from both a patient perspective and from a dentist perspective.
As a patient, I prefer to know who my dentist is going to be when I go into the office. I want to build a relationship with him or her and want my dentist to know the history of my dental care — and a little bit about me as well. In a corporation, you might get the same dentist the next time you go in, but there’s a good chance it will be a different dentist. Small groups lean more towards a solo practice and you will have a reasonably good chance to get the same dentist in the well run small groups.
From a dentist perspective, most dentists do not want to be told what treatment to focus on, what supplies to use, etc., The majority of dentists surveyed by the ADA still have a dream of owning their own practice, being their own boss, making their own decisions.
Recent court decisions in New Jersey, Allstate vs. Northfield, sided on the side of dentists. It may begin to set the tone to start scaring away the non-dentist corporate owners. Washington State has been trying to pass a bill to allow non-dentist owners and so far has been successful. If you’d like to read an article on the New Jersey case, you can read it here.
So, if you have been holding off on not buying a practice because corporates are going to drive solo practices away, think again. There will always be a need and demand for a solo practice. Court cases like Allstate vs. Northfield will help ensure non-dentist owned practices stay away. Join the practice ownership club today!
ARE YOU 5 TO 7 YEARS AWAY FROM SELLING YOUR DENTAL PRACTICE?
You have had a great career and now you are thinking about selling and transitioning out of your dental practice. You would like to get the best value for your practice. Do you just walk away? Being prepared can not only help you get the best price, it will help ensure a smooth transition.
Here are a few things you can do to help prepare for your dental practice transition:
1. Know your financial situation – Meet with your financial advisor, CPA, or whoever gives you financial advice to get a good picture of where you are with your savings and investments.
2. Get a practice valuation – A practice valuation will help you see how much equity you have in your practice. Additionally, a CPA can help you figure out what the taxes and net proceeds from your sale will be.
3. Update Technology – Buyer’s like to see new technology in a practice.
4. Cosmetic updates – Have you updated the interior with paint and carpet in the last 20 years? If not, it’s time. Buyers like a practice with a fresh feel to it. A 1970’s feel was good in the 1970’s.
5. Review Accounts Receivable Aging – Collect any past due accounts, send to collections or write them off. Also, review credits to either pay back to the patient or send unclaimed property to the State.
6. Review Staffing – Are you over or understaffed? Adjust accordingly.
7. Clean up your financial statements – Make sure the expenses you’re running through your dental practice financial are related to your practice, or at least identifiable as an adjustment.
8. Consider ramping up production – If you are not sure how, then hire a dental consultant. Ramping up your practice when you’re 3 or more years out will pay dividends on the sales price.
9. Review your fees – Do you have the lowest fees in the area? Consider a fee increase to catch up.
10. Harvest your Equity – Maybe you are a few years away from retirement, but tired of being an owner. You should consider selling now, take the equity out of your dental practice and work back as a dental associate.
How OMNI Dental Practice Group Can Help Speed Up the Process of Selling a Dental Practice
Selling a dental practice, also known as dental practice transitions, is a time-consuming and often stressful experience, both for the seller and for the buyer. Even with a professional to help with the process, it can sometimes take years to complete. OMNI Dental Practice Group can help to streamline the selling process, making the transition smoother and much quicker for all involved.
Hard Work and Dedication
On average, it takes approximately 200 man-hours to complete a transition from start to finish. The experienced team at OMNI Dental Practice Group work hard to complete the process as quickly as possible by focusing on each client’s needs while maintaining complete confidentiality until the sale is completed. One way OMNI Dental Practice Group does this is by showing the dental practice after hours, over the weekends, and will even conduct showings throughout the holidays as needed. When it comes to selling a dental practice, OMNI Dental Practice Group is dedicated to the success of their client, before, during, and after the sale.
Keeping the Buyer Focused
Due diligence is a key part in dental practice transitions. The experts at OMNI Dental Practice Group strive to keep buyers focused throughout each step of the process. Obtaining financing, for example, can be a complicated and drawn-out step in selling a dental practice. Through assisting buyers with the financing portion of dental practice transitions, OMNI Dental Practice Group helps maintain the momentum of the sale up to closing, regardless of the type of transition needed to ensure the best possible outcome from both the seller and the buyer.
Experience
Hundreds of doctors have successfully bought and sold their practices through the OMNI Dental Practice Group. The experience allows the professionals at OMNI Dental Practice Group to handle a wide variety of dental practice transitions throughout each step of selling a dental practice, with creative transitions and solutions being a specialty. Some of the types of dental practice transitions include:
- Setting up associate to own agreements
- Partnership sales
- Merging practices
- Outright sale of the practice
OMNI Dental Practice Group has the experience and resources to successfully perform all aspects of the transition process, such as:
- Consulting
- Valuations
- Real Estate Services
- Transitions and Sales
To learn more about how OMNI Dental Practice Group, please contact their team of experienced professionals for a free consultation.