Dental Seller FAQ

The first step would be to have your practice valued. You will need to gather a number of documents from your practice. In order to do a valuation, you will need to provide five years of tax returns, a depreciation schedule and a few practice management reports. With these documents, a seasoned transition consultant who has been trained to do dental practice valuations can come up with the value of your practice.

There are no state or federal laws that require you to hire a broker. You can sell the practice yourself. A practice sale typically takes approximately 200 hours on average to sell. That includes valuing the practice, preparing a practice prospectus or offering memorandum, placing ads in all the publications throughout the United States, organizing the documents, taking calls from potential buyers answering their questions, sending them non-disclosure agreements, showing the practice on nights and weekends, answering more questions about the practice, reviewing letters of intent, assisting with due diligence, assisting with the second and third rounds of due diligence, taking more questions from the buyers CPA, advisor, consultant, father, brother… and on and on and on. It’s an exhausting process. According to bankers and attorneys, if a broker is not involved, the sale falls through approximately 50% of the time. You then have to start all over again… and sometimes a third and fourth time.

A broker is an expert in the entire process. Brokers wear many hats. They have to be knowledgeable in accounting, financial analysis, taxes, state and federal laws, practice management, real estate and human resources. According to dental attorneys and practice finance specialists, when a broker is involved in a transition, the sale goes much smoother. The transition is much easier and it is much less likely to fall apart than a sale without a broker.

When a buyer is sufficiently interested in your practice, he or she will, or should, submit an offer in writing. This offer or proposal may have one or more contingencies. Usually, the contingencies concern a detailed review of your financial records and may also include a review of your lease arrangements, or other pertinent details of the business. You may accept the terms of the offer or you may make a counterproposal. You should understand, however, that if you do not accept the buyer’s proposal, the buyer can withdraw it at any time. Your broker will assist you in analyzing the offers. At first review, you may not be pleased with a particular offer; however, it is important to look at it carefully. It may be lacking in some areas, but it might also have some pluses to seriously consider. There is an old adage that says, “The first offer is generally the best one the seller will receive.” This does not mean that you should accept the first, or any offer — just that all offers should be looked at carefully.

Once you and the buyer are in agreement, the buyer will perform due diligence in the practice. The broker will work hard with you and the buyer to satisfy and remove the contingencies in the offer. It is important that you cooperate fully in this process. You don’t want the buyer to think that you are hiding anything. The buyer may, at this point, bring in outside advisors to help them review the information. When all the conditions have been met, your attorney will draft up the purchase agreement for signing. Once the closing has been completed, money will be distributed, and the new owner will take possession of the practice.

A buyer will want up-to-date financial information. If you use accountants, you can work with them on making current information available. If you are using an attorney, make sure they have worked on dental practice sales and are familiar with the closing process and the laws of your particular state. You might also ask if their schedule will allow them to participate in the closing on very short notice. Time is of the essence in any practice sale transaction. The failure to close on schedule permits the buyer to reconsider or make changes in the original proposal.

On average, it generally takes between five to eight months to sell most practices. Keep in mind that an average is just that. Some practices will take longer to sell, while others will sell in a shorter period of time. The sooner you have all the information needed to begin the marketing process, the shorter the time period should be. It is also important that the practice be priced properly right from the start. Some sellers, operating under the premise that they can always come down in price, overprice their practice. This theory often “backfires,” because buyers often will refuse to look at an overpriced practice.

In general, buyers want you to stay around to assist with the transition. Doing so helps facilitate a smooth transition and makes the staff and patients more comfortable with the new doctor. The length of time that you will be asked to stick around ranges from a few days up to six months. A specialist will usually be asked to stay on and introduce the buyer to the referral sources.