If you're considering selling your dental practice you need a well thought out strategy, a transition team, and a timeline to sell. Today we are talking about what should be on your checklist when going through the process of selling a dental practice. The to-do list can be daunting, so we wanted to review what's most important. We partnered with our friends at JPA Dental Transitions, who have been providing specialized broker services to dentists for 10 years. They've given us their top musts for buying and selling a practice, and we are now sharing it with you!
What do I need to consider before selling my practice?
"The process that leads up to the decision to sell should include an in-depth review of the seller’s financial plan and retirement plan. Selling a practice when financial stability is achieved and retirement is not dependent on the practice sale, is the ideal starting point. Scheduling a meeting with a financial planner, or other retirement/financial advisor, can help determine if it is the right time to move forward with a sale. The second consideration is the overall health of the practice. Is the practice on the decline revenue-wise?"
At Square Practice we recommend a strict review of the practice KPI's as a determining factor in the timing of a sale. A practice's dental KPI's can show you the patterns of a practice's business. It's important to know where they are meeting goals and where there is room for improvement.
What do I need to do to prepare for the sale of my practice?
"Sellers often fall into the 'seller mindset' which means taking more time off, cherry-picking procedures, and not keeping a close eye on the key indicators of the practice. This can result in declining revenues leading up to the sale of the practice. Savvy sellers that want to maximize the value of their practice, will use that final stretch of clinical practice to work on practice efficiency, ensure the proper office procedures are in place, and strive to sell with a history of steady or increasing revenues. Keeping a close eye on the health of the practice prior to selling is an easy way to capture a higher net after the sale of the practice. In preparation for the sale of a practice, sellers should perform a personal audit of the practice. This can include collecting and reviewing the prior three (3) years of tax returns, production reports (by provider and by ADA code), the KPI's of the practice, having all employee contracts in place, and having any lease on hand, as well as, an in-depth compliance review. Once completed, ordering an appraisal of the practice is a great next step. An appraisal will determine the approximate fair market value of the practice. If the appraisal of the practice results in a lower than expected number, there are strategies sellers can implement to increase that value over time. Efficiency experts and practice management consultants can help create a game plan to achieve value growth prior to a sale. The most important thing to know prior to the sale of a practice is what the strengths and weaknesses of the practice are and how to address both."
What is the most common strategy mistake you see?
"As discussed, the most common mistake is the failure to plan for a practice sale. Time off, declining production, and overall inefficiency in the practice directly impact the value of the practice. These mistakes take time to correct, planning-ahead, and engaging a knowledgeable advisor is key."
Who does a successful transition team ideally consist of, and what are their roles?
"Building a knowledgeable transition team is important. Although every deal is different, a well outfitted transition team usually consists of a practice broker, attorney, CPA, financial planner, and banker. Sellers and buyers have different needs during a transition, but for the most part, each of these team members will apply to both. The practice broker will help the seller through the initial planning for the sale, the information gathering, the appraisal, locating a buyer, negotiating the deal, and the closing. The attorney will create the documentation necessary for the deal, review all documents from a legal standpoint, negotiate, and often act as the coordinator of the transition plan. The CPA will review the structure of the sale for tax ramifications and help the seller plan for the tax implications of the sale. The financial planner will make sure the seller is ready to sell, help the other advisors keep the deal structure in a form that fits into the seller’s financial plan, and help the seller invest the proceeds after the sale. Lastly, the banker will ensure the funds are received and accounted for properly. All these team members should share one commonality, a deep understanding of the dental industry. Utilizing dental specific advisors is an investment in the success of a practice transition. The last thing a seller should be concerned with is whether their advisor understands the unique points of a dental practice transition."
How long will it take to sell my practice?
"There is no hard and fast rule for how long it takes to sell a practice but, a good rule of thumb is three (3) months from the point an offer on the practice is accepted."
Why are deadlines put in place?
"Hard deadlines (closing dates) help keep the team members of the seller and the buyer motivated. There are multiple steps throughout the transition process that need to be completed in a timely manner. Having agreed upon a firm timeline will help the buyer and seller achieve a successful transition."
How can I help meet these deadlines?
"Be available. Sellers that are unavailable due to vacations or disinterest in the transition process will cause unnecessary delays. Periodic follow-ups with all team members, and being available to answer questions during the process, will help maintain the timeline."
Thank you JPA Transitions for all of this insightful information. We are so happy they were open to providing you the best and most accurate information concerning practice transitions. There is more to a transition than just the sale of a dental practice. When you are the purchaser you have an entire team you now need to win over and that requires good dental leadership. Remember companies like their's are there for you in the potential chaos of transitioning. It's a big undertaking to transition your practice. Having support will help guarantee your success!
****Joseph D. Jordan, JD, is the president and founder of JPA Dental Transitions, an ADS member, that provides assistance with transitions in the dental community. Mr. Jordan is also the founder of the Jordan Law Group, a dental specific law firm which represents clients throughout the transition process. Mr. Jordan may be reached at 980-283-7355 or at firstname.lastname@example.org. The company’s websites are www.jpstransitions.com and www.dental.law .