The prospect of selling a dental practice can be a bit daunting, but, like selling houses or cars or your old CBCT, if you know the process and what to expect it becomes much easier. Many times, doctors are selling dental practices that they have spent the better part of their lives building and nurturing. They wonder “What will happen to my staff?” and “Will the new doctor take care of my patients?” among a hundred other questions that come with selling something that means more than just what the accountants and suppliers see. So, let’s break down the basics of selling a practice. Understanding the basics will, hopefully, alleviate the fear of and potentially help prepare for that eventual day.

Valuing a dental practice will be the topic of a future post, but the basics are this: banks are a major decider in the value of a dental practice. You might be on Main and Main and have all the top-of-the-line equipment, but the reality is that bankers rarely ever see any of that. What they see is income and expenses. Because most buyers will need a loan to buy your practice, they will rely on banks to fund 100% of the purchase. This generally means that Loan Dollars = Purchase Price, which is why banks play such an important role. Understanding the value of your practice is a key first step in selling. Brokers who specialize in practice sales and have relationships with bankers who fund practice loans can help with this and should be able to help free of charge.

Practices have been sold with and without a broker. Not using a broker will save in selling costs and may be appropriate in certain circumstances. However, the sale of a small business such as a dental practice is complex and much less standardized then selling a home for example. Too often I see dentists who want to save the brokerage fee by trying it themselves. This often leads to longer-than-normal transition times, stress and failure. Because a transition involves many parties (buyers, sellers, bankers, attorneys and escrow agents) an experienced practice broker will be able to manage the transition process much more efficiently and with much more success. Brokers get paid when the deal closes, so they are motivated to keep everyone on task and moving towards closing. In addition, brokers will have a Rolodex of possible buyers, which means the practice gets exposed broadly to the market and will likely achieve a price that more than makes up for a brokerage fee. By the way, those fees range from 7.5% - 10% depending on the size of your practice, i.e., the bigger the practice the lower the fee.

If you’ve decided to hire a broker and have signed a listing agreement, the next step is preparing the marketing materials. Marketing materials can include things like a simple 1-page flyer with a few highlights, a postcard, and a detailed 30+ page prospectus outlining pertinent details of the practice. The goal of marketing materials is to generate tours. The more prospective buyers you get through the door, the more possibilities you have of receiving offers. Marketing time ends when an offer or “Letter of Intent” (LOI) is accepted. This can take as little as a few days or many months with the average being 1-2 months. Remember my comment above about Main and Main and all the top-of-the-line equipment? While these attributes of a practice may not affect the value with the banks as much, they will motivate potential buyers and reduce marketing time. Buyers love modern practices with $800,000+ in steady or increasing collections in good locations with 4+ operatories and strong hygiene programs. The more of these attributes your practice has, the less time you can expect to be on the market. Also, during the marketing period is when prospective buyers will tour the office and, hopefully, meet the seller. Some brokers try and keep buyer and seller...