Tips for Sellers

With demand for dental practices high and capital gains taxes and interest rates low, now is the time to sell your practice.

By following these tips, you can get TOP DOLLAR for your practice:

1. Make sure your annual revenue doesn’t fall below the prior year’s level.
Declining revenue is a red flag for many buyers. Moreover, banks use only results from the most recent year when assessing the value of a practice.

2. Invest in modern equipment.
Even small investments in new equipment can significantly boost your sale price.

3. Isolate and identify discretionary expenses
Discretionary expenses affect income negatively and don’t allow the income statements and tax returns to accurately reflect the financial position of the dental practice.  These must be explained or the buyer will think the practice is less profitable than it really is.

4. Investigate the transferability clause in your lease
If necessary, have an attorney look into how you can transfer your lease.  This has bogged down deals, so that if this can be dealt with at the beginning of thse process, deals can be much easier to negotiate and complete.

5. Present credible data.
Ensure that the data on your practice is verifiable and well-organized. Reports on multiple data points – including demographics, insurance, practice management, accounts receivable, and profit and loss statements – should be provided to buyers. Young buyers will demand to see this information before they agree to a transaction.

6. Ensure that your office is very clean
Cleanliness is extremely important to prospective buyers.  Floors, carpets, and walls must all be clean, while operatories, labs, rest rooms and the front desk area must be spotless. All of the equipment has to shine, and supplies must be well-organized.

7. Tabulate financial and statistical data
Buyers will want to evaluate your financial and statistical data before visiting your office. If the data is not saved on a computer, you should, for a period of a few months, write in your appointment book the zip code of each patient and the procedures performed on him/her.

8. Sell your practice NOW!
We are in a seller’s market, with demand far outpacing supply. Many dental school graduates are saddled with high levels of debt and are desperately looking for profitable practices. Meanwhile, banks are lending at very low rates. These great conditions won’t last forever. Interest rates are already starting to rise. Now is the time to sell!

Sellers can recruit their own buyers. We will continue to work with such sellers and we will help them close their deals. Moreover, they will get a significant discount on our commission fee.

Tips for Buyers

1. Selecting an attorney
Choosing an attorney is one of the most important decisions that have to be made when buying an existing dental practice. It’s best to hire an attorney who has a great deal of experience with dental transactions and rarely spends time in court. Lawyers who do not make many court appearances will have more time to work on your transaction, enabling them to communicate much more easily with the other dental attorney.

In order to be considered an experienced dental attorney, a lawyer must have worked on at least ten completed dental transactions every year for the past three years. If you hire a lawyer who does not meet these criteria, the closing will take much longer than you expected.

2. Choosing a financial institution
Choosing the right financial institution is also important.  About six banks are very well-versed in dental transactions and are very experienced in this area. By choosing one of them, you will make the sale process much easier.

3. Sale process length
The entire sale process usually takes only 45 days. However, it can take significantly longer than that if problems arise.  Although the sale process can be long and cumbersome, it will definitely be worthwhile in the end.

4. Be open-minded about location
Based on data from multiple banks throughout the U.S., it has been determined that 98% of the purchases of dental practices are successful.

Often new buyers are particular about location, size and other characteristics of the practice they are looking to purchase.  As an entrepreneur, a buyer needs to be a visionary as to what the office is to be in the future, but this evolves over time.  Dental offices cannot be custom ordered and buyers must be open minded and flexible.

5. Banks will provide extra financing
In most circumstances, the majority of dental banks will finance the entire cost of buying a practice and will not require purchasers to make a down payment. Moreover, dental banks will usually loan buyers an additional amount equal to 5% of the purchase price in order to provide them with working capital.

6. The first step after locating a practice
After you identify a dental practice you want to buy, the next step, which must be undertaken as soon as possible, is credentialing with insurance companies.

7. Marketing plan trumps office renovations
Many new buyers rush to radically renovate their entire offices. However, we have found that it’s best to wait until you have spent some time in your new facility before undertaking this process. Instead, in the initial weeks after acquiring your practice, you should focus primarily on developing a comprehensive marketing plan.

8. The partner trap
Immediately recruiting a partner is a trap into which many buyers fall. Although wanting to work with a good friend from medical school is understandable, we have found that many partnerships eventually break up, costing both partners a great deal of money. Far, Far too many dental partnerships result up in failure, so if you want camaraderie and better office coverage, hiring a great dental associate is a much better idea. Far far too many dental partnerships result in failure.

9. Visibility is important
If at all possible, buyers should look to buy a practice in a highly visible office, and they could consider placing a sign in front of their properties.

10. Leases are challenging
Dealing with the landlord and the landlord’s attorney can be quite challenging.   Obtaining or transferring a lease sounds like a simple process, but it can often drag out for a few weeks and can sometimes last for a few months.