Three Proven Ways to Keep the Seller on Your Side When Buying a Dental Practice
It’s a common understanding that a dental practice is made up of both equipment and goodwill, but primarily goodwill. When you’re buying a dental practice, you’re paying for a small amount of value in equipment and a lot of value in the dental practice’s name and reputation.
Buyers tend to lean on this when discussing the restrictive covenant portion of the contracts and during the “transition period.” What is often missed is that significant, unintended damage can be done to goodwill during purchase negotiations. Here are three ways to easily avoid this:
- The True Impact of Price
The amount paid for something is generally the most focused-on piece of a transaction. However, in most dental practice transitions, the amount that may be negotiated off the purchase price ends up having a negligible effect on the buyer’s long-term “take home” compensation.
Hard negotiations to save 10% percent of a $500,000 purchase price ($50,000) amount to about $550 per month, or roughly one-half of a crown. That same $50,000 could be the difference between a deal and no deal. It could also be the difference between a seller who complies with only the bare minimum requirements or one who goes above and beyond what is contractually required. One crown every two months is a small sum to pay for the seller’s whole-hearted endorsement and cooperation in the transition period after buying a dental practice.
- Uncomplicating Contracts
After agreeing on a price and completing in-office due diligence, the next step is to have contracts prepared. The best dental practice transitions firms have “draft contracts” on hand designed to be complete, fair and neutral. They’ve evolved over time and represent the best feedback from educated counsel.
If you hire counsel that makes excessive or complicating changes, it not only costs you, but also the seller. The longer the back-and forth continues, the more frustrated the seller may become. This is not to say you should not have qualified counsel; but keep in mind that counsel works for you—not the other way around.
- Keep Requests Reasonable
Everybody wants everything, and it is understood that you want to protect your investment. That said, insisting on too many “just one more” requests of a seller, regardless of magnitude, can erode a future relationship and, therefore, the goodwill of the practice. In the process of buying a dental practice, you should look out for yourself but seriously consider whether a request is reasonable and something you would agree to if the roles were reversed.
These are three simple, yet important, factors to keep in mind. Working with a tenured specialist and consulting with them throughout the process is an easy way to avoid these and many other pitfalls. While the consultant should not represent both parties in any way, they should be interested in your success and have experience in dental practice transitions. Use them as a resource and reasonable sounding board.
Contact A Henry Schein Professional Practice Transitions Professional
Have a question about selling, buying or transitioning a dental practice? Contact us online and have a Henry Schein Professional Practice Transitions Expert help you take the stress — and emotion — out of buying or selling a dental practice.
Henry Schein Professional Practice Transitions, Inc. is a national leader in dental practice transitions. A subsidiary of Henry Schein, Inc. they provide expert guidance for selling and buying dental practices, assessing partnership and associateship opportunities, and performing dental practice appraisals and valuations.