Selling Your Dental Practice: How Much Advance Preparation Is Required?

Selling a dental practice requires scrutiny of financial statements. This determines the total amount of preparation time needed. The process of getting the financial condition of the practice in order is usually the biggest obstacle. Although this might take some time, the exact amount will vary from one practice to another. Consider first performing an internal assessment of what it actually takes to get the finances ready for inspection by a potential buyer.

Time Buffer and Planning Ahead

A buffer is an important consideration when preparing your dental practice to go on the market for sale. Plan to give yourself a significant buffer, which should be greater than what you really think is necessary. This will enable you to avoid rushing to get the dental practice ready to sell. It can take years to get all of the financial statements in order for a buyer in some cases. New dental practices might be able to shorten the amount of time necessary to get the business ready to sell. Dental practices that are more complex and have an established clientele often require more preparation time. Keep this in mind when you initiate the process.

Checklist for Preparing a Dental Practice to Sell

Selling a dental process is facilitated by adequate preparation. Get the practice into a condition that is ready for the new owner to operate on the first day. The basic idea is that you want to make it easy for the buyer to agree to the terms of purchase. The amount of effort you put into the preparation strategy is also part of the marketing, so make sure that you present it that way.

Provided is a checklist of the three major areas you need to cover to make the practice attractive to informed buyers:

  1. Get a practice valuation before deciding to sell: Once you obtain a professional opinion regarding the value of your practice, your bargaining position will become more clear. This will help you avoid choosing a price that is either too high or too low. Accurate information will also be appreciated by any serious buyer. The practice valuation will provide the owner as well as the potential buyer with important insight into the condition of the practice. This includes the gross income and net income, for example. However, other non-financial aspects of the practice will also be evaluated. This includes the number of new patients as well as the total number of patients, for example. The valuation will also consider the procedures performed, insurance accepted, service fees, staffing and marketing. This process gives a comprehensive overview of the value of the practice. One time-intensive strategy is to spend a few years building up the practice for the purposes of obtaining a favorable valuation. Practice owners should have an up-to-date Practice Valuation completed or updated every 12 months. If you’re prepping to sell, this can help you compare how much the effort has improved the overall condition of the practice.
  • Financial statements: Prepare to be audited whenever you are considering selling your dental practice. This means ensuring that the bookkeeping and financial statements are in order. The time taken to go over these essentials can vary depending on the complexity and size of the dental practice; be sure to calculate the maximum amount of time needed to get financial statements in order before even considering opening up the practice to buyers. Any serious buyer will ask to see the financial statement before closing the deal; you can take that advice to the bank.
  • Research alternative options: Difficult conditions can produce frustration for both parties involved in a transaction. Buyers and sellers will sometimes look into alternative options in order to find a mutually agreeable solution when the situation is at a deadlock. For example, the earn-out is an arrangement designed to benefit both the buyer and the seller. It involves setting up an agreement in which there are financial milestones that must be met by a certain date. Payments are contingent upon the ability to make this target. Breakeven points are often used to facilitate the arrangement. The details have to be worked out carefully in order to benefit both parties. This is why it’s an option that must be negotiated carefully.

Time to Sell a Dental Practice

The amount of time required to prepare a dental practice for sale is a function of the practice’s actual condition. Estimates range from a few months to five years or more, so it’s important to understand why the amount of time varies so widely from one dental practice to another. Although a complex practice might require years to properly prepare for this transaction, a healthy small practice could only need a few months to get ready for a buyer.

Building up a dental practice involves a considerable investment of resources. This includes nonmaterial resources as well as the physical items contained in the practice. For example, many buyers are interested in the size and quality of the clientele as much as the physical equipment. As a seller, it’s critical that you accurately understand the motivation of the buyer.

The selling process is facilitated by the professional valuation or appraisal, which can provide both buyer and seller with insights regarding the dental practice’s actual condition. Contact the experienced team at Henry Schein Professional Practice Transitions with questions or complimentary phone consultation for invaluable help in this complex but rewarding venture. Accurate information makes the transaction much easier, so this is a worthwhile investment of time and money.