First, prepare for a smooth transition with these quick tips:

Loose lips sink ships. Telling your staff, your friends, and your patients that you are considering retiring in two, three or five years will guarantee that you will have no practice left to sell in two years. Your patients will start looking for a new and younger dentist, and your staff will have their ear to the ground for their next job. There will be plenty of time for your retirement announcement after you have sold your practice and your check has been deposited in the bank. Make sure that your accountant , your significant other and your family realize the importance of non-disclosure.

Marketing: Continue both internal and external marketing efforts for your dental office. Maintain your website presence and continue to ask your patients for referrals. It is easier to sell a thriving practice than a dying practice.

Production reports: Most dentists have dental software that can create summary reports of the various clinicians and the year to date tunrover. This shows concentrations of each producer and ideally having a good spread of income (30-40% is ideal)

Profit and Loss Statement: Profit and loss statements are amortised to remove all private and non- ongoing expenses. There are some industry norms for staff salaries, consumables etc which we are more than happy to assist with. This will allow you to check the percentages of your dental supplies, lab, and staff compensation to make sure these expenses are not excessive. Once Plautus Brokers assist in an amortised report, we can estimate ( Earnings before interest, tax, depreciation and amortisation (EBITDA). This is a measure of a company's operating performance. Essentially, it's a way to evaluate a company's performance

Company Entity / Finances:

1. If your asset is in a share structure, speaking to you account is imperative as share sales can become quite complex. In saying so, Handon Brokers can advise on cleaning ups the structure in preparation for a pending sale. If you have a standard company structure, the process is significantly easier.

2. Create 2-3 year of Profit and loss statements. Year to Date ( YTD) are also very valuable

3. Hourly rates and entitlements of staff.

4. Ensure all property / leasehold contracts are obtainable for review and the landlord can be contacted to change this into a new entity, when required.

5. If you own your building and plan to sell it in the future, we can organise the interested buyer ( in corporate situations ) to obtain a commercial appraisal on your building.

6. Ensure all equipment and office updates are to ensure that you get the maximum value for your practice.

7. Meet with your Handon broker to calculate or estimate your practice value.

Equipment

You will not recover dollar for dollar the money you spend on equipment prior to the sale of your practice. Only purchase equipment that you have time to use prior to the sale. Before updating your equipment, determine the years until your transition. If you plan to continue to work for less than two years, do not buy large items or “go digital”. However, if you plan on practicing three years or more, upgrading equipment will make your office more productive prior to the sale and may make your office more attractive to buyers. The upgrades will not appreciably “add to the value” of your practice, but they will make your practice easier to sell. In the use of corporate buyers, they will sometimes see the purchase of new equipment in the 6 months prior, as cap-ex and add this to the total offer.

Updates to the office:

1. Discard all broken equipment and instruments.

2. Do a cosmetic update to your facility, but do not spend thinking you will recover your expenses. Cosmetic updates include:

   1. Thorough cleaning of office and storage rooms

   2. Painting the walls

   3. Replacing broken or tattered pictures and furniture if you are three or more years from sale.

Contact us at Handon Brokers to help you determine which updates will provide the greatest return on investment. The sooner you consult with an experienced broker, the longer you’ll have to improve your practice and get a high valuation.If you are healthy and just want more free time, you are fortunate to have time to plan for a successful dental practice transition. If you are three, four or five years out from selling your practice, it is not too soon to meet with your Handon broker before selling your practice.

Maxamise the value of your practice: There is no one best ways to sell a dental practice because many factors affect the type of sale, the type of buyer, and the value of each practice.  But foreseeing the exit will give substantial value. If you want an immediate exit, (Walk in - Walk out), this can greatly effect the offer due to the Principal in most cases, being significant to the transaction. Giving plenty of runway for transition is paramount in a coproatate buyer and sometimes very useful with a private buyer.

Types of Dental Transitions:

The size of your practice and the overhead of your practice may determine your dental practice transition plan.  The simplest practice transition is a ‘Turn Key Sale’ where the seller walks out as the buyer takes over.  This is more common with practices having a gross income under $500- 900,000 ( 2 clinicians ) Larger practices ( Over $1.2 M+++ in revenue- 3 or ) are likely to interest many of the corporate buyers. This process presents a higher value to the buyer and generally involves the owner stating on for the earn out period.

Dentists owning more than one location may wish to sell one of two locations or both locations. A Handon broker will help you wade through the possibilities stress free after examining your profit and loss statements to determine what type of transition works best for you and meets your desired goals.

Dental Practice Valuation:

Is your dental practice ready for a profitable sale? Do you know how much your dental practice is worth? Don’t settle for an informal, DIY practice appraisal. A skilled Handon broker will perform a dental practice valuation to price your practice correctly provide insight on how to increase the value of your dental practice.  Valuation is not a simple multiplication of your gross income.   Practice value is based on location (rural or urban and area of the country), demographics and dentist/population ratio, local economy, education levels of the population, practice income and practice overhead.  

Most “for sale by owner” sellers chase off the best prospects by asking too much or they lose money by undervaluation of their practice and sell themselves short. A Handon broker will give you suggestions on preparing your practice for sale and coach you on negotiating a practice sale.   In our dental , we explained that one myth of sellers is that they are selling potential and potential should bring a higher price.  Potential is a selling point, but it does not increase the value.  The Cash Flow (income stream or profit margin- EBITDA) is usually what is being sold. 

Getting your facility ready for sale:

Buyers are attracted to nice facilities and new equipment, but if a seller purchases new equipment in order to sell his practice, he will not recover dollar for dollar the new equipment expenses in an increased price of the practice.  In the year prior to the sale, it is usually beneficial to clean up and spruce up your facility, but it is not wise to purchase new equipment expecting a return on your investment.

The purchase of new equipment is only done if you still have time to get some use of that equipment. Purchase or upgrade based on a timeline.

• 2 years or less

  • small upgrades and equipment repairs

• 3-5 years

  • Strongly consider digital radiography

  • If something old breaks, consider replacement

• 5 or more years

  • Digital radiography at a minimum

  • Computerize your office and treatment rooms

  • Larger equipment purchases start to make sense

Advertising and screening for your potential buyer:

The buyer must be able to pay the practice overhead expenses, pay the note to the bank and still have enough profit to pay his or her personal living expenses.

Unless you are in a very rural area and are willing to owner finance, your best buyer is not going to be the new dental senior with no experience and a mountain of debt.  There may be the exceptional student with no debt, a savings account and the hand skills and know how to run a practice, but this is the exception, not the rule.

Handon brokers advertise your practice through our data base to dentists and vendors in the industry. Letters, e-mails & phone calls also utilized to reach potential buyers.  Because of the constant advertising, Handon brokers are in touch with dentists looking for a practice to purchase.  In addition, a Handon broker team member has the skills to screen the buyer and not waste your time with “shoppers” who have no ability to obtain financing.

Dentists who attempt to sell their own practices often seek out a Handon Broker after they see the mounting costs of advertising and experience the frustration of fielding phone calls from “shoppers”.   Offers to purchase your practice are usually contingent upon financing.  A full price offer from someone who cannot get the loan is worthless. Weak buyers waste your time.  Handon brokers have the skill and expertise to qualify buyers for purchases early in the transition process.

Financial documents required and buyer funding:

Lenders look at two things when loaning money to a buyer.  The first is three years of your practice income tax returns and your most recent profit and loss statement.  If you own more than one location and are selling one or both separately, the lender will require separate financials for each location.

The buyer’s history is also an important part of obtaining financing.  If your buyer just purchased a home and a car, has high credit card debt or large student loans, has no savings or has declared bankruptcy in the past, it may take a lot of work to find a loan for the purchase of your practice.  Your Handon broker will know how to navigate these hurtles and will also guide you when it is time to seek a more qualified buyer.

What can I expect once a credit worthy buyer is found?

Creditworthy savvy buyers will perform chart audits because patients are the biggest assets of the practice.  The buyer wants to determine if the seller and buyer have a similar treatment philosophy.  The buyer also wants to establish an active patient count, confirm if treatment plans are present, and determine if there is dental work in the practice.   The buyer may also want to test the equipment, meet the staff, and generally “kick the tires” of the practice. Handon brokers will guide you on the proper time for each of these steps.

Real Estate: 

If you are selling real estate, each state has laws and rules that govern the sale.  Do not sign with a realtor to sell your building if you are planning on selling your dental practice.  The building may or may not be required for the transition. Handon brokers first to examine the options.  If you do not own your building and have a lease, your lease should be transferable and you should have several options to renew.

Bank Loan:

Handon brokers have screened dental lenders and knows which banks will provide the funds and get the job done and which banks will still be requesting documents a year from now.  We will will also let your accountant know which documents are required by the bank to make a successful transition.

Lawyers – Other Handon brokers will provide sample documents/contracts or recommend an a lawyer/s who is knowledgeable of dental transactions.  Follow your broker’s advice on a lawyer and do not make the mistake of using a friend or relative , especially if they are not knowledgeable about dental transitions.