>> Feb 8, 2012
Either you are getting ready to retire, selling a dental practice, or move on from your dental practice for whatever reason. Either way there are some important things that you should know before starting the sales process to ensure getting the best price for your practice.
Have Your Practice Valuated
The most important thing to be concerned about when valuating your practice is the accuracy of it. The best way to achieve this is to work with qualified dental practice brokers who have done this before. A proper and accurate valuation of your dental practice will assist you in making the best decisions regarding your practice and career. The value of a properly appraised practice depends on two factors: Risk and Net Income. The greater the risk to success in a practice, the lower the interest from buyers. Higher risk translates to lower practice value. Valuing a practice typically involves a review of the most recent three years of financial information and management reports. One mistake many sellers make is looking at the previous year's cash flow to assess value. However, you should have a full value analysis conducted to properly assess risk. Value cannot simply be based on one or two points of data or rules of thumb, or be made “on the spot” without careful inspection.
Even if you're not contemplating selling your practice in the near future, you should still have a current valuation on hand should any unforeseen events happen. When you begin thinking about selling your practice and cashing in on your life's work, though, it is advisable to have a valuation done three to five years before you actually plan to sell. By doing so you can prepare and you can plan accordingly to reach your financial goals.
Find a Savvy Broker
Once you have a good idea what your practice is worth, you need a buyer. Dental practice brokers have large networks and know how to put your practice in front of the right people. An easy way to know if your broker is connected is to look in various trade publications to see if they have a presence. A few good places to check are Dental Economics, DentalTown.com ADA News, and Dental Entrepreneur Magazine.
Have a Knowledgeable Team
After someone finds your practice, the buyer makes an offer. You, the seller, can accept, decline, or counter. Negotiations may become very complicated but should establish the general framework (price, anticipated closing date, real estate transfer details, restrictive covenant terms) for the purchase agreement. Have your team look over this carefully to make sure you understand everything. Once you and your team decide the offer is acceptable, the purchaser applies for financing (if applicable) and completes the in-office due diligence. After documentation is finalized and financing is secured, you'll set a closing date and notify your staff. Many steps, if done incorrectly, can negatively affect future steps and jeopardize the sale, so it is imperative to thoroughly check that every i is dotted and all the t's are crossed.
As a final word, if a deal isn’t good for you, don’t pursue it. If you follow these steps you ought to get your asking price because you are prepared.