Are You Considering Selling Your Dental Practice?
When is it time to sell ?
Are you still excited about investing in your practice? If yes, you are probably not reading this article. If no, there are an endless supply of recent grads who are anxious to invest big money in their new practice. Yes, they may have student debt, but banks know these hard working young dentists will work overtime to make ends meet. Most have invested so much in their education they will not accept an office to put their name on if it isn't the nicest office in the neighborhood. There are the DSO companies backed by millions of dollars in venture capital money eager to build the nicest office in town, spend big money advertising and reel in as many new patients as they can. Your practice facility is getting older every year , you are getting older and less willing to work the same long hours while your competition is building new facilities that are open 24/7/365. Your practice will plateau at best and decline is inevitable. There are so many dentists who when they finally agree to sell will say that they used to do twice as much dentistry, so isn't their practice worth what it was worth at the peak? The answer is an emphatic NO ! ! Your practice is worth what its worth when you sell it. If you want top dollar you need to sell it before it declines and before all the equipment is too old to sell. Yes, everything works ! Everybody says that. They say that and there is a lot of invisible income and that anybody could build it back up in no time and for no money. There is nothing unique in those arguments to buyers and they will not overpay you, or pay you what it was worth in its prime, because you said it. Just because it hit a plateau, doesn't mean you have to sell. But if your revenues continue to be the same; at best , and your expenses continue to rise that's a recipe for problems. You will be working for lower and lower percentage of your gross revenues as you cut back on working and your expenses keep rising. No Buyer will be able to afford to pay you for your practice and make a living. Add on that your equipment is going to be older and the Buyer will want to replace it, you will have a tough time finding any buyer o give you anything for your declining practice. If you want to cash out you must do so while the practice is still relatively profitable. Its OK to run it into the ground and close the doors. But, you will be the custodian of the records if you don't sell your practice. How much of a nuisance will it be to retain and copy records for years to come ? Finding just the right time is not like getting the answer to an algebra question. there are many factors that sway the decision. Its up to the practice owner to balance the pros and cons of selling vs holding and decide when its best for them to sell.
What are some of the pros of selling your practice ?
-You are no longer responsible for managing staff , payroll , rent , bills so you can just come in, do dentistry and go home.
- Don't have to worry about overhead when you think about going away on vacation or taking a few days off
- you want the cash built into the equity in your practice to pay off your mortgage and other debts.
- Selling your practice is typically taxed at a long term capital gains rate so you can keep most of the proceeds of the sale
- You have a desire to pursue doing other ways to make a living but you are now stuck chair side too much to work on other things
- Don't have to think about spending money on advertising or upgrading the office
-You get the cash out of your practice today before its worth less tomorrow
- If you own the building, the Buyer will pay you rent instead of you working to pay yourself rent.
What are some of the cons of selling your dental practice ?
- You are not 'The Boss ' anymore
- You no longer own a business
- You are no longer guaranteed a place to work
- You are no longer growing a business or gaining equity [ but probably business stopped growing or you wouldn't be selling ]
What are the cons of being an associate dentist ?
- You get paid every week not every day
-Your expenses come off your Net pay not your Gross revenues
- You lose control over purchasing, hiring, firing and maybe what labs you can use
- You have to adjust your schedule to the new Owner's office if you choose
- Your services may no longer be needed
Can a Practice Broker represent both Buyer and Seller and have in house counsel ?
Tri State Dental Sales is SOLELY a Seller's Agent. We don't believe its possible to be all three at once and represent anyone other than the Parent Company ! Yes, you can read what other companies say and do. I come from a family of lawyers and judges, As the only dentist in the family, I was the black sheep of the family. But, its not that I didn't pay attention to my Father growing up. Its not that I did not see first hand what goes on. I know all too well that everyone needs a dedicated representative who represents ONLY their interests. If the purpose of multiple representations is to get the deal done at all cost to all concerned is the goal, yes multiple representation is the way to go. If you want to insure that each party is represented FAIRLY, then each party needs their own representative and their own attorney. Its one thing if my wife and I share an attorney in the purchase of a summer home that we will enjoy together and another if one person is selling an asset that they want top dollar and another is a Buyer looking for a fair deal.Does charging you more as a built in extra fee, to hire an in house attorney to represent both parties really protect either party? or is the purpose of the attorney just to get any deal done so that the Broker Company make a commission on the sale of the practice? I believe it does. Are you saving money by paying high commissions for triple representation and wind up getting represented by nobody I do not apologize to my competitors who argue its all well and good. I object to their representation as to fairness as not in the best interests of Buyer or Seller. Tri State is , has been and will always be a Seller's Agent ONLY.
I can do a formal Evaluation for your practice if you want to sell it on your own.
by William J Lossef DDS
drbill@USdentalPractices.com