Finance32: Dental School’s Missing Curriculum
Finance32: Dental School’s Missing Curriculum
Great clinical skills simply are not enough for dentists to achieve financial success. Let Buckingham Strategic Wealth's Practice Integration Advisors share what else you need to know to realize your lifetime goals and obtain financial peace of mind.
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Selling a Practice: What selling expenses should I expect to pay?

Selling a Practice: What selling expenses should I expect to pay?

3/29/2019 10:04:29 AM   |   Comments: 0   |   Views: 50

Tom Bodin, a Practice Integration Advisor with Buckingham Strategic Wealth, works with dentists to help them achieve financial freedom through a comprehensive approach to wealth management. 

After a long and successful clinical career, you are ready to sell your practice. In our last post, my colleague, Katie Collins, laid out the expenses that a buyer should expect to pay when purchasing a practice. In this post, we will look at your anticipated expenses as the seller. Practice transitions can take many forms, and expenses will vary based on the sales strategy that makes the most sense for your practice and your financial plan. Below is a high-level outline of the expenses a seller should anticipate when approaching the sale of their practice. 

Most of the seller’s costs will come from their professional team. Assembling the correct professional service providers can be crucial to maximizing your practice price and retaining the most money possible in this transaction. Do not pass up a dollar to save a penny! The team usually comprises an accountant, an attorney, an appraiser and possibly a broker.  

        
  • Accountant: Selling a business is a complicated matter. While dentists often view themselves solely as clinicians, they are small business owners. The value of a small business is allocated across multiple components. For dental practices, this generally includes dental equipment, fixtures and furniture, supplies, patient records, personal and corporate goodwill, and a noncompete agreement. Each of these categories has distinct tax treatments to the buyer and seller. A competitive accountant who is knowledgeable about the dental industry will assist you in navigating this breakdown and ensure that no excessive tax drag erodes your practice proceeds. 
        
  • Attorney: When you sell a practice, you want to ensure the transaction is complete and aligns with state, local and federal laws. A competent transactions attorney can be invaluable in ensuring you have no unknown outstanding liabilities or responsibilities once the transaction is complete. We generally recommend engaging an attorney in a review capacity if the broker is providing most of the closing documents. If the attorney identifies areas of substantive concern, it may be appropriate to escalate the relationship to include revisions or, in the worst-case scenario, a rewrite of the documents. At each level (review, revision or rewrite), the attorney’s involvement and thus expenses will increase. With this in mind, be sure you understand the billing structure of their work; if a flat fee is an option, costs are known upfront. 
        
  • Appraiser and/or Broker: Oftentimes, transition specialists/brokers can be invaluable to shepherd a deal to conclusion. If a buyer is unknown at the time you list your practice, a broker’s ability to identify and work with a prospective buyer can provide tremendous value. If a broker is used, they will generally bring with them appraisal services. Brokers will generally charge 8 to 10 percent of the transaction. Several will provide services to the buyer as well and offset your fees with the buyer’s charges. If you know who your buyer is, a broker may not be necessary; however, an appraisal by the seller should be completed regardless. A standalone appraisal generally costs between $3,000 and $5,000. A buyer may choose to have a second appraisal conducted; if this is the case, they should assume the cost. 

While these are real costs, the cost of the alternative—going it alone—is generally much more expensive in the end. You will likely only sell one practice during your career, and it will be one of the largest financial transactions you undertake, so do not go it alone. If you have questions about the above fees or about your specific situation as a seller, please reach out to us.  

In upcoming installments of this blog, we will break down the three major mistakes to avoid in a practice transition. As always, if there are specific topics you’d like us to address in Finance32, please send us an email! 

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