Listing your dental practice for sale can feel like placing your life’s work in a display case. You’ll want to showcase the legacy you’ve built as you seek the right buyer to carry it forward.
While it takes courage to put your practice out there and find a new doctor to care for your patients and staff, this is a positive step towards securing your exit strategy and maximizing your practice’s worth.
“Listing your dental practice for sale can present a sense of vulnerability,” NDP Listings Manager Kathy Whiting said. “You’ve built your practice for years, maybe decades. And now it’s going to be on display in front of everybody. It’s important to work with a transition advisor that ensures you’re protected and offers you control throughout the process.”
A dental transition advisor, like NDP, can help put your practice on the market and present the business in the best light. While the listing process can seem complex, asking the right questions can help ease concerns and set you up for a smooth transition. Here are some common questions (and answers) our team receives from owners as they prepare to search for their ideal buyer.
When should I start thinking about listing my practice for sale?
A common mistake among owners is they decide they want to be done practicing dentistry yesterday. By the time they engage an advisor, get their practice listed and find a buyer, it often takes longer than they’d like before they can physically stop working.
“Knowing you’re ready for the next chapter doesn’t always revolve around a certain age,” Kathy said. “You may have been in practice for 30 years and still feel ignited for the years ahead. However, for some doctors, they often notice signs that they’ve lost their drive.”
We recommend thinking early about when you want to begin your next chapter and then consider how far out you are from that timeframe.
Declining financial trends in the year(s) leading up to a transition can make the opportunity less appealing to potential buyers and lenders alike. Try not to take your foot off the gas and rather, start as early as possible in educating yourself about your transition options.
How long does it take to find a buyer?
This is the “million dollar” question that every owner wants to know. Unfortunately, there isn’t a one-size-fits-all answer or a crystal ball to predict the timeline.
The amount of time it takes to find a buyer can depend on a number of factors, including:
- Type of practice (general dentistry versus specialty practice, practice size, procedure breakout, fee-for-service versus PPO, etc.)
- Type of location (urban versus rural practice)
- Practice health (how strong and clean the practice financials are)
- Economic and market conditions
- Lending and interest rates
- Timing of sale (when your practice is listed on the market)
With various pieces at play, it’s not always as easy as sending out an email. And when some of these factors are grouped together, such as an oral surgery practice in a small rural town, it can take even more time to find a buyer.
Remember, the objective is to not find any buyer, but the right buyer to care for your practice, patients and staff.
Will my practice name and location remain confidential to buyers? Will my staff find out?
Throughout the listings process, all parties involved—you, the buyer and each of your advisors—must take confidentiality seriously. To keep the deal intact, protect patient trust and prevent staff turnover, the announcement of a new owner should start with the seller when they’re ready.
To maintain confidentiality, transition advisors market your practice without revealing identifying information, such as the practice name or exact location. They screen candidates for only serious, qualified buyers and require nondisclosures from candidates before sharing sensitive details about the practice.
While you as the seller have complete control over who gets to know about the sale, it’s also important that you keep it between a small group of people, such as yourself, spouse and advisors.
There’s a time and place to announce the transition to the team, but involving certain team members too early can cause anxiety about job security or turnover. In the worst-case scenario, it could even cause the deal to fall through.
What is a financial analysis and why is it needed to list my practice?
When you’re ready to officially put your practice on the market, the first step is for the transition advisor to complete a financial analysis of the practice. The analysis determines a market price for your practice and highlights the financial opportunity to both the buyer and the lender.
The findings from the financial analysis are compiled into a listing summary report, which illustrates the full opportunity. This listing summary includes components such as:
- Strengths and opportunities of the practice
- Growth, decline or stability trends
- Practice cash flow
- Percentages of services rendered
- Marketing statistics
“I’ve seen some brokers only ask for the practice tax returns or one piece of the financials,” Kathy said. “The problem with that is it doesn’t show the whole picture of the practice; it doesn’t show more than the numbers. Several factors play into how marketable or sellable a practice is, and it’s important to display that for potential buyers.”
TAKE NOTE
While some people use the terms, “financial analysis” and “valuation” interchangeably, these terms have two distinct meanings in the context of a practice transition.
Dental valuations are most often used in a partnership sale where a future valuation method needs to be documented. This is helpful for future buyouts so that the owners understand the format of the previous sales. If the transition involves selling 100% of the practice, a detailed financial analysis to set the market price is often all that’s needed. Read more about the distinction in this blog.
What should I do to prepare for the financial analysis?
The financial analysis can require a significant amount of work from the owner and every aspect matters, so familiarizing yourself with the practice details is key to preparing for this part of the process.
In addition to basic practice information, you may be asked to provide:
- Practice tax returns
- Profit and loss statements
- General ledgers
- Payroll summaries
- Production reports or practice monitors
- Accounts receivable aging reports
It’s not uncommon for owners to not know where to find the financial information or pull reports, simply because the office manager or another staff member manages it. To maintain confidentiality, your transition advisor can assist in showing you how to pull reports from a variety of practice management systems.
Simplifying the Complexity
At NDP, our transition advisors understand the emotions and complexity that comes with listing your dental practice for sale. Removing the heavy lifting off your shoulders, our practice listing service is designed to take on the responsibility of marketing your practice, screening and vetting candidates and facilitating all communication. Reach out to our team to learn more about how we can support you in finding your ideal buyer.
