Some dental practices are only on the market for a couple months when the ideal buyer comes along. As brokers, we advise selling dentists to prepare for a transition process much longer than that – up to a couple of years, depending on the situation. This is normal; but a practice that’s still sitting on the market and unable to find the right buyer after a year or two might mean that it’s time to reevaluate the approach. Some things about the transition process you can change. And what you can’t control, it still helps to be aware of so you and your broker can market your practice effectively.
Below are a few reasons that are likely to influence a long selling process.
Price
You knew it would come up, so let’s get it out of the way first! Setting an appropriate price for your practice is determined by many factors, including number of active patients and operatories, production, overhead expenses, and accounts receivable, to name a few. Whether your practice is priced comparatively high or low doesn’t matter as much as whether potential buyers understand why. Premium-priced practices are going to be highly profitable with not a lot of upfront investment needed for the buyer, other than the purchase price itself. Lower priced practices might have high overhead or fewer active patients, for example; it doesn’t mean those practices aren’t profitable, or can’t be with the right buyer. The bottom line is to make sure that your practice is priced for the market it’s in and that potential buyers understand what the numbers mean.
Location
Location matters, especially to a new buyer. Rural practices, as an example, tend to be harder to sell and will likely be on the market a longer time than urban practices. If you know your practice is situated in a less than ideal location for most buyers, there are some things you can do to work around that. Motivated buyers will be excited about the excellent goodwill you’ve created over the years, specialty services that competitors don’t offer, or modern tech that the buyer doesn’t have to invest in on his or her own. Be sure your broker knows how to communicate that you have built a successful practice here, and the right buyer can continue that profitability, too.
Books and Records
Potential buyers will be looking for organized and updated books and records. If you’ve entertained potential offers that didn’t go anywhere, make sure your practice’s financial statements, tax returns, patient records, invoices, and other paperwork is updated and easy to find. We have seen handwritten tax records and disorganized invoices more than we’d like to admit, and though organizing this material is time-consuming, not doing so is a turn-off for buyers.
Décor
As the seller, you want potential buyers to walk in your practice feeling confident they can walk in on Day One, start practicing dentistry, and not worry about whether the practice appears dated. Interior design matters. Buyers may be quicker to agree to a premium-priced practice if it means the décor is updated and modern.
Pitfalls to Avoid
Other than looking at some of the reasons why your practice may be on the market longer than you anticipated, make sure to avoid these potential pitfalls in the transition process.
Preserve the Goodwill
In the months and years leading up to your transition, do spend time investing in your practice’s future. Maintaining positive patient relationships, ensuring a steady stream of new patients, and continuing to build your practice’s reputation are all important. Buyers are looking for a practice at its peak, not one on its decline.
Inflated Labor Costs
Some potential buyers can be turned off extremely high overhead expenses, especially when labor costs are inflated and way above market rates. If you’ve been overly generous with wages, benefits, and other incentives, your future buyer will thank you for addressing any unreasonable costs before they buy your practice.
Employment Contracts
If you have associates or other high-value employees on your staff, it’s a good idea to secure their future with the practice before you put it up for sale. Employment contracts vary by position but the general idea is to lock in a guarantee of certain wages, hours, duties, and timeframe. A potential buyer is more likely to feel at ease if he or she knows that the best staff will definitely be there to help with the transition.
Hopefully, your dental practice will never sit on the market too long. But if you ever find yourself wondering why your practice won’t sell, look at this article and ask yourself if any of these issues could be preventing you from a successful deal.
N/L Transitions represent dozens of dentists each year. We can help you sell your practice, even if you tried before without success. Contact us to find out how.