There Are a Lot of Things to Consider When Selling Your Dental Practice

A Lot to Consider When Selling Your Practice

This is an article from our good friend, Thomas Snyder, DMD, MBA.

As our economy slowly recovers, we have seen an increasing number of doctors making the decision to sell their practice. Don’t think this decision is like turning on a switch – there are many things you need to consider. Here are a few points.

1. Meet with your Financial Advisor
Can you really afford to sell your practice? You may be surprised. If you have never had a financial plan prepared, it’s critical to take this step. We often speak to potential sellers who are emotionally ready to sell, but financially unable to do so. You may find that you’ll have to put your plans “on hold” for a few more years, or conversely, feel quite confident that the practice sale proceeds will only enhance your retirement lifestyle.

2. Get a Comprehensive Practice Valuation
If you plan to use a broker, retain one who will prepare a “formal” valuation using multiple valuation methods.  Most brokers charge a fee to prepare a formal valuation and some will credit the valuation fee against the future sales commission. Getting a “free” valuation usually does not serve your best interest. Just having a “number” appear on a spreadsheet with financial projections does not do you justice when potential purchasers are trying to determine if they want to make the commitment to purchase your practice.

3. Discuss the Tax Ramifications of a Sale with your Accountant
If you are a “C” Corporation, for example, there are some “road blocks” that must be overcome.  How will you allocate goodwill between the corporation and yourself? How tax efficient will the future sale be? Getting answers from your accountant regarding what you’ll retain after a sale is critical to your decision to sell. Remember too that the clock is ticking on the capital gains rate extension that is due to expire at the end of 2012.

4. Do Not Slow Down or Work Less Days
When you take this step, many doctors often stop accepting new patients as well. This may hurt your practice’s value and make a potential purchaser less interested in buying a practice that can be in a decline.

5. If you have an Associate, Be Sure that they have an Employment Agreement
This should contain a restrictive covenant (if allowable) and non-solicitation clause as well as a clause that transfers the associate’s covenant to the new purchaser. If you do not have an existing agreement, consult with your attorney, as you may ask the associate to sign an Employment Agreement with these stipulations included for additional compensation known as “consideration.” This will protect your practice’s value. Selling your practice without a covenant and transfer clause will be very detrimental.

6. Take an “Honest Look” at your Facility
You do not necessarily have to make any large capital expenditures, especially if you want to sell in less than a few years. However, you should consider cosmetic enhancements if needed, whether it’s fresh paint on the walls, new carpet, tile, landscaping, etc. Get your practice to look more aesthetically appealing. First impressions are always critical to any purchaser.

7. Fee Increases
We suggest you obtain a fee analysis to determine where you stand within the fee percentile range in your area. If you are well below average and you still have a year or so to go before sale, do yourself a favor and increase your fees. Chances are that your patients will accept your fee increase, you will increase your income, and you may even increase the value of your practice.

8. Purge any Uncollectible Accounts Receivable
Make every effort to collect those accounts that are past due over 90 days. If you fail to do this, it will become a “sticking point” in your negotiations. Usually Accounts Receivable are collected on your behalf for the first ninety days at no charge to you.

9. Retain an Attorney who has Dental Experience
This decision alone can save you and the purchaser thousands of dollars. Ask your accountant or broker for referrals, as they often work with attorneys who have considerable dental experience.

10. Be Realistic in your Timing.
Sometimes we get calls from doctors who want to sell their practice in six months or less!  This is almost an impossible task for any broker. We advise prospective sellers that you should allow a broker 9-12 months to sell your practice.

In the end, a good deal of planning is necessary for you to really get your practice ready to be put on the market. Careful planning will give you the highest return, and most importantly, peace of mind. 

You may reach Dr. Snyder by following this link.

Send your questions to Tim Lott, CPA, CVA at

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