Selling your dental practice is an irreversible decision. It takes patience, due diligence, and can take anywhere from six months to five years to find the right buyer.
Regardless of the reason to sell, there are many key elements you need to consider to prepare for a smooth transition – all of them having an impact on the financial value of your practice. After all, you want to be prepared as a seller and get away with as much mark-up as possible. Depending on many factors, you may sell fast and command a higher price or work harder to find the ideal buyer.
Here are five key considerations you should be thinking about to make your transition easier.
There’s so much at stake through the process of selling a dental practice.
For example, if your dental practice premises are leasehold, it is crucial to be well-informed about all clauses in the lease that will be assigned to the buyer.
Prior to completing the sale, you need to make sure you have the landlord’s consent to transfer the lease agreement to the buyer.
The landlord must give their consent in writing. Then, the buyer’s name will be added to a new or altered lease agreement.
Make sure you meet all of the lease terms so that the landlord can approve the transfer of the lease agreement with no hassles. You should also ensure that you are released from all obligations to the landlord after the settlement day.
Your prospective purchaser will want to request a complete list of furniture and equipment and potentially renegotiate new supply agreements, so it’s a good idea to have this organised beforehand.
To increase your dental practice valuation, make sure the equipment in your practice results in a solid return on investment, or ROI.
If any equipment is leased, you need to contact the owner of the equipment to have it transferred.
Your purchaser will also want to determine how much your stock is worth. This means you’ll have to conduct an accurate stocktake on the settlement day for a smooth sale process.
When going through the stock and associated receipts, it’s good practice to use an automated dental stock management system to ensure full transparency between you and the purchaser and avoid time-consuming and error-prone manual inventory counts.
Before selling your dental practice, it is imperative that you consider your employees and what will happen to them.
Your staff members can either be transferred to the new owner or end employment.
Regardless of whether your staff members will be transferred or terminated, you need to ensure they’ve been notified of the upcoming sale, and you’ve properly calculated all employee entitlements.
If your employees get transferred to the new owner, they need to be employed by the new employer within three months while also having the same duties or substantially the same - as highlighted by the Fair Work Act 2009 Section 311 ("Transfer of business").
When selling your practice, you must comply with laws and regulations surrounding client records (e.g. The Privacy Act 1988).
Your purchaser will want to check out your client list and fee schedule to assess the success of your business and determine the financial results of your practice.
Before showing the buyer your client list, you may need to notify people that you are selling your practice by publishing a public notice. As a result, your patients can notify you if they do not wish for their information to be provided to the buyer.
However, do note that privacy laws vary by state. As a general rule, you may ask your prospective purchaser to sign a non-disclosure agreement before sharing with them your dental records.
Although profitability is an essential element that attracts potential buyers, they will also consider other factors, such as curb appeal, infrastructure, processes and systems, and more.
Make sure you implement a well-rounded strategy to add more value to your business before selling. As a general rule, you should apply it 12 months before selling.
Consider activities that can increase your practice’s valuation, such as building a strong online presence, growing your patient base, automating scheduling, ordering and stock management, etc.
Remember that the buyer wants to hit the ground running after completing the purchase rather than wasting time on administrative issues.
You should also note that the time frame needed to complete the sale is strongly dependent on the legal and financial advice you receive, so make sure you get professional, reliable advice.
Although there are several factors you need to consider before selling your practice, the list above will hopefully provide you with a brief overview to get your business ready to sell.
Long story short, transitioning out of your practice is a complex process that not only requires you to comply with specific laws and regulations but also requires you to increase your business’s value prior to selling.
This way, you can get the best possible price from the buyer and make selling your dental practice a fulfilling experience.
Need quick financing for upgrading your dental practice and achieving maximum value when selling your business? In that case, do not hesitate to get in touch with one of our team members, or call 1300 27 33 22. We’d be happy to hear from you!