transitions
THE BIGGEST MISTAKES
Doctors Make When Selling Their Dental Practice
by Frank J . Brown and Jeremy Brown
Selling a dental practice is one of the biggest financial decisions a dentist will make in their career . Like any business transaction , there are several things that can go wrong when selling a dental practice . To avoid these costly mistakes , it is best to have a plan and be prepared well before you decide to sell . Proper planning will ensure you make educated decisions on what is right for you and your practice . At Watson Brown , we have seen practically every side of buying and selling dental practices . Our unique experience allows us to notice the patterns of common issues that arise during this process . Here are the biggest mistakes doctors make when selling their dental practice .
Sharing Information Too Soon
Selling a dental practice is as large of a business decision as buying a dental practice . From every angle , it takes time to properly sell and transition to the buyer . Sharing your intent to sell too early can make your employees , patients , and referral sources nervous . The uncertainty for your staff of working for a different employer , and for your patients of receiving dental care from a different provider , can cause them to flock to other practices . This loss of staff and patients can cause the value of your practice to decline rapidly . It is important to announce the sale after you can confidently ensure the buyer can close on the sale . Keep everyone ’ s mind at ease by not sharing this information before it strategically makes sense to .
Inaccurate Valuation of Your Practice
You might be surprised to learn an inaccurate valuation can go in either direction . Having an incorrect understanding of your practice ’ s value on the market could lead you to list for too low , and end up leaving money on the table . On the other side , being unrealistic regarding your practice could have you list for too high , and make it more difficult or impossible to sell . In some cases , a buyer may even offer their own valuation , which is likely to be biased in a way advantageous to themselves . It is key to have an accurate valuation that can be trusted by both the buyer and the bank , something that goes deeper than just a multiple of EBITDA or a ratio of annual collections .
An experienced transition group can help you evaluate your unique practice , and ensure you get the most out of your sale .
Making Large Changes During Transition
Over time , it is important to make upgrades to your practice . While there may “ never be a right time ” for some changes , making large purchases immediately before listing your dental practice for sale can be unwise . Incurring additional practice debt could adversely affect your dental practice ’ s value . Change during transition should be a part of a larger strategy that serves the value of your practice .
Focus on changes that potential buyers might find appealing , like tuning up the dental office equipment . Keeping equipment updated , both functionally and aesthetically , can increase your offer price . When considering the acquisition of a practice absent of modern equipment , buyers may adjust their offer to account for the upgrades they will need to do . However , substantial replacement of equipment is rarely worth the investment . If you ’ re curious about where to draw the line , it is smart
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