As the son of a golf professional and an active member of golf organizations my entire life, I thought I would parallel the thought process of a PGA Tour professional and a dentist in preparation of a transition of their dental practice. See why taking necessary steps and working with an experienced dental practice transitions company can help you be a “champion” in the sale of your dental practice.
1. Know the Course! When a PGA Tour professional plans their tournament schedule for the year they are selective of the type of courses that fit their game and also attempt to plan their travel so it is convenient to see their family during the year. This is similar to understanding the transition marketplace before you start the process in selling your dental practice. In general, we are finding the market is strong. Quality practices are coming back on the market and lenders are offering more competitive financing. PNC, Wells Fargo and Bank of America Practice Solutions are still top lenders, and Stock Yards Bank is now in the mix with all four banks having an experienced practice acquisition team. With money available, and skilled dentists willing to buy, value remains strong and we are completing transitions at a steady rate. Demand will continue to outpace supply, which bodes well for those looking to sell and for values of practices.
2. What’s the Purse? PGA Tour Professionals are paid on performance…similar to small business owners like dentists. When preparing to market your dental practice it is important to get a third-party market valuation for your practice. The value of a properly appraised practice looks at risk and net income. A proper valuation, conducted by Certified Valuation Analysts like the ones we use at DDSmatch, looks at more than just a simple percentage of last year’s production. Using three years of financial information, cash flow for the practice and various practice reports that provide details will give a complete picture. Most dental brokers use limited information, general rules of thumb or best guesses which will not provide a thorough or credible valuation.
3. Where Does Your Game Need Improvement? Golfers are always striving for improvement, especially if it means better results in their pocketbook. Analysis of your practice is critical at this stage of your career if you are looking for an increase or decrease to your practice’s value. Fewer specialty services (if in a general practice), less discounted fees or insurance, (especially HMO/Capitation), higher gross and higher net income yields more possible and interested purchasers, thus a higher value. DDSmatch uses Dr. Charles Blair’s Clinical Treatment Analyzer to reveal the potential in a practice. Looks matter—the more visibly appealing a practice is the more a practice is likely to sell for. While the appraised value probably will not go up, the sale price might increase due to increased desirability. Importantly some procedural and nearly all financial modifications to increase value require longer range planning (three to five years) to provide a return, so start planning now by talking with DDSmatch.
4. Environment can affect your situation. In golf, weather and course conditions affect the outcome of a golfer’s performance on the course. In dentistry, the local economy and also your landlord can affect the sale of your dental practice. Unfortunately, a non-cooperative landlord can hold up a transition. Even with a good relationship with the landlord doesn’t ensure that the negotiations will be easier. Be sure to review your lease carefully and be aware of potential issues. As a licensed commercial real estate broker, we understand the local economy and can assist with this.
5. “Short game” is critical to a Player’s Success. In golf, the shortest shots make all the difference between a good round and a champion. In negotiations during the transition, it is imperative that the small details are taken care of confidentially by a transition specialist to make sure the transition and communication runs smoothly. We see a lot of negotiations between dentists who choose to not hire a broker damage the goodwill which ultimately is what the purchaser is purchasing. Negotiations can be damaged by either party but the first pitfall for a buyers and sellers is trying to save “pennies on the dollar” when in the end, the potential savings is minor when looking at a successful transition of the practice for you, your patients and your staff.
6. All Great Players have a Team of Advisors. PGA Tour players have swing coaches, caddies, fitness advisors, agents, dietitians and financial planners on their team. For a dental transition you must have a team around you to protect your asset in its transition. Some transition specialists/brokers will encourage you not to retain advisors or require you to use their “in-house” or “referred resource.” This is wrong. You should always have a competent team made up of an accountant, attorney, bankers and others looking out for you, preferably professionals who have a familiarity with dentistry, and ideally with practice transitions. Reputable resources are available, but be sure whomever you choose is well-versed in local statutes, taxes and the local community. This person should be a team player, who makes not breaks the deal for you, while safeguarding your best interests.
7. Know the Rules. On Tour, players must know the USGA and Local Rules of Competition or suffer the consequences. In dental transitions there are many forms of representation for
you in your practice sale. Dual representation is the practice of representing both the buyer and seller in a brokered transaction and being paid for both. This is unethical, and in many states, illegal. Transactional brokerage is the practice of representing neither party, but rather the transaction itself. This typically provides shelter for a broker where it minimizes responsibility for accuracy and disclosure. Ask if the specialist is a dual representative or transactional broker- -both are rules the person should disclose. At DDSmatch, we only represent the seller and we depend upon the buyer to hire a great team to help them with the transaction.