What are your options?
Martyn Bradshaw recommends exploring all avenues to get the best price for your practice when you decide to sell
With such a buoyant market, most dentists probably know someone interested in buying their practice. However, does selling to that one person really ensure you are getting the best price, best terms and best overall sale?
It’s much better to choose from a larger number of prospective purchasers. To do so, you need to know what sort of people are seeking to buy dental practices and may be interested in your practice in particular. That can depend on your reasons for selling.
While each of my clients has different reasons, the two most common ones are dentists wanting to sell and retire immediately and those wishing to sell their practice and continue working for some years to come. Perhaps, because they are ‘cashing in’ while values are so high, they wish to relieve themselves of the administrative burden and concentrate on dentistry or to semi-retire.
Each scenario is likely to attract a different type of buyer. Who are the main people looking for practices?
Buyer types
1. Principal owners
We sell most practices to dentists who are looking to come in and work at the practice. This generally means there needs to be space for the incoming principal, thus replacing either the outgoing principal or one of the existing associates at the practice. The benefit with this type of buyer is that they will build their livelihood on the success of the practice and generally look after the practice in a similar vein to the previous owner.
It is very rare for a principal owner purchaser to request a tie-in of the current principal, and no retentions (money held back from the sale) would be applicable.
2. Body corporates
These are the large corporates that we all know. As they are not a dentist who will be working in the practice, they can be a huge attraction for someone looking to sell and remain as a dentist. Corporates are usually keen to build up the number of practices that they own. This comes with pros and cons. The corporate may also request certain tie-ins, retentions of sale price and may put in a penalty for any personal or practice underperformance in the few years after purchase. All of this can be costly and should be compared with a ‘clean break’ offer without such clauses.
3. Clusters/groups
These are becoming more popular. A dentist in a certain area will purchase five to 20 practices and run them like a small corporate. As they are keen to get practices within a certain area, my experience is that the tie-ins and retentions of the body corporates are not required – newly purchased practices are supported by others in the group.
How to get the best deal
Typically, most people use a dental practice sales agent who will have easy access to the body corporates and a significant database of dentists who are looking for dental practices to purchase. A good dental sales agent will invest a lot of time speaking with potential buyers, which means that as soon as you take the plunge and put your practice on the market, they should be able to identify and contact people who will be interested in your practice.
As a vendor, you will be encouraged to see as many potential purchasers as possible, as each will have slightly different offerings. With a number of offers, you will move to a ‘best and final offers’ position, whereby offers are often generally above the asking price. One important aspect to consider is that selling your dental practice is not like selling a house, in that you have staff, patients and the business, all of which you have a relationship with. Most, if not all of our clients, want to ensure that they have a purchaser who they feel will make a success of the practice – to ensure the staff and patients are looked after post-sale.
Although it is possible to go it alone, in my experience this is a false economy as you will be unlikely to benefit from the widest number of potential buyers and offers. An experienced agent can also guide you on certain points for your specific requirements, saving you significant tax or problems later on during the process.
About the author
Martyn Bradshaw is a director of PFM Dental, which offers a number of services including dental practice valuations, accountancy, finance negotiations, finance projections and independent financial advice. It has offices in Edinburgh and York. Go to pfmdental.co.uk for more information.
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