Choosing to sell your dental practice is not an easy decision. You may have agonized over the idea for a while but have now come to the conclusion that it is time to make your exit.
So, what is the next step?
You can’t just give your two-week notice and walk out the door. This is a practice that you have poured your blood, sweat, and tears into for the last several years. You have helped it grow and flourish.
You need an exit strategy to ensure you and your patients are taken care of appropriately.
Read on for the steps to follow when selling your dental practice.
What to Do Before Selling Your Practice
The steps that follow serve as a guide to make sure your i’s are dotted and t’s are crossed before you sell your practice. Creating an exit strategy requires a look within yourself and your business to make sure that now is the appropriate time to sell your dental practice.
1. Meet with Your Advisor
Remember that team of advisors, practice consultants, lawyers, etc. that we suggested when buying your practice? That same team understands the ins and outs of the dental industry and the current market. Let them serve as your guide throughout the exit process as they did when you were buying or starting out.
You would be surprised how many adults do not plan for or think about financing their retirement until they want to retire. Unfortunately, that is not the best way to head into retirement. You need a plan. Your financial advisor and/or practice consultant can take a look at your financial plans to make sure that you can afford to retire.
Also, review your business plan with your advisor. You may have already devised an exit strategy that you can now tweak or put into action.
2. Determine the Tax Consequences
When selling your business, you want to maximize its value, make the most money for your practice, and not be surprised by any post-sale financial obligations.
Depending on the business structure or corporation you established, the tax consequences of selling your business will be different. Also, your practice is not taxed as one entity. You have assets such as equipment, supplies, real estate, and goodwill that each follow separate accounting and tax rules. The way in which your income is allocated can save you from spending too much in taxes when you sell.
Your financial consultant can help you determine how to minimize your tax obligations and maximize your profit.
3. Obtain a Comprehensive Practice Valuation
Get a certified practice valuation. This takes into account the physical attributes of your practice such as the location and equipment and the intangible assets and goodwill. The practice’s goodwill often makes up a large percentage of its worth and must be considered in the valuation process.
Use a broker or business appraiser that specializes in dental practices. This professional will understand your practice and the best valuation method to use to ensure you don’t get shortchanged.
If you are just starting to consider retirement or selling your practice, it is still important to have the valuation done. This can help you determine the best ways to improve your practice and increase its value.
4. Keep Working
Don’t just stop working because you’ve decided to sell your dental practice.
Remember, your practice value lies with how you work, how your practice is run, and by having active patients. If you aren’t working, you don’t have patients, you aren’t making money, and your practice value decreases. It’s a domino effect.
If you stop working, it affects the sale price of your practice.
5. Maintain Your Equipment and Facilities
Just as those buying a home want a house that is “move-in ready,” your potential buyers want a turnkey practice as well. They want to be able to walk in and get started without incurring additional expenses.
Make your practice ready to sell. Keep your essential equipment up-to-date and your dental office in good physical shape. Don’t take the risk of a buyer giving a low offer due to old or outdated equipment.
At the same time, this does not mean you have to go out and completely re-furnish and buy the latest technology. Use your valuation report mentioned above and your consultant’s help to create a list of potential upgrades and a timeline for purchases.
6. Start Early
It takes time to sell a dental practice. You cannot just wake up, decide to sell, and assume the process will be over in a couple of months. Oftentimes, it takes several months and possibly even a couple of years to prepare, find a buyer, and sell your dental practice.
Selling requires several steps and questions to determine the right time to sell.
- Are you financially prepared to sell your dental practice?
- Is your pension or retirement account fully loaded and able to maintain your lifestyle?
- Are you ready to stop working? Are you tired of practicing dentistry?
- What is the dental market like?
- Do you need to upgrade your equipment or space?
Each of these questions requires time and careful planning to prepare for the sale of your business.
7. Be Realistic
In addition to the time frame, you need to be realistic about what your dental practice is worth. We understand that you have poured your heart, time, and energy into this practice. However, you can’t have an overinflated sense of your practice’s value and assume a buyer will pay well over your current earnings.
Your patient demographics, your location, and the current dental market play a role in what your practice is worth. Your business consultants can help determine the best sale price for your business.
Time to Sell? Let LenDRgroup Consulting Help
LenDRgroup Consulting has a team of dental practice consultants who are ready to help you sell your dental practice.
Experienced, Certified Dental Practice Consultants
At LenDRgroup Consulting, we care about your long-term success. If you are ready to retire today or are just starting to consider it, we can help you maximize your practice value and create an appropriate exit strategy. We customize our dental practice financing and business consulting services based on your needs.
We have helped hundreds of dental professionals launch, grow, and sell their practices. We understand the dental market and get to know your practice’s needs to help you avoid costly mistakes.