So, you want to sell your dental practice. You’ve had a good ride – so many memories of root canals, dentures, and endless fillings. But, the time has come to move on and sell your practice for the most amount of money possible.
Figure out when you want to sell your dental practice
It’s not wise to wake up one morning and decide to sell your dental practice right away. This isn’t a task that can be rushed into; you will be far better off to have a clear plan of action.
As such, the first step is figuring out when you want the sale to go through. When do you want your dental practice to be sold and taken out of your hands? For some, this is an idea that they’re not looking to complete until four or fives years in the future. For others, they want their dental practice to be sold within the next year.
It’s entirely up to you! So, before you start thinking about how do I sell my dental practice, you need to think more about when you want to sell it. This gives you a date in your head, which creates a timeline to work with and you can get a specialist dental accountant and business consultant involved to help you achieve that timeline.
Get your dental practice in shape
The next step is getting your dental practice in shape, so it’s ready for the sale. By this, we mean financially, operationally and physically. We’ll talk more about the financial side in a later point, so, for now, the focus is on making it operational and getting it in good physical shape.
Let’s face it, if you’re wondering how much is my dental practice worth? Then the answer will be very little – if it’s not in good shape. The next person that buys your practice will want to do as little work to it as possible. Ideally, they move in with all their staff, and they can start work as soon as possible. So, if your practice is operational, then it makes it more appealing to prospective buyers.
The same goes for the physical appearance of it, ask yourself these questions:
Is your dental practice in good physical condition?
Are there underlying structural or design issues?
Are you happy with the way your practice looks?
Given a choice, would you improve certain physical features?
Your answers will help you figure out whether or not your dental practice is in good physical shape. If it’s not, then you should understand where the issues lie and how to sort them out. When your dental practice is in good shape, it’s far easier for you to sell.
Review your financial situation with the help of dental accountants
As briefly mentioned above, you’ve got to check out your financial situation and ensure everything is in order here as well. We’re not talking so much about your personal financial situation, but rather your practice finances.
It’s simple, you could have a modern dental practice with lots of positive online reviews in a peak location, but potential buyers don’t care about this. Well, that’s a lie, they do! However, they’re mainly concerned with the financial performance of the practice. It lets them see if there’s the potential to make a lot of money should they proceed with the transaction.
So, the main thing to do is to review your financial situation and ensure you have updated financial information. Using professional dental accountants like The Peloton will help you here! As dental accountants, we live and breathe the financial side of dentistry. We know the different things that might concern you or that buyers are interested in. So, dental accountants will help you get all of your financial info in order and up-to-date.
If you’re still a bit confused about how having your financial data will help you sell your dental practice, then it mainly comes down to two points:
Firstly, your financial information tells you about your financial performance. By analysing your accounts and seeing your income and outgoings, we can see if you’re generating as much profit as possible. If not, then this information allows us to see where things can be improved to boost your profitability before you sell. This can help you sell your practice for more money.
Secondly, you want to show off your financial information to potential buyers. It’s something you should proudly give them to prove that your dental practice is a real money maker. When combined with your location and the physical/operational state of your business, the financial side can tip the scales in your favour. It’s the ace up your sleeve, the final move that can convince someone to buy your practice for a lot of money. Plus, on the flip side, it looks awfully suspicious if you don’t present updated financial information when trying to sell your dental practice. People will wonder why on earth you don’t have it, which may lead to them pulling out.
Calculate your EBITDA
As part of your financial evaluation, dental accountants will be able to calculate your EBITDA (Earnings Before Interest Tax Depreciation and Amortisation). Don’t worry if you haven’t got a clue what this means, it will all be explained to you by your accountants. In simple terms, it’s basically a way of measuring the profitability of your dental practice.
I want to know how much is my dental practice worth? Will the EBITDA help me?
Great questions! The answer is that calculating the EBITDA is seen as the most common way of valuing a dental practice these days. Previously, people would look at revenue figures to show the value, but that was proven to be ineffective. If you’ve got impressive revenue figures, but your expenses outweigh them, then that doesn’t really mean your dental practice is that valuable because it isn’t turning a profit.
So, we know value dental practices based on the EBITDA. In essence, by calculating yours, it helps you figure out how much your dental practice is currently worth. If you’re taken aback by the results, then there’s no need to panic. One of the benefits of figuring out your EBITDA is that you can see if you need to improve the profitability of your business. Do this, and you’ll end up boosting the overall value when proceeding with the sale.
Assemble a team with a very particular set of skills
One of the biggest mistakes you can make when selling a dental practice is going at it alone.
So, if you keep asking how do I sell my dental practice, then the answer is with a team of experts who are skilled in different areas. These are a few people you need to get on-board to help with your sale:
Specialist Dental Accountants
Dental Business Consultants
What’s more – and this is something we spoke about earlier when talking about finances – these people need to have dental experience. They don’t have to be former dentists, they just need to work within the dental industry and have experience with other dental practice sales. It ensures they know what they’re doing and can handle everything as you move forward.
You already know what accountants can help you with, but The Peloton are not just specialist dental accountants but they also have great experience in valuing and negotiating the price for your practice when people come bidding. They make sure you’re not played the fool by someone else and sell your dental practice for far less than it’s worth. Solicitors can help you when it comes to exchanging contracts and dealing with all that irritating legal mumbo jumbo.
Be there for all practice visits
Naturally, prospective buyers will visit your practice before they go ahead and buy it. It’s vital you’re there for this as you know the ins and outs of the business better than anyone else. It gives you a chance to show off the practice while also ensuring you like the potential buyers as well.
There’s every chance you might want to stay on to work at the practice after you’ve sold it, so if that’s the case you need to be comfortable with the new owners! Also, when you’re there, you can authorise the sharing of any information they request, such as:
CQC registration details
Property lease details
Records of dentists working there
Luckily, you’re smart, and you paid attention to the advice earlier about getting your dental practice in good shape! So, you can easily share this info, but don’t forget to make them sign non-disclosure agreements, so your information is protected.
Negotiating the price and agreeing on terms
Right, we’re nearly at the end here; your dental practice is almost sold! You’ve got everything in order, you’ve had various people visiting, and you’ve reviewed all offers. Your expert have helped negotiate the perfect price, and the other party has accepted.
So, it’s time to get your solicitor out of their office to take control of all that will happen next.
When both parties agree on the offer, you’ll be sent a document with it in writing. Don’t sign anything until your solicitor has looked over it. They may disagree with what’s been written and send it back for them to review. Eventually, you reach a point where both parties agree on what’s written – this is usually called the heads of terms.
After your solicitor has given you the thumbs up to sign away, the buyer carries out something called due diligence. This is a fancy way of saying they thoroughly assess your business, paying key attention to the legal side of things, the clinical aspects, and the finances. This process can take a long time depending on the buyer as they ask for loads of information. Give them what they need, when they need it, and you can speed things along.
When they’ve finally finished with the due diligence, then you can move onto the transaction. A date is agreed when the transaction will be finalised – and they usually send the money via electronic bank transfers. When everyone is happy with all of this, the solicitors shake hands, and the sale is completed.
Well, there you have it; you now know how to sell your dental practice. It’s well worth pointing out that the team here at The Peloton can be of excellent service to you during this period. As a specialist dental accountant, we can help value your practice, work out the EBITDA, get your financial records in order, value your practice and even provide business coaching. After your sale, we’re also on hand to help with capital gains tax to ensure you only pay what you need, maximising the value of the sale! So, if you need help selling your practice, then get in touch with us today.