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Selling Your Practice |
1.
Fair Market Value
Fair market value is determined
by both an in-depth analysis and thorough
documentation of your practice. This
is the first step to a successful sale.
A qualified and professional appraisal will determine the fair market value
by direct comparison to actual, recent open market sales of similar practices.
An accurate appraisal is also a very important tool for the purchaser to
use when arranging financing, which is generally the final step to ensure
the sale of your practice.
Financial Institutions are reliant upon appraisals to make proper and timely
decisions. The appraisal provides critical information, necessary to both
purchaser and vendor.
The fee for an appraisal is a tax deductible expense.
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2.
Timing
Practices rarely sell within a few months. The complicated and difficult
process for a purchaser to investigate available practice opportunities,
compare the alternatives and identify the right practice, is only the start.
A purchaser must then acquire complete knowledge of all details of the
practice. After being satisfied with this, a review with an accountant
and/or business advisor is usual. At this stage negotiations for an offer
normally begin. Once the intricate terms and conditions are worked out
in draft form, a purchaser will likely seek legal counsel. Upon acquiring
this advice, the buy/sell agreement of purchase and sale, and all supporting
documents are finalized for presentation.
Assuming you have received a satisfactory offer, your acceptance will constitute
a binding agreement. However, while your practice is "sold",
closing must still occur. This process again involves many steps. Conditions
of the offer (usually financing), if any, are to be met and lease(s), if
applicable, have to be assigned.
Following this are various activities, such as, staffing arrangements and
preparation of closing documents. Once all this has been done, a successful
sale is finalized, money changes hands and the purchaser assumes ownership
responsibilities.
Allow yourself one to two years to sell your practice. Have time on your
side and not working against you!
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3.
Confidentiality
Both you (as the vendor) and a
purchaser require confidentiality.
It's in your best interests to maintain
confidentiality, to protect the goodwill
value of your practice.
Open knowledge of your selling could lead to staff resigning or, in the
least, concern for their job; patients changing dentists; landlords considering
alternatives for your office space; decrease in referrals from existing
sources and a continuing barrage of questions from everyone about your
personal plans, health and/or finances.
A purchaser also expects the goodwill value to be protected. Rumours of
a new dentist taking over may lead to negative implications. A purchaser
will be reluctant to buy if the value of the goodwill is questionable or
may want to pay a decreased price for the goodwill.
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4.
Planning
In planning for your retirement,
perhaps you should consider semi-retirement
first. If your practice will support
more than one full-time dentist, sell
your practice upon the condition that
you remain as an associate with the
new owner. This will enable you to
reduce your hours, enjoy continuing
income and relieve you of practice
management headaches. You will also
have the opportunity to invest the
cash proceeds of the sale (received
up front).
Bringing in an Associate just prior to the sale of your practice may complicate
your plans.
If the Associate does not purchase your practice, you have the concern
of the potential impact on the value of your goodwill if the Associate
draws patients away to a nearby location. Purchasers will be wary of this
possibility and will be reluctant or unwilling to pay you a fair market
value for the goodwill of your practice.
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Purchaser Services |
Our
Purchaser Professional Services
Include:
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1.
Structuring your offer
The likelihood of your offer being accepted and the vendor's expected high
standard of its presentation will require professional attention.
You want to present the most comprehensive terms that reasonably satisfy
both yours and the Vendor's objectives.
With our extensive experience in this area, we will structure your offer
in a manner that will enhance its acceptability and meet your needs.
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2.
Assisting with the financing of
your purchase
We can help you put together your presentations for financing and introduce
you to several reputable and experienced lending institutions. We do not
accept referral fees from any finance company as we believe this would
be a direct conflict of interest.
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3.
Analyzing the terms of your financial
proposals
Borrowing options can be confusing at the best of times and in today's
highly competitive financial markets, the proposals are even more complex.
You want to be confident that you understand all the conditions of financial
proposals and the effective rates. The full details and terms should always
be obtained in writing from the lender in a timely and professional manner.
We will review any proposals with you and/or your accountant.
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Five Things You Should Do When Buying a Dental Practice |
- Call
all of the brokers that advertise
in Oral Health Magazine. You
are obligated to contact each
broker because we do not share
our listings with each other
like residential real estate
agents do. In other words,
there’s no Multiple Listing
Service (MLS) and if you only
call us, you will not be aware
of all the different opportunities available
to you.
- In
order to investigate the entire
market of practices for sale,
you should also write or call
each of the “For Sale by
Owner” (FSBO) advertisements. These
are private sales. They
can usually be found in the classified
advertisements and they sometimes
use a Box Number at the magazine
to screen their inquiries. Unfortunately,
it takes a long time to get a
reply from a box number, and
sometimes you get no reply at
all because they receive dozens
of letters from all over the
world.
- Find
a good accountant you can trust. They
will become your most trusted
source while looking at all the
different financial information
you will receive while investigating
practices. Most accountants
charge an up front and/or an
annual fee to help you to find
the right practice. They
will also prepare proposals for
the bank and help you with personal
and tax planning.
- Establish
a relationship with a financial
institution. The chartered
banks and leasing companies are
willing to review the appraisals
you have borrowed to pre-approve
your loan. However, they
are often reluctant to go through
the entire credit application
process until you show them an
accepted offer to purchase.
- After
looking for one to two years,
you may identify the “right” practice. At
this time you should see a lawyer
and begin discussing your Offer
to Purchase. Most brokers
will draft an offer for you,
at no charge, and will fax or
courier it to your lawyer. The
broker should also process and
make the changes your lawyer
wants to have the final offer
ready for your signature in triplicate.
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