by Guy Jaffe
Dentists should not attempt to sell their own practices for five primary reasons:
Not knowing how much the practice is really worth
Very few professionals are capable of appraising a dental practice. Most accountants appraise a dental practice the same way they appraise a manufacturing business or a restaurant; their approach is theoretical. The majority of them don't have the comparable sales experience needed to appraise a dental practice.
If you decide to sell your own practice, you incur these risks:
- Using someone inexperienced to appraise your practice and determine the sales price
- Using a "rule of thumb" for valuation purposes (guessing)
- Not appraising your practice at all
If your staff members know you are selling your practice, they will begin looking for another job. If patients hear that you are retiring or relocating, some will begin looking for a new dentist. Also, it isn't good if nearby dentists hear that you are selling.
If you attempt to sell your own practice, it is highly unlikely that you can keep your intentions confidential. When you run classified advertisements in dental publications, who will answer the calls? Dental prospects do not answer ads with box numbers. Is your spouse, a friend, or your attorney able or willing to take the time to conduct a professional interview?
In short, you don't want to notify your staff, patients, or the public about a practice sale until you have found your purchaser, obtained financing for the sale, and entered into the necessary agreements.
It is not usually a good idea for buyer and seller to negotiate directly. Many issues arise during negotiations, some difficult and contentious. By having an experienced agent negotiating on your behalf, it gives you the necessary time to think through various scenarios before committing yourself. If you deal directly with the purchaser, you often commit yourself before you have the opportunity to adequately consider alternatives. A good dental practice broker will offer you choices, some of which you might never have considered. With a dental practice broker as a buffer, most of the problems will be forgotten once the deal is completed. If hard feelings remain, let them be directed at the broker. It is extremely important that the purchasing and selling dentists get along once the sale closes and the transition begins.
Selling dental practices successfully involves a steep learning curve. A good dental practice broker knows where to find prospective dental buyers and how to interview and screen qualified prospects. As an agent for the selling dentist, brokers have developed methods to keep the practice sale confidential and to determine what information is essential to appraising a practice. They also decide what information is to be given to interested prospects. As your agent, they know how to properly show a dental practice ... and the neighboring area itself. A good practice broker understands how to structure a sale properly. Knowing which lenders might be interested in financing which practices is a skill that only can be learned through trial and error. All of these skills and more are needed to sell dental practices successfully.
A dentist trying to sell his own practice (even with the help of an accountant or attorney) does not possess these skills. This is not the time or place for "on-the-job training."
As dental schools have closed and class sizes have shrunk, we are experiencing a major shortage of young dentists. In many parts of the United States, it has become a "buyer's market."
Today, when a dentist lists a practice for sale with an ADS broker, the practice is immediately listed in the ADS special section of practices for sale in Dental Economics and on the ADS Internet Web site. These two sources have truly become the "place to be" for dentists wanting to sell their practices.
ADS has referral procedures so that when a dentist from Boston wants to relocate to Denver, the referral is made and the practice is sold. The dentist from Boston successfully relocates to Denver and the dentist in Denver sells his practice and retires. When ADS was organized six years ago, we correctly recognized that buying and selling dental practices was going to be increasingly done on a regional and national basis.
It takes many years for a dental practice broker to develop a good reputation. It is the reputation of the dental practice broker and the years of successfully selling dental practices that attract most dental prospects. All of this is cumulative. It is much more than running an ad or two. A dentist selling his own practice cannot match the traffic that a successful practice broker can generate.
It all comes down to this. When thinking about selling your dental practice, "this is no time to be thrifty." Be prepared to pay the commission to a good dental practice broker. It is the best money you will ever spend. Remember that you have a valuable asset that took many years to create. Keep in mind that it is not easy to sell a dental practice ... and you have only one chance to do it right!
Guy Jaffe is the founder of the firm, The Dental Marketplace, a dental practice appraisal and brokerage firm located in St. Louis. The Dental Marketplace services central and eastern Missouri, central and southern Illinois, and southeastern Iowa. Jaffe is past president of American Dental Sales, the largest group of dental brokers, appraisers, and consultants in the United States. He can be reached by phone at (800) 221-6927; by email at email@example.com; or write to him at P.O. Box 410356, St. Louis, MO 63141. See the classified ads for names and addresses of ADS members in your area.