The process of selling your practice can be straightforward and easy, convoluted and difficult, and everything in between. To compare this process to the process of performing a dental procedure is relevant. While performing a dental procedure, you follow the proven steps that have worked for many years in order to get a positive result.  When selling your practice, you should take the same approach. Valuing the practice by a qualified practice broker is a great place to start. But once the asking price is determined, you need to target and locate the best buyer, in order to obtain the best outcome. Of course, chemistry and compatibility with the potential buyer will give you the emotional satisfaction that you have found the right buyer. But what is equally important are the business characteristics of the potential buyer that make him/her a viable candidate. In today’s data-driven world, this is an attainable goal. Here are the characteristics to look for from a business standpoint when searching for a qualified buyer.

Experience

Typically, we like to see at least two to three years of working experience as an associate for our general dentist buyers. The lenders that are financing these sales look for this as well. A dentist who recently graduated from dental school or recently completed a residency does not yet have the knowledge and speed to adequately take on his or her own dental practice. There are exceptions, but this is the basic rule.

Ability to Produce

The variety of dental practices’ gross revenues on the market for sale can range from $100,000 in one year’s gross revenue to $10,000,000. It is advisable to match your practice with a buyer who can take on and produce the kind of numbers you are producing. A buyer who has been out of dental school for 10 years and is only producing $200,000- $300,000 annually should not be taking on a practice with an annual gross income of $1,000,000 or more. That buyer will most likely not be able to produce what that seller is producing, and potential lenders won’t be willing to lend the appropriate amounts of money for such a purchase.

Is your practice a “bread and butter” general dental practice or are you performing all your own endodontic and oral surgery procedures? Are you pulling impacted wisdom teeth? Are you placing multiple implants and doing many Invisalign cases? If your buyer doesn’t perform these procedures, they will refer these procedures and the associated collections out. The Buyer should only be looking at practices that are within their own scope of skills.

Financial

The buyer of your dental practice should have;

• Good Credit – The first action a lender will perform is to pull up the applicant’s credit history.  If the credit is sub-par the bank will pass on the loan application.
• Earnings as an Associate – Your buyer should have at least a two to three-year record of solid production and earnings at their job as an associate. This is a key metric that lenders use to predict future success in being a practice owner.
• Cash on Hand – Many lenders want to see that an applicant has 2-4 months of cash on hand for both the purchase and their personal expenses. If the economic environment becomes difficult, they want to see that the buyer can ride it out.
• Reasonable Debt Levels – Most lenders are not concerned about an applicant’s student loans. However, they are concerned about large mortgages, bank debt, and excessive credit card debt. They see these items as red flags

We once had a young potential buyer come to our office to talk about dental practices for sale. He drove up to the office in a brand-new leased Mercedes.  Once we sat down and started talking about his financial status, he told us that he recently graduated from dental school and had zero assets (no funds) and $300,000 in student loans. His auto lease payments were astronomical. Did he really need to lease a Mercedes to drastically increase his overhead just days out of dental school? Not advisable.  

Window Shoppers

In the era of the internet, window shoppers have upped their game. They can now look at more practices, decide to pass, and move on to the next. The same goes for practice sales.  Our company has had several potential buyers who see listings on our website and then want to visit the practices. In most cases that is great news. But some of these buyers have been looking for years and years. They seem to be looking for a practice that doesn’t exist. Will they ever make a purchase? Doubtful. Our ability to track and filter out these “lookers” can save you considerable time in the sales process.

Non-Disclosure

All potential buyers should sign a non-disclosure (NDA, confidentiality agreement) before you give out your financial data and other pertinent information about your practice. Truthfully, this should be signed before even your identity is given out. You want to make sure potential buyers are not spreading the word in your community that the practice is for sale. Rumors as such can cause undo harm and might even cue patients to start looking for a new dentist. Also, you don’t want your office staff to find out you are selling your practice. This news may cause them to start looking for a new job. At a minimum, it will make your staff anxious about their futures. In a worst-case scenario, the staff could leave and not be around for the transition. In another worst-case scenario, a potential buyer could steal your staff and take them to another practice.  In the post-COVID era, good staff has become very difficult to find.  Have your potential buyers sign an NDA.

The good news is that these important screening measures can be easily accomplished.  Doing it yourself can be difficult and awkward. However, using a qualified dental practice broker makes this an easy standard process. The broker has the same goal as you do, which is to make a successful sale and not waste time with unsuitable prospects.

Give us a call today so we can set up a free transition consultation to discuss the best options for you and your practice.