For those of you who are looking to sell your dental practice in the near future and retire to a life of luxury on a tropical island somewhere, there are a few things you will want to keep in mind when it comes to the final sale of your practice. In many ways the practice you are looking to sell is just like a used car. When selling a used car there are a few items every buyer will want to know about.
Maintenance Records – Just like a car, the records of your practice are equally important in determining its value. A practice that regularly files its tax returns on time, maintains good employee records, and continuously monitors and cleans up its accounts receivable, is typically going to be more attractive than a practice that does none of those things. Accurate record keeping eliminates risk from the buyers perspective because it lets them know how the practice/car has been maintained as well as giving them a clear picture of what they are purchasing.
Multiple Owners – If you ever watch any of those car auctioning shows, the used (vintage) cars that always sell for the most money are the one owner cars that had been in the same family for many years. Likewise a practice that has had the same owner for many years will typically be more attractive to buyers. Practices that have changed owners multiple times over a short period of time will not be as desirable. If you have a practice like this, be prepared to answer questions as to why the practice changed hands so many times.
Inspection – Before any used car purchase most will have their potential purchase inspected by a mechanic of their choosing. Be aware that any buyer for your practice will most likely have a mechanic (in the form of a CPA or Consultant) inspect your practice for quality as well. They will ask questions about the practice’s collection policy, recall system, and marketing plan to mention a few items. Making sure you have set policies in place, that are continuously followed, will add value to your practice’s sale price.
Emotion – If you are going to sell a car that you have had for a long time, its natural to feel like the car is worth more than what similar cars are selling for. All the good times experienced in the car, perhaps its exclusivity, and the sweat equity that went into maintaining it, cause sellers to put a premium on the price. Similarly, your practice could feel to you like it is worth a lot more than what practices are selling for. Remember that this is a business transaction, nothing more, nothing less.
Selling your dental practice will probably be one of your life’s biggest transactions. To make sure you get the most value out of what you have built, have a plan in place to maximize your practice’s worth and be sure to implement that plan at least 3-5 years before you plan on selling. Just like a car, if your practice has been cared for and prepared properly for sale then it will sell quickly and for a premium.