If you’re considering selling your dental practice, whether it’s in the next 12 months or several years down the line, you need to ensure it is on the best possible terms.
Whether you want to move on, stay on or wind down towards retirement, you need to prepare a sound exit strategy that’s right for you and your business to ensure the best-selling price, while making sure the business continues to thrive post-sale.
The transaction process usually proves to be something of a challenge, and finding the right specialist broker to advise and support you can be a great asset. But what should you look out for and when should you look to professional help to ensure a successful sale? Here are six points to consider.
1. The tie-in period
Often, buyers may ask to tie you in, especially if you are the leading performer, the practice is predominately private, or you personally provide specialist services. This needs careful consideration, but also means more options could be available to you if you are able to commit to assisting with the transition of goodwill.
2. Deferred payments
Any offers received, and depending on the business, may include deferred payments that are released on meeting certain targets to ensure practice performance remains the same post-sale.
The possibility of deferred payments again depends on the type of practice and any targets tend to be related to practice turnover or to you as an individual performer.
In this situation, it is always best to take the advice of a specialist broker. These targets need to be fair and achievable in relation to the business, so there’s no likelihood of you losing considerable revenue if unrealistic targets are not met.
3. Partnership model acquisitions
This model works well for vendors looking to reduce responsibilities, but continuing clinically for the longer term by deferring some of the monies and converting this into shares. The projected return can certainly make this an attractive option to some vendors, but don’t be too hasty. The terms and conditions of this type of deal need to be properly scrutinised and discussed with both a broker and solicitor to ensure the terms are reasonable, and in the best interest of the seller.
If you are unsure whether to sell the freehold outright or to lease the building, it’s advisable to have an up-to-date commercial property evaluation
4. Post-sale payment
Any incoming buyer will consider the vendor remunerations as part of their earnings before interest, tax, depreciation and amortisation (EBITDA) model and this needs to be carefully checked by a broker against what is being offered. This will ensure that a fair remuneration rate is being put forward and the price is not inflated due to a poor post-sale associate contract.
If you are unsure whether to sell the freehold outright or to lease the building, it’s advisable to have an up-to-date commercial property evaluation.
A specialist broker can help to provide this, along with an estimate of the return you are likely to expect from leasing the property in the current market. This allows you to make an informed choice whether to sell up, lease the building, or offer both options.
6. Upgrading equipment
Most buyers usually purchase on a debt-free cash basis, so any loans are paid off on completion. Some of the tangible assets purchased – fixtures and fittings – hold little value in comparison to the value of goodwill, so it’s advisable not spend extra money upgrading the surgeries or taking on any major refurbishment prior to marketing. You’re unlikely to see any return on investment, or even break even.
These are just some of the important points to consider when planning and executing an exit strategy, and even if you have no current plans to sell, it’s never too soon to start putting a plan in place.
The team at Mediestates has comprehensive and extensive specialist knowledge of the dental market and how it relates to your individual circumstances, which allows us to help you plan and execute an exit strategy at the earliest opportunity.
An exit strategy does not mean the end of a career, it’s just as applicable to anyone wanting to sell a practice, becoming part of a corporate, planning for retirement or choosing a new career path entirely.
Whatever decision you make, Mediestates can provide you with the practical knowledge and expertise to plan the exit strategy that’s right for you.