How long will it take to sell my dental practice?
The length of time it will take to sell your practice will depend greatly upon how you approach the sales process. If your practice is healthy, has four or more treatment rooms or capacity to expand, has a desirable location and is priced fairly, it could sell quickly – between three to five months from start to finish. The decision of when to sell can make a difference. The first six months of the year can sometimes work in your favor as doctors with families ideally purchase in spring and summer and especially if the purchase will require a move.
Purchasing doctors will scrutinize your practice based on their practice objectives. The last three years of practice performance will be examined. This will include financial performance, staff management, new patient flow and the total number of active patients. They will look to see if they can add any treatment services or if you are offering any services, they will not be able to provide.
If they want a minimum of 5 treatment rooms and you have four with room to expand, they may still consider your practice. If you have three treatment rooms with no place to expand, they may not pursue it.
Practice transition is perhaps one of the most significant decisions of your life as well as theirs, so give them what they need to complete their due diligence. Sometimes it can feel like they are asking for way too much information but understand that this is the only way they can gain confidence and get comfortable with purchasing your dental practice. As a broker, I gather all the needed information in advance so that you only need to gather once. I do believe using my services will save you time, money and much frustration, but if you are a people-person who is non-plussed by negotiations and have the time and energy to show and facilitate your private sale - it has been done.
The buyer will need to have a lease that will comply with the lender's loan terms. If you own the building and you wish to sell it with closing to coincide with the practice closing, the monthly building payment will need to work within the practice cash flow for lending to be available. Lenders will require a down payment or for you to carryback the down payment. If you wish to hold on to the building and gain some passive income, the buyer may request an option to purchase in the future or the first right of refusal before you can sell the building to someone else.
Characteristics that can make the process of selling a practice more cumbersome and drawn out:
- The practice has three treatment rooms and is collecting under $500K a year: Smaller practices are harder to sell because student loan debt has doubled and tripled in size equating to substantial student loan balances on top of practice loan and living expenses. Often smaller practices do not have enough cash flow to support the buyer’s obligations.
- The practice is in a rural area: Although the buyer will have little to no competition the pool of candidates wanting to be in rural areas is not as large. Some practices can be on the market three or more years waiting for the right person to come along.
- Specialty practices: It can sometimes take longer to find a replacement for specialists. This is due to how your practice originates new patients. If the practice is highly referral based from general practitioners, you may need a layered transition to expedite a sale.
- The practice has declining revenue: This can be worrisome to buyers (not to mention lenders) if you can’t point to direct reasons. Reasons could be that you cut back a day a week or you took off six weeks for surgery.
This article was written by Lynne Nelson co-founder of Practice Management Associates, LLC (206) 455-5388. For a no-charge consultation or questions regarding study club presentations, please call us! Copyright © 2018