Checklist of Items Needed for Dental Practice Sale

Are you starting to consider selling your dental practice?

Here is a useful checklist of some of the items you will need in order to begin the process.

For further details, email Ellen Dorner (a dental broker) or pick up the phone and call her at (800) 772-1065.

General Practice Dental Office in Laurel/Wheaton, MD for Sale

Well-established GP practice in high-rise professional bldg. with free parking. Adjacent to Wheaton Plaza Shopping Center. @2200 sf - 4 ops with high-end updated equipment, lab, staff lounge, private office for Dr. Grossing in excess of 800,000.  Great opportunity for growth due to re-development in Wheaton/Laurel area. Easy access to 95 and 495 and the red line of the Metrorail..  For more information contact Ellen Dorner at NL Transitions at 410-616-2042 / toll-free at 800-772-1065 or e-mail edorner@nltransitions.com.

The Letter Of Intent (LOI) – Does a Dentist Really Need It?

Here is a post from Tim Lott, CPA, CVA and Ellen Dorner of NL Transitions, a Dental Brokerage firm.

The easy answer is no, it is not necessarily needed.   In most states it is not a legally binding agreement anyway, so why go through the effort?

There are actually some very good reasons why having a LOI is crucial to every dental practice transaction, in spite of it not always being a legally binding agreement.  In my opinion, there really is no downside to having one.  Let’s discuss what a letter of intent is and what purposes it serves.

The primary purpose of the letter of intent is just as it’s titled, to lay out what one’s intent is as it relates to the transaction at hand. It should be a one or two page letter or memo detailing some of the major points of the transaction. In the case of a sale or purchase of a dental practice, some of these major points typically identify: what’s being purchased, the parties involved, the price, the timing of the payment, the structure of the transaction, exclusions, covenant details, seller’s compensation and general terms, buyer contingencies, time frames for acceptance of offer and due diligence, deposit requirements, etc.

As mentioned above, since the majority of these letters are NOT necessarily legally binding and may be somewhat boiler-plate, they shouldn’t cost too much in the way of professional fees to put one together. While you may not need to have an attorney involved to draft and submit a letter of intent, we do suggest you have attorney look over it before submitting it to the other party. If you can hammer out the meat of the transaction BEFORE engaging your attorney you may save money and a lot of headaches having your attorneys iron out these issues.

The letter should be a way for the parties to document what they believe has been discussed as it pertains to the major points. It serves as a way to let the seller know your intent to purchase the dental practice is serious enough to make a written offer and should give them some level of confidence that you’ll be committed to the transaction.

It is customary for the seller to require a deposit with the signed letter of intent. The amounts can vary, however, it’s usually in the range of $5,000. Many times the deposit is non-refundable so if the buyer walks away from the transaction, the seller is covered for any professional fees they’ve incurred to entertain the offer. If a seller requires a substantial deposit then the seller may also have to commit to a penalty if they walk away.

The drawback of NOT having a LOI is that without consensus on the main points, the two parties can wind up going back and forth, or worse, the attorneys or other professionals go back and forth on the main points and the parties wind up spending more in professional fees than they have to. Do yourself a favor and minimize your stress level, start with a LOI BEFORE jumping right to the legal agreements. 

For more information about your situation, email Ellen Dorner or call her at (800) 772-1065. Visit our website at www.NLTransitions.com .

Maximize Your Chances of Selling Your Dental Practice and Your Sales Price – Part 2

Here is a post from Tim Lott, CPA, CVA and Ellen Dorner of NL Transitions, a Dental Brokerage firm.

In Part 1 (5 Ways to Improve the Selling Price of a Dental Practice), we dealt with issues within your dental office you can “clean up”. However, if those items are already completed, what else can a seller do to enhance the value of their dental practice and increase the chances of selling?

Here are five more things a dentist should or should not do prior to putting their dental practice up for sale:

1.       Don’t coast - This is one of the worst things a dentist can do prior to selling their dental practice. It decreases dentistry production, thereby decreasing practice revenue, which buyers AND bankers do NOT like.  If you want or need to cut back on hours or procedures, consider hiring an associate to help you out. Just be sure you protect the practice with a legal agreement and proper covenants.

2.       Don’t reduce your hygiene hours - THIS is the worst thing a seller can do prior to selling their practice. Not only are you reducing your dental practice revenue, you’re potentially losing patients as well. Reduced hygiene hours also leads to reduced dentistry, a horrible idea if you want to get the most value out of the practice you’ve spent 25+ years building. Keep in mind, if you reduce the hygiene hours, your hygienists may be forced to work elsewhere and inadvertently have patients follow them as well.

3.       Review your dental office policies and systems – Long before you sell, make sure you have excellent operating systems and policies in place. If you’re not collecting a patient’s portion of the fee at the time of their visit, make that change now. If you don’t take credit cards, start taking them. If you’re not running daily, weekly and monthly management reports, start doing so. Invest in your dental practice if you have to by hiring the proper consultants to assist you in implementing the necessary protocols that your practice may be lacking. That investment will absolutely be recouped in a higher sales price.

4.       Track your referrals to specialists- At least one year, and preferably two years, prior to a sale, begin tracking the procedures you refer out each day/week and be prepared to provide your broker with good, accurate information for the prospective buyers. We’re seeing a younger generation of dentists who are getting educated and trained on procedures that many older doctors are referring out. If you can show a buyer the additional revenue potential with these additional procedures, they’re more likely to pay a premium for the dental practice.

5.       DON’T add or eliminate any PPOs prior to the sale of your dental practice - This can backfire terribly.  If you eliminate any PPOs you will probably begin to see fewer patients. Even if the collections stay about the same, it’s typically going to be a short term thing. You’ll likely see a loss of patients as well as a loss of production. When a dental practice decides to eliminate PPOs, there’s a transition period where you’ll have more openings in the schedule as patients cancel their re-care appointments and\ or follow-up work dentistry. If you add PPOs shortly before you prepare to sell, you may NOT get the influx of patients you wanted. In addition, some of your existing patients may actually participate with the new PPO and will be paying less for their treatment, which will show in your production and collection numbers.

This is why it is so critical to think and plan WAY ahead of actually putting your dental practice up for sale. There are always opportunities to enhance your “house” to make it more marketable and more valuable.

For more information about your situation, email Ellen Dorner or call her at (800) 772-1065. Visit our website at www.NLTransitions.com .

Maximize Your Chances of Selling Your Dental Practice and Your Sales Price – Part 1

 5 Ways to Improve the Selling Price of a Dental Practice

When someone wants to sell their home, what is the first thing that comes to mind? Typically they will start by improving curb appeal, cleaning out the clutter and making sure it is spotless,  and making it more appealing to the masses. Sellers of dental practices need to think the same way. Here are five ways a dentist can clean their house before they put their dental practice up for sale:

1. Clean up you practice management software – check for old uncollectible balances and write them off. If any of the accounts are collectible, get on them, offer discounts to collect them and clean up the accounts receivables. Check the procedures that the hygienist gets credit for and make sure those are accurate. Be sure your fee schedule is up to date, even those procedures you haven’t performed in ten years. Eliminate, if you can, any provider codes like a hygienist that hasn’t been there in five years or a dentist, i.e. associate and/or original owner provider codes that are still lingering in the system.

2. Clean-up your other record keeping – Make sure expenses are coded properly and discretionary expenses are easily identified. Remove any expense accounts you haven’t used in five years. Have the records filed away in an organized manner so they are quickly accessed when requested by a potential dental practice buyer. Have an organized filing system for your accounts payable invoices and your dental patient charts. This will make it easier on you when the information is requested or when asked questions to support certain expenses etc. It will also make it easier on the buyer for their due diligence.

3. Clean up your office – get rid of the clutter lying on the desk in the reception area and get rid of the “stuff” lying on counters in your lab and kitchen area. Spruce up the reception area and the operatories with up to date décor and a fresh coat of paint, if necessary. Look for opportunities to replace old, outdated pictures with newer, relevant artwork. Be sure the private offices are tidy and without clutter and get the carpets or flooring cleaned. Simple things… you’re not looking to spend a ton of money, hopefully. Make sure the outside is as appealing as you can make it depending on your control over the location of your dental practice.

4. Clean up your staff - make sure their compensation is reasonable and you separate regular wages with discretionary bonuses. Remind them how generous you’re being to them and that the new owner may not be in a position to be as generous to them. If you’re providing unusually generous paid vacation, sick, and holiday pay and year-end holiday bonuses, make sure they understand these are discretionary fringe benefits you’ve been able to afford to show your appreciation of them.

5. Clean up your other overhead – keep in mind you should have been doing this anyway and well before you decide to sell your dental practice. Make sure you only buy the things you need and be sure to price shop. Make sure your staff remains vigilant about spending to control overhead. Evaluate some of your services like telephone, gas & electric, internet or cable, your insurance needs and make sure you’re not overspending. Be an excellent CFO….profits drive value and the more profits your practice shows the more value you’re likely to get.

I am certain there are other areas of your dental practice you can clean up, just as would do when selling your home. Many of the items will be easy and inexpensive fixes, however, they will go a long way in making your dental practice that much more attractive to a prospective buyer.

To review your specific situation, email Ellen Dorner or call her at (800) 772-1065. Here is our Dental Practice Sales website.

Selling a Dental Practice in a Distress Situation

Here is a blog from Ron Ehman from the Dental CPAs and Ellen Dorner of NL Transitions, a Dental Brokerage Firm

Definition of distress - “Acute or extreme pain or anxiety, state of extreme necessity or misfortune, to compel by pain or force of circumstances“.

Selling a dental practice in a distress situation is never easy or pleasant. It is laced with many difficult but related issues, i.e., maintaining staff, maintaining productivity and maintaining practice value.

When a distress situation (usually disability, death, or an extremely adverse financial condition) arises the first priority should be to “circle the wagons” and stabilize the productivity by securing a dentist capable of covering the practice. Possible sources could be younger dentists working in other offices in other geographical areas looking to supplement their income, or seeking out a dentist looking to associate in the practice for a short while with a longer term goal of ownership (this may not be very practical as it is a time consumptive process and therefore may not prevent a decline in productivity).  Perhaps even much more favorably, seek out an experienced dentist who has sold his/her practice, who still wants to work, and can cover the existing hours of the practice until a sale can be consummated.

Regarding the retention of experienced staff who are so valuable to patient relations and maintaining productivity, it is critical to provide reasonable assurances that a prudent buyer will want to retain staff and not make immediate changes in personnel or policy.

Next, if there hasn’t been a recent indication or range of value report of the dental practice done, then have one completed immediately so that you have some idea of and evidence of the value of the practice and a reasonable basis for the asking price in a sale situation. This will also provide a potential buyer with valuable information when he/she is doing their own due diligence.

Whatever you do – do not close or shut down the dental practice. It can be costly and difficult. The value of the “goodwill” will plummet at best, and, in worst case, will disappear altogether.

While the overall goal is to realize the maximum value for the dental practice in this or any other type of sale situation, one should recognize  that the real value of the dental practice (distress or not)  is what  a buyer is willing to pay and that the price and other terms will be a negotiation.

Finally, assemble an experienced, dental - specific team of advisors who will work for you and advise you solely as your advocate and not the buyers.

 Contact Ellen Dorner to discussion your situation, (800) 772-1065 www.NLTransitions.com 

There’s More to Selling Your Dental Practice Than the Price

Here is a post from Tim Lott, CPA, CVA and Ellen Dorner of NL Transitions, a Dental Brokerage firm.

Far too many times when dentists are preparing to sell their dental practice, they are focused mainly on the price and may wind up overlooking many other issues surrounding the practice sale that are just as important, some even more important than the price. That is not to say the price is NOT important, because it is; however, there are so many other aspects of the transaction.  Sometimes you need to know when to give on one issue so you can profit or benefit from another issue.

The following are some examples of different components of the dental practice sale where the seller can benefit.

• How are you handling the assets that you are including in the sale? How is the price going to be allocated among those assets?

o As a seller, do you know how the allocation is going to impact the income tax picture in the year of the sale?  It is important to have an income tax projection done to determine how one allocation may differ from another in terms of the income taxes you will pay.  If there’s an allocation that works better for you, compromising on the price may be necessary for you to benefit from that allocation.

• If you plan to stay and work for the buyer as an associate, how will you be compensated?

o Would you prefer to be treated as an employee or an independent contractor? What professional expenses do you want the new owner to cover?  These are all negotiable points and if you’re planning on staying on for at least a year, the compensation you receive might actually be more valuable to you then standing firm on a higher price.

• Will you be selling the accounts receivables to the buyer in addition to other dental practice assets?

o If so, how will they be valued?  If you’ve compromised on the price of the other assets, you might be in a better position to use that as your negotiating chip for a more favorable price on the accounts receivables.

• Do you currently own the real estate where your dental practice is located and if so, will you be selling it or renting to the new owner?

o Again, if you’ve compromised in other areas of the transaction, you’ll want to remind the buyer of the compromises you’ve made in those areas so the price of the real estate or monthly rent works more in your favor. The annual increases and/or expenses can be passed through to the buyer within the lease agreement.

So as you can see, there so many other areas that get negotiated during a practice sale.  If you are solely focused on the price of the practice, you may wind up losing a good buyer when, in actuality, the difference in the price may be made up in other areas of the transaction.  It is important to look at the ENTIRE picture and plan accordingly.

Have a range in mind for the price you’ll accept for the practice.  Also have a range that you’ll accept as compensation, a range for the value of the receivables and if you own the real estate, a range for the sales price or annual rent.  When you approach the transaction with a global view instead of just concentrating on the price, you’ll have a much better chance of success in not only selling the practice, but getting what you want from the ENTIRE package.

For more information about your situation, email Ellen Dorner or call her at (800) 772-1065. Visit our website at www.NLTransitions.com .