Upon receiving an offer to purchase your dental practice, the purchase price is usually the first thing you notice. After years of building the business, you want to know what a buyer is willing to pay for it.
Although the purchase price is an important term, the highest offer is not always the best offer.
The manner in which the buyer plans to pay, the conditions attached to the sale, and what will be expected of you after closing can make a major difference. Two offers with similar prices can lead to very different outcomes.
An ADS Dental Transitions broker can help you look beyond the sales price and understand if this really is a good offer.
Start with the payment structure.
Will you receive the full purchase price at closing? Is part of it being held back? Does the offer include seller financing, an earnout or funds that will be held until certain requirements are met?
A higher sales price may be less appealing when a significant portion is contingent on the practice’s future production.
An accepted offer does not guarantee a completed sale. The buyer still needs to secure financing and satisfy the lender’s requirements.
A buyer who has already spoken with a lender and understands their borrowing capacity may bring more certainty to the transaction. That can be more valuable than a higher offer from someone who has not started the financing process.
ADS Dental Transition brokers work with preferred dental lenders, including Huntington, U.S. Bank, and Bank of America. These lenders specialize in dental practice financing and understand how practice cash flow, buyer debt and the terms of the sale affect loan approval.
Connecting buyers with the right lender early can help uncover financing concerns before any unnecessary delays. It also gives the seller a better sense of whether the buyer is in a position to close.
For general lending information, sellers can review the U.S. Small Business Administration loan resources or review our preferred dental practice lenders.
Curious about financing your practice? Check out our Loan Calculator and determine what your monthly payments would look like.
Most offers include contingencies for closing such as financing approval, due diligence, and lease approval. These are common, but the details deserve attention.
Review the conditions carefully:
A slightly lower offer with fewer uncertainties may be stronger than a larger offer that gives the buyer several opportunities to change the terms or rescind their offer.
Your ADS broker can help you compare these terms and identify conditions that may create additional risk.
Many buyers want the selling dentist to remain with the practice for a period after closing. This can help patients and employees adjust, but the arrangement should fit your plans.
Review how long you will be expected to stay, how many days you will work, and how you will be compensated. You should also understand your clinical responsibilities and whether your schedule can be reduced over time.
Some sellers are ready to retire immediately. Others want to continue practicing for several years after the sale. The post-closing transition terms should support what you want your next chapter to look like.
Your employees helped build the practice. Their future may be an important part of your decision.
Ask whether the buyer plans to retain the current team. Will compensation, benefits or responsibilities change? When will employees be told about the sale?
You may not be able to control every staffing decision after closing. However, understanding the buyer’s plans can help you evaluate how the transition may affect your team and patients.
ADS can also help plan when and how the sale is communicated so employees receive consistent information at the right time.
The practice location can add another layer to the offer.
If you own the building, the buyer may want to purchase it or lease it from you. If you rent the space, the landlord may need to approve the buyer and transfer the lease.
Look closely at the rent, lease length, renewal options, maintenance responsibilities and any personal guarantees.
These terms can create financial obligations that continue long after the practice sale closes.
The purchase agreement will divide the price among asset categories such as equipment, supplies, patient records and goodwill.
The allocation of the purchase price likely will affect how the proceeds are taxed. The buyer and seller can have different preferences, which makes this an important part of the negotiation.
Your accountant and attorney should review the proposed allocation before you agree to it. ADS brokers work with your advisors to help keep the transaction organized and moving forward.
You can also review general IRS guidance on business asset sales for background before speaking with your tax advisor.
Most purchase agreements include restrictive covenants for the seller that limit how and where the selling doctor can practice or communicate with the patients and employees after closing.
Review how long the restrictions last, the geographic area they cover, and which activities are included.
This is especially important if you plan to practice, teach, consult or continue working in the dental industry. Terms that seem reasonable today could limit your options later.
Equally important to the terms of the sale and transition, is who will take over the practice.
Consider how the buyer communicates, how they plan to work with the team, and what they want for the future of the practice. Its helpful if the buyer has a similar practice philosophy to the seller.
No buyer will run it exactly as you did. Still, shared expectations can make the transition easier for you, your employees and your patients.
You can also review current dental practices for sale to better understand buyer activity in your market.
Selling your dental practice is a major financial and personal decision. Do not base it on one number.
Consider how much you will receive at closing, the strength of the buyer’s financing, the conditions attached to the sale, and what will be expected of you after the sale.
ADS Dental Transitions helps sellers evaluate the full offer, address potential concerns, and move forward with confidence.
If you are preparing to sell or reviewing an offer, contact ADS Dental Transitions to speak with a dental practice transition expert.
