Many of us have probably heard from individuals who think sellers don’t need a practice broker to sell their dental practice. That is one side of the story, but in this case, it really pays to hear both sides. To that end, let’s look at the advantages of using a practice broker.
Brokers have the best insight into the true value of a practice. I’ve seen university professors use calculus and involved formulae to value a practice. They have never sold a practice and did not know at what price it sold, if it sold at all. Brokers have to back up their valuations by bringing that amount of cash to the table, and it doesn’t help to overvalue a practice only to not have it sell, or to undervalue it and leave money on the table. Brokers will have the best estimate of a practice’s true value.
Brokers can inform your accountant as to how to best structure a sale to get the best tax benefits. I have shown several accountants a legal method for saving tens of thousands of dollars that they were not aware of, savings which were much more than my fee.
Brokers can help sellers avoid lawsuits. Knowing what has resulted in lawsuits in the past gives brokers insights that they can share with sellers’ attorneys and key language that will prevent legal losses from frivolous actions.
Brokers protect your confidentiality. They can provide and explain volumes of financial and other sensitive information to prospects who don’t know your identity. Only when qualified prospects understand and agree to terms and sign a confidentiality agreement would your identity be revealed.
Brokers can help make you money. Instead of spending weeks of effort in doing a task you probably have no experience or expertise in, brokers can handle the process while you treat patients and make money.
Brokers help prospects understand the facts of the deal. Buyers cannot look at a tax return and see what is really happening. We know your tax return was designed for one purpose – to compute the tax you owe – and not to show what a practice net income actually is. Without this understanding, many practices may be overlooked or purchased far below market value.
Brokers know where the cash is and how to get a practice financed. We know the lenders personally and the best matches for practices and lenders. We work with lenders to get full financing quickly and help find the best rates for buyers and don’t waste time and effort where loans don’t get made.
Brokers provide the maximum market exposure for your sale. The more prospects there are, the more likely you are to get your asking price. Through proprietary websites and the many venues that brokers have developed, your practice will be discovered by the most prospects possible.
Brokers bring legitimacy to your sale. Buyers can discern that brokers inspect, value, and investigate a practice thoroughly before bringing it to market. We show owners how to increase their practice marketability, value, and financeability. It is the difference between buying a certified used car from a dealer versus a used car in someone’s driveway on a dark night. This added credibility gives buyers the confidence to decide to buy and to pay a fair price.
Brokers get it done. I listed a practice for a seller who had tried unsuccessfully for two years to sell his practice. In three weeks, I had a full-price offer, and it quickly sold. The seller told me that he made more from the sale, even after paying my commission, than he would have by selling it himself. Then the buyer told me that the seller offered the practice to him a year earlier at a lower price but that he didn’t see that it was worth it. But through my explanation of the cash flow, the risk assessment and other factors he hadn’t thought about, the buyer decided it was worth the higher price.
Before you decide to sell by owner, remember the money, time, security and expertise that brokers bring to your sale.
Earl M. Douglas, DDS is the founder of ADS South and is a founding member of ADS Practice Transitions
This entry was posted on Wednesday, July 7th, 2021 by Earl Douglas, DDS and is filed under