My Sunday nap ended suddenly with the frantic ringing of the phone. It was Doctor Z, a man in his mid-60s. We had met at a seminar on practice transitions, but he decided to “go it alone” with the sale of his 40-year-old practice. His voice was trembling, “Alan, you’ve got to help me! My buyer is destroying my practice! I just can’t stand by and watch my life’s work shrink up and die!”
“Hey,” I interrupted, “didn’t you tell me you got a great price from that doctor?”
I then asked him for other details, and I realized that he had made every error possible in structuring the sale. His buyer, a young man with just four years experience in general practice, had simply stopped showing up for regular office hours, sometimes skipping whole days. Production was down by almost 50 percent, and patients had stopped returning. Dr. Z found himself doing the work of the purchaser as well as finishing the last of his old cases.
Dr. Z had simply aimed for the best price for his practice. This may look no harder than selling a home, but the reality is quite different. Transitions rank among the most complex of contractual arrangements. Here are a few tips:
- Get expert help from the best broker you can find. Make sure the broker has expertise in the kind of arrangement you desire. Do you want a merger or an outright sale? Do you want to stick around for awhile, or do you want to be out the door before the ink dries? Don’t hesitate to discuss your goals, fears, and financial needs. If you’re married, be sure to include your spouse in making all of the critical decisions.
- A broker should have the means and experience to assess any prospective buyer’s financial capability, compatibility, and work habits. Just having enough capital to buy you out is not enough. Will your patients like him? Do you?
- A broker should help your attorney and accountant structure a contract that will reduce negotiations.
- Be realistic. If your gross is $300,000, don’t expect to get $295,000. The broker will explain to you that valuations are based on many factors, unique to each situation.
- Don’t make the mistake of falling in love with the first person who shows you a checkbook. Business transactions have a funny way of coming apart and fading away. Keep showing the practice right up until the day of the closing!
Now let’s get back to Doctor Z and his dilemma. Within a few minutes, he faxed me a copy of the contract.
I read it carefully and noticed a clause about late payments. I questioned him on that point. He replied, “Late? How about being 45 days late as of this minute?”
Using that fact, Doctor Z’s attorney was able to void the contact and return what was left of the practice to a sadder but wiser Doctor Z. A few months later, we found a perfect “fit” with a doctor in a neighboring community who merged his practice with Doctor Z’s.
The sale of your practice will probably be one of the biggest business transactions of your lifetime. It’s a time of high stress, and, besides the complex economics of such a move, there is a tremendous psychological aspect which must be recognized and addressed. Choosing the right people to help you through it can make all the difference to your peace of mind as well as your wallet.
Alan Clemens is president of The Clemens Group, a firm with 30 years’ experience specializing in services in dental practice transitions, including appraisals, partnership buy-outs and buy/sell agreements, and practice sales in New York, New Jersey, and Connecticut. He is a member of American Dental Sales and can be reached at (212) 270-1169 or e-mail at firstname.lastname@example.org. Visit The Clemens Group Web site at www.theclemensgroup.com and see the ADS classified ads in the back of Dental Economics for names and phone numbers of ADS members in your area.