If you are at a point in your career as a dentist where you think you are ready to slow down or even retire in the next few years, you should start preparing to sell your dental practice. Getting started can feel daunting, but it doesn’t have to. It’s important to understand your options, research, and identify the right partners to prepare your business for a smooth transition. The right partners will help you understand how to get your finances in order before selling your dental practice and will help you understand your transition options.
Know your transition options
There are several different transition options and they are influenced by the size, location, and overhead of your business. Dental facility ownership and/or lease arrangements also affect your transition options. The main transition options are:
- Selling your practice “turn-key” and retiring completely.
- Hiring an associate and setting a date for the associate to purchase the practice in the future. You can also sell now, then be an employee of the buyer.
- The last option (for larger practices) is to divide your business and sell just a portion of your practice.
A broker can work with you to help find the transition option that best fits your practice and future plans.
Before you consider your transition options, it is important to have a solid understanding of the financial state of your practice, including an accurate practice valuation. If your practice is valued too low, you’ll miss out on money you may need for your retirement and if your practice is valued too high, your listing can languish on the market for years.
The three forms of practice value
There are three types of value to consider when you are looking to sell your practice. And, each is important to be aware of, in order to arrive at an accurate asking price. The three forms of value are: Market value, Appraised value and Economic value.
- Market value is the price a practice like yours is currently going for in the marketplace of your area.
- Appraised value, which is also known as mortgage valuation, is the value of your practice at a certain time and is conducted by a professional appraiser. It takes into account curb appeal, infrastructure, location and more.
- Economic value has two interpretations. It is the measurement of value of your practice based on the benefit that is derived from it. Economic value can also be defined as the maximum price a buyer is willing to pay.
Start with a valuation
The valuation of your practice is the launch point in selling it. It helps set realistic expectations and reveal aspects to be improved and enhanced. To get an accurate valuation, work with an experienced dental practice broker to help you accurately value your practice. A proper valuation will involve answering questions about your practice and providing practice income tax information and other records to calculate the right price for your practice.
Once you’ve decided that a practice transition is in your future, get in touch with a dental practice broker to understand your options, determine the value of your practice, and prepare your practice to get the highest return.