Selling a dental practice you’ve built and nurtured for years can be difficult. Many dentists use dental practice brokers to help them navigate their dental practice transition and retirement. But how do you choose a dental practice broker and more importantly how do you know which ones are good? Before starting this process, you need to do some research and talk with colleagues, accountants or an attorney to get recommendations. It’s really important the broker fits your needs and has a proven track record of bringing the best possible buyers together with their clients.
Common Sense Approach
When it comes right down to it, you need to approach this process with common sense. For instance, always be straightforward and explain your expectations, retirement goals and concerns. There’s no such thing as a stupid question. Interview potential dental practice brokers with a list of questions. Most brokers will work hard to sell your dental practice. Checkout their track record and reviews from other dentists. Most brokers’ long-term business comes from referrals (this is good for you). That said, most brokers’ only get paid when the practice deal closes (this could be good or bad for you). Make sure you understand how the broker gets paid and if there are any personal incentives.
Here are some questions to ask potential dental practice brokers
- How many dental practice transitions have they done in your area? Ask for recent transaction comparables and client referrals.
- Find out if they exclusively work on dental practice deals. A good dental practice broker will only do dental practice transition deals. Don’t work with a broker who does several types of business sales. Also, make sure you work with a full-time practice broker. Part-time or semi-retired brokers don’t have large pools of buyers and usually don’t work as hard as full-time brokers.
- How long does it typically take to sell a dental practice?
- Do they keep your information confidential while marketing the practice?
- How does the broker determine the value of your dental practice? There are several methodologies used to value a practice. It’s very important you understand each method and agree with the broker’s valuation approach. Note – if a buyer doesn’t agree with the broker’s valuation method, you bear the risk – not the buyer!
- What should you do to increase the value of your practice before sale? Quite frankly, it’s a bit late to ask this question but a good broker will recommend several short-term changes (if necessary) to make sure you get the most for your practice. Spending a little money on paint, carpet and replacing worn-out furniture or equipment goes a long way.
- What are the broker fees? Most dental practice brokers charge 8%-10% of the purchase price paid at closing.
- Are there any additional fees you might have to pay at closing? Note – you’re required to pay your own lawyer and/or accountant. A good broker will explain all additional professional service fees you’re required to pay at closing.
- How does the broker market and vet potential buyers? Find out if they prefer specific types of buyers. Note – this is a trick question. A good broker will have a wide range of reliable potential buyers. They should only exclude buyers that don’t meet YOUR criteria!
- How are dental practice transitions structured and what variables (if any) should you be aware of upfront?
- How common is seller financing in my area? Note – seller financing is common in dental practice transitions but varies by geographic area.
Single vs. Dual Representation
Some brokers operate as single representatives while others operate as dual representatives. Single representation means the broker represents either the buyer or the seller during the deal – never both. For example, most real estate deals use single representation so each party’s representative advocates their best interest.
Pros of Single Representation
– Higher level of trust & comfort knowing the broker only represents your best interest.
– The seller usually pays all broker fees. The broker is incentivized to meet sellers’ needs.
– Brokers tend to work on fewer deals allowing them more time & resources for your deal.
Cons of Single Representation
– Brokers won’t match potential buyers to your practice because it’s a conflict of interest.
Dual representation – brokers represent the interests of both the practice buyer and seller. This is relatively common with dental practice transitions. Dual representation isn’t common with other industry business deals.
Pros of Dual Representation
– Brokers talk to many more buyers than sellers. There’s no conflict of interest when matching the right buyer and seller.
Cons of Dual Representation
– Brokers represent multiple parties’ interest with any transaction. Bottom line – this means the broker doesn’t have just your interest in mind. Note – the broker could be collecting fees from both you and the buyer and those fees may vary.
Brokers Affiliated with Dental Supply Companies
There are several dental practice brokers that are owned by big dental supply companies. When working with these brokers, you run the risk of not being presented with viable buyers because they know these buyers might not continue purchasing goods from their parent company. There are also brokers that have professional “arrangements” with these same big dental supply companies. These broker/dental supply company “arrangements” effectively present you with the same buyer/seller issue.
Note – DSOs or large group practice buyers can negotiate lower prices with the very same dental supply companies that own brokers. What does this mean? These brokers might be dis-incentivized to present you with viable buyers – like DSOs or large group practices. Just be aware of all broker affiliations before making a decision.
Enhanced Broker-Dentist Relationship
One of the most important things you can do to enhance your professional relationship with a dental practice broker is to be well prepared and flexible. Know what you want to accomplish upfront and tell the broker. Have all your practice financial information ready. There are no guarantees in life. The same holds true with any dental practice transition. Knowing this upfront will help you strategically navigate & negotiate your dental practice sale.
Knowledge is Power
Before selling your dental practice – seek advice from experts in dental practice transitions. Talk with your accountant about any tax ramifications with different types of transaction structures so you are financially prepared. Also consult an attorney who regularly does dental practice sales. If you don’t know any lawyers well versed in dental practice deals, ask the brokers. Most brokers will give you a list of reputable lawyers.
Benevis is free of any conflicts of interest and always has your best interest in mind. We are not practice brokers. We will happily work with you, and your broker, to buy and transition your dental office. If you’re thinking about selling a dental practice in the next five years – look no further than Benevis to get the most for your dental practice. Benevis is the only DSO that customizes terms based on your needs and works with you throughout the entire process of selling and transitioning your practice.
Call (844) 879-0087 or email firstname.lastname@example.org to see how you can get the most for your dental practice with Benevis!