20 Jun Preparing for a Practice Sale

There are certain things a seller should and should not do in preparing for the sale of a dental practice. We will address several important considerations in this article for your review and convenience. Please do not hesitate to call your PARAGON consultant if you have any questions or if you have any doubt as to how to handle a particular situation. We are here to help you in every way we can, but obviously we don’t know you need help unless you let us know.

DENTAL OFFICE: DO THIS

Straighten up and clean your dental office. The waiting room makes the first impression, so see to it that your staff makes an extra effort to clean it before leaving at night. The magazines in the waiting room should be current. If you have a lab, then see that the equipment and counters are clean and uncluttered. There is no need for making leasehold improvements such as painting and replacing carpet. If you own the building, then be certain that the area around the building is neatly mowed and bushes trimmed and make any necessary repairs to the parking lot.

DENTAL OFFICE: DON’T DO THIS

Don’t buy new equipment or make any expensive leasehold improvements. Please don’t promise the potential purchaser that you will be replacing or repairing equipment or making leasehold improvements; the purchaser will be prepared for what he or she will see in your office. We base the sale on the economic value of the transaction, not the value of the tangible assets. A successful transaction is jeopardized by too much emphasis on the equipment, etc.

STAFF: DO THIS

Confidentiality is very important, and it is preferable not to tell the staff about the sale until it has actually been completed. The best time to tell the staff is after the deal has closed so both you and the purchaser can explain to the staff together about the practice sale. You don’t want the staff to seek employment elsewhere because they erroneously think you will just pick up and leave the practice without a replacement. Again, it is always best not to say anything until the transaction is completely finalized.

However, if one of your staff members suspects something, then by all means have a confidential meeting with that staff member. Inform the staff member that you have retained PARAGON to locate a purchaser for your practice. Explain to them that one of the reasons you decided to use PARAGON is because of PARAGON’s track record of finding a purchaser that best fits into the current personality of the practice. You can assure the staff member that in virtually all of PARAGON’s practice sale transactions (other than merger transactions), the purchaser keeps the existing staff in tact. Be very positive when discussing the sale with a staff member, letting them know that you are looking out for their future by seeing to it that the practice will continue as normal as possible after your retirement! Expect the staff member to be somewhat sad and also concerned about whom the purchaser will be, but you should assure the staff that you will do your best to see that a suitable replacement is located.

NOTE: The only change will be that a new purchaser will most likely not have a pension and profit sharing plan for the first few years of practice. Generally the staff and their salaries are secure following the sale unless certain staff members are uncooperative (which usually does not happen; they want to keep their jobs). A practice merger, however, may require fewer staff members, so if the purchaser is acquiring your practice for merger purposes, you and the purchaser will need to discuss which staff members you feel should be retained after the merger. Experienced staff is valuable and is usually retained by the purchaser in tact if at all possible.

STAFF: DON’T DO THIS

If at all possible, don’t tell the staff that the practice is for sale until after we have located a purchaser and closed the transaction. Don’t promise your staff members a job with the purchaser, even though normally their job will be secure. Don’t increase salaries or benefits just before a closing without discussing it with the purchaser first. Transactions have fallen apart for this very reason numerous times!

INITIAL MEETING WITH A PURCHASER CANDIDATE

We do our best to screen prospective purchasers and prepare them for the initial meeting with a seller. PARAGON does not like to attend this initial meeting between you and the purchaser because we do not feel that we should be there to “monitor” your meeting. We want the two of you have a chance to get to know each other. You and the purchaser should feel free to ask each other any questions about the practice and your future plans. However, we strongly emphasize the following: Never talk about the specific business aspects of the practice sale. Don’t talk price. Don’t talk terms. In short, don’t talk about anything other than dentistry and personal issues!

We will have already shown the purchaser a proforma for your practice opportunity. He or she will be aware of the terms of the sale and have been told repeatedly not to “negotiate” with you regarding the purchase price, terms, etc. If the purchaser says or asks ANYTHING about the financial aspects of the transaction, simply say: “That is why we have (your PARAGON consultant’s name). Please direct all such questions and comments to PARAGON.”

FYI: The purchaser has been advised to say the same thing to you if you attempt to talk about the transaction particulars.

After you meet, both parties will contact their PARAGON consultant and let us know what you think. Typically the initial meeting leads to the next step of the transition process; the execution of the Purchase Proposal between you and the purchaser so we can move forward with the practice sale.

We pride ourselves with our ability to make good matches, but no one can be perfect and occasionally we miss on our initial assessments of a purchaser. We do try very hard to only send you quality individuals that have a sincere interest in your practice. We do our best to weed out the bad apples, but it is not always possible to identify them in advance. Remember, there is never just one purchaser… nor is there ever just one practice for sale. If you are uncomfortable with the purchaser, then end your  discussions with him or her and inform us. We will locate another candidate. We want you to be happy with your successor.

MEETINGS WITH THE PURCHASER: DO THIS

Discuss your practice philosophy and methods of treatment. Disclose any special or unusual methods of treatment and your fee schedule. Talk about the staff and patients (in general). Talk about the area and all the positive things that are happening nearby. Show the purchaser the office and any special equipment, etc. You can talk about  why you are selling and your post-sale plans (in general), but PLEASE limit the first meeting to these topics ONLY!

MEETINGS WITH THE PURCHASER: DON’T DO THIS

Don’t show a purchaser candidate your tax returns or other practice financial information. There will be a time for this once PARAGON has determined that the purchaser is truly interested in acquiring your practice. The purchaser candidate will tell us about his or her interest and ask us for any pertinent information after your initial meeting. We will provide the required paperwork if and when needed.

Don’t discuss the terms of the sale, purchase price, down payment, number of years of seller financing (if applicable), etc., etc., etc.

Don’t disclose non-transaction related personal information.

Don’t allow the purchaser candidate to review your patient records; there is a due diligence process after the first meeting for this step.

Don’t let the purchaser candidate make copies of your patient records or call any of your patients.

Don’t let the purchaser candidate meet your staff members.

Don’t talk to the purchaser’s attorney, accountant or any other advisor.

Don’t agree to anything to which you are uncertain or confused; check with your PARAGON consultant before making any commitments at all.

Don’t discuss your problems with other practitioners in the area.

Don’t “bad-mouth” the competition, but don’t build them up too much either! Don’t talk down the area, or the people living nearby. Always be positive.

DEALING WITH THE NEW PRACTITIONER

If you have a new practitioner purchaser candidate (a doctor who has never owned a practice… could either be a recent graduate or an associate who has been out of school a few years), try to be as patient as you can. This is a first time experience for the young doctor and he or she will seem to be naturally suspicious of everyone. Many  times the new practitioner will feel as though they must impress his friends with his ability to negotiate a “good deal.” If you encounter this aggressive, adversary posturing, we suggest you immediately discontinue the discussions and call us to let us know what happened. You can always schedule a new meeting if we can get the purchaser candidate turned around and thinking clearly again. If not, we will locate a new purchaser candidate for your practice.

Try to remember what you were like when you were the same age and be prepared to be a little forgiving. A new practitioner will either: believe that he is smarter and is a better practitioner than you; or, will be scared to death to make a decision of any kind; or, if you are really fortunate, he will be confident and very appreciative of the opportunity to acquire your practice.

You will have many questions as you proceed through this process. Keep in mind that PARAGON has been through this thousands of times before, and we will get you through it too! Make sure you maintain constant contact with your PARAGON consultant. Good luck!