Why Not Sell the Practice Yourself and Save a Commission?
Some dentists may consider the “FSBO” (For Sale by Owner) option when they decide to sell their practice. They think they will save money, no one knows their practice better than they do and they think the process won’t be difficult.
You can go that route, and you will definitely save a commission. But at what risk and cost? This page addresses some thoughts you may want to consider before you go down that path.
First, consider that your setting the price will be subjective—not objective. Improper pricing may mean you don’t get enough for your practice—or you ask too much and discourage buyer inquiries.
Neither your accountant nor your attorney is suited to be your lead advisor for this unique project. They are not equipped nor prepared to be working on your project 24/7. With intermittent involvement, they will have no understanding of how you got to a particular intersection in your sales journey. This is an engagement where you need hands-on guidance from start to finish.
When it comes to handling negotiations, there needs to be some “give and take” in order to accomplish the sale in an amicable manner. These parties may not understand the trade-offs in the sale of a dental sale. If their posture is: “This is what we want!” and then they draw a line, you will lose your best candidates. There are ways to give both parties what they need, but only the experienced agent will know this.
Who Will You Talk to When Serious Questions Arise? Examples Include:
- When do I tell my staff?
- How are the accounts receivable handled?
- What is expected in a non-compete agreement?
- How are retreatments handled?
- What are my responsibilities after the sale?
- Neither your accountant nor your attorney will have the needed expertise to answer these and other questions.
How many dental practices have you sold? There is a tremendous learning curve in this activity, and it is never over. Are you willing to risk the real value of your practice, along with making yourself vulnerable to a post-sale problem as you did not know how to cover your assets?
How will you quickly defuse buyer objections that are unfounded? How will you know which pitfalls to avoid? How will you know the proper safeguards that need to be employed to protect yourself from post-sale problems?
It will be far more difficult for you to maintain the requisite confidence required for this task if you handle your own sale. Is it your intent to have your sale become public information? Do understand that the FSBO avenue takes longer to conclude, and why?
How can you immediately respond to buyer inquiries if you are busy in your practice?
It is impossible to be objective and analyze the sales journey if you handle the task yourself.
It will take considerable time for you to fully market your practice, and you will most likely miss most of the best candidates available. What a good agent can do in a couple of weeks will take you at least a couple of months—and still not be as extensive. In fact, just as you are just starting to get nibbles on the practice from your own efforts, a good agent could already have a ratified purchase offer on the practice with the closing just weeks away.
By handling your own sale, you will lose the advantage of leverage. By engaging an experienced agent, you will have leverage and the benefits that go with such an engagement.
There is no one party who has been engaged to facilitate the event. Will you know when to pull the proverbial trigger, which is ratifying a purchase offer? And once the trigger has been pulled, what next? This shall be the biggest procedure you will ever experience in your practice. Can you close the deal?
Will you understand the value in having the sale proceeds handled by a neutral escrow holder? And if so, whom? Many escrow companies believe that the sale of a dental practice needs to be conducted as a bulk sales transaction. As such, they feel the need to publish a pending sales notice in a local newspaper and collect sales tax on the equipment and furnishings. This is inappropriate!
Will you prorate the unsecured property taxes paid on the hard assets along with notifying the county tax assessor of the change in ownership? Will you obtain the necessary title reports on the practice? What about the transfer of the fictitious business name? What about the security deposit on an assigned lease?
How about the certificate of release from the employee development department, the clearance from the county tax collector and the release from the Franchise Tax Board? These are all very important aspects in the sale of a dental practice.
How will you maintain the important element of trust with an interested prospect when it becomes apparent that you are trying to create competitive interest in your practice?
Will your papering of the transaction be the best possible?
How might you handle the dilemma of dealing with multiple offers? As attractive a situation as this seems, it is a very delicate area. Great care needs to be taken. If not handled properly, there can be unpleasant consequences. No seller needs their sale soured by a restraining order or a court-ordered specific performance. With one simple mistake, your sale could be muddled with legal issues that you could have easily avoided.
Review the role playing section for additional information.
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“Professional Practice Sales successfully marketed and closed the sale of my pediatric dental practice in four months bringing in multiple offers and a final sales price above asking. Ray Irving delivered an exceptional level of personal service, with attention to the legal as well as emotional aspects of this difficult process.
His thorough preparation of all pertinent documentation afforded the buyer an accurate and complete representation of the practice performance and provided me with security and legal protection. Initially I did not realize that there are many unforeseen complications that can arise in this complex transaction. Ray’s vast wealth of experience was vital to bringing the process through to completion.
He provided useful sage advice and counselling to both seller and buyer. This is a highly specialized market, and is no place for amateurs, discounters or impersonal corporations. I highly recommend the incomparable expertise of Ray Irving to orchestrate and conclude the sale of a dental practice.”
—George Mednick, DDS, Pedodontist, Santa Clara