There are few moments in the long successful road of your dental career that are more precious or stressful than selling your dental practice. This milestone will represent the culmination of years of risk taking and hard work. While it can feel bitter-sweet to send your practice into the capable hands of another, doing so provides you with newfound freedom and allows you to enjoy the fruits of your labor.
After ten years of specializing in dental practice legal issues, this author has witnessed his share of the good, bad and ugly in practice transitions. Ultimately, the hallmarks of a smooth dental practice sale are being prepared and putting together the right team. Doing so will lessen your stress, mitigate your exposure to liability, and allow you to properly enjoy the end of one chapter of your professional career while you start a new one. Below, is part one of a two-part article examining the most important points a dentist should understand to accomplish a successful transition.
Pre-Practice Sale Considerations
Don’t Tell Your Staff
Many dentists have enjoyed a long and successful relationship with their team, and keeping secrets from them is often very difficult. However, when selling your practice, it is very important that you refrain from telling your staff about your intentions. Your instincts and loyalty to your employees may tell you to prepare them for the coming change in ownership. To do so, however, may result in the devastating effect of causing a staff exodus just before you list your practice or find a buyer. Instead, a business coach or the right practice broker will prepare you for a staff transition that preserves your sale while properly introducing the employees to the new owner.
Put the Right Team Together
The sale of your dental practice should be a celebration of your hard work and the realization of the equity you built in your business. To accomplish this goal, an experienced team will help you find the right buyer, maximize your equity, and mitigate your liability. At minimum, your team should include a dental practice broker who will help value your practice and find a buyer, a consultant who will assist you with transition issues, and an experienced dental attorney who will draft and negotiate the transition documents so as to mitigate your exposure to liability post-sale. Later articles on this site will outline how to choose the right team members.
Understand Your Lease Obligations
Generally, a buyer cannot purchase and operate your dental practice without taking over your lease. As such, it is critical that you understand what rights and obligations you have to the landlord when requesting that the lease be assigned to your potential buyer. Most of the time, this author has seen sellers who have found a buyer and are ready to sell their practice but have never reviewed their lease assignment obligations. Some sellers don’t even have a copy of their lease! It is critical to review your lease with a dental attorney before you find a buyer, in order to understand how to navigate the lease assignment provisions in that document.
Don’t Take Your Foot Off the Gas
Understandably, after a long (and back breaking) career in dentistry, a seller may start to take her ‘foot off the gas’ once she sees the light at the end of the tunnel. Sellers may start coming into the practice later, taking vacations and days off, marketing less and focusing more on post-sale plans. This is all on the false assumption that the practice sale will be quick. However, no one can predict how quickly your broker will find a buyer and how fast the sale will consummate. Parties may face obstacles with financing, the landlord, and unknown issues that may pop up during the transition. A ‘quick’ transition is the exception to the rule. Your transition is likely to hit at least a few obstacles along the way. Taking your foot off the gas will exasperate issues by decreasing the value of your practice (if production slips). It might also leave you in a difficult mental space if your sale falls through and you have to rev up the practice operations again.
Prepare to Let Go
One of the biggest issues this author has witnessed in representing sellers in their transitions is a dentist’s failure to appreciate the significance, both professionally and personally, of selling a dental practice. It is important that sellers talk extensively with their loved ones and advisors prior to deciding to sell their practice. Contemplate the decision and post-sale plans, and mentally prepare to let go of the business you have worked so hard to build. Unsurprisingly, the lack of mindfulness in this regard causes sellers to react emotionally in negotiating deal terms, transition documents and letting go of their ownership hat if they work in the practice post-closing. All of this can be detrimental to a smooth transition. On the flip side, a seller who is at peace with his decision will properly prepare for the sale, and they will experience a much more successful tradition. Thereby, they uphold the legacy built in the dental practice.
Part two of this article will exam a seller’s obligations typically associated with the sales documents and how to mitigate your liability post-sale. This includes: understanding the representations you are making in an asset sales agreement, how uncompleted dentistry and retreatment issues are typically handled, covenants not to complete, and other transition issues.
Mention this article to receive a complimentary phone consultation with dental attorney Levi Barlavi to discuss your dental practice transition. Email Levi at [email protected]
or call him at (888) 995-5384