February 5, 2021
How to Choose a Dental Practice Broker — A Comprehensive Guide
Selling a practice takes approximately 150 hours, which is why you’ll want to hire Professional Transition Strategies (PTS) to do the heavy lifting rather than attempting to add that task to your already-full plate. As a business owner, it may be instinctual to want to take the sale of your practice into your own hands rather than hiring a professional.
But hiring PTS to handle one of the largest financial transactions in your life will help you get the most out of your transaction in the long run. Likewise, both financially and personally, there are other considerations that can affect the outcome of selling your practice. After all, your time is money, and your time is better spent on keeping the value of your practice up.
Whether you are looking to sell your dental practice, bring on a partner or buy a dental practice, PTS makes the process easy, painless and seamless for general and pediatric dentists, endodontists, orthodontists, prosthodontists, oral surgeons and periodontists across the country.
However, not all dental practice brokers are created equal, which is why you’ll want to hire PTS to focus on the bottom line and vet potential buyers while alleviating stress for you.
As an aside, we’re also here to help you answer these questions along the way:
- How do I find a dental practice to buy?
- What should I look for in a dental practice?
- How do I set up my own dental practice?
- What is a dental practice broker?
Know the difference in dental practice broker services
By having a dental practice broker act as your fiduciary, you can feel confident your best interests are being represented rather than just the interests of the group. PTS isn’t compensated by any group. While being your advocate in the transaction, we don’t have any other skin in the game.
PTS helps you answer all the important questions, such as: Should I take out a loan? How much will the loan cost me? Is this fair market value? We have the expertise to answer these questions and more. We even have a calculator to estimate what the monthly cost of a purchase would be.
Whether you want to sell a practice and leave, partner with another dentist to help carry the load, sell but stay on as an associate, or simply merge or affiliate with a larger practice or dental service organization (DSO) in your area, PTS will provide the dental practice broker services you need to make your transition successful.
The steps to selling a dental practice or merging a dental or medical practice are intricate. It includes not only the financial and physical challenges, but emotional ones, as well. We realize that every situation is unique, and we will help you decipher which option is best for you. And while it’s important to know the difference between buyer and seller representation, a dual-representation broker could never truly have the best interest in mind for both parties.
Single agency versus transaction broker
Brokers who are single representatives can act on behalf of either the buyer or seller. A single agency broker tends to have fewer qualified buyers in their arsenal since they only work with one party. Unlike a transaction broker that acts as a referee throughout the process, a single agency broker has fiduciary toward the buyer or seller. Along with disclosure, confidentiality, accounting and reasonable care, a single agency broker also owes the client obedience and loyalty.
A transaction broker who represents both parties owes each party the promise of disclosure, confidentiality, accounting and reasonable care while having no fiduciary in the game. Acting as a mediator between both parties, a transaction broker ensures a smooth transition will take place. The transaction broker will help the seller determine a competitive list price, as well as help the buyer prepare an offer. They will help facilitate communication between both parties, including coordinating the transaction from the time the offer is accepted to the time it is closed. In addition to marketing the practice, finding qualified buyers, writing the contract to buy and sell, and assisting in negotiating terms, they will also assist with the closing entirely.
The PTS difference
Just like your patients come to you for your experience, dentists come to PTS for our expertise.
We are experts in the industry and have extensive market knowledge that will lead to a more seamless and possibly faster sale. When representing yourself, it can be hard to get to the bottom of each interested party while also negotiating the terms and running a successful practice at the same time.
For the buyer, our knowledge expands to medical or dental competition and patient demographics in your location of interest, along with expertise in practice appraisals to determine a fair market value. Our real estate, legal, accounting and strategic knowledge rounds out a complete transition service all in one place.
Along with industry knowledge comes experience. As with any team, you’re only as strong as your weakest link, so it’s important to choose advisors who have experience in the dental industry. The easiest route to a smooth transition is to hire PTS that is familiar with practices like yours. While we may not be in your geographic area, we have experience with the size and type of transition you are working toward.
PTS takes a proactive approach to finding the right fit for dental practices, ensuring fewer days on the market. Additionally, PTS has personal experience with the DSOs, making it easy to predict which way the transaction is heading and negotiate accordingly, whether simple or complex.
Leave the dental practice details to us
Arguably, one of the most important steps during the beginning of a dental practice transition is to have a practice appraisal to determine where you are most valuable and where there is room for improvement in areas that are not as highly profitable. This includes the practice’s location, visibility, and population of city or town; type of medicine or dentistry, revenue sources and active patient base; growth potential; patient attrition and retention rates; reason for sale of practice; long-term trends of the practice’s revenue and profit margin; condition and age of medical and dental equipment based on wear and tear, as well as technical advancement; and even office decor and condition.
The extensive practice appraisal offered by PTS breaks down the current value of the practice and where the practice needs to go before the sale. The appraisal uses the most effective method of calculating your practice’s worth by looking at both attributes and challenges and how they have impacted the success of the practice. Best of all, PTS can perform these services at no charge with no commitment obligation.
Whether you’re planning to put your investments toward retirement or another investment, you’ll want to ensure a smooth and lucrative transition. A prospectus breaks down the facts to ensure business owners are making an educated decision on their largest asset, which is when the work has just begun.
PTS offers a complimentary prospectus to assess the true value of your practice and which options are available. While many brokers say practice value is as simple as 70% of collections, it also includes applying a multiplier (including location of the practice, type of building practice is in, office itself, longevity of doctor and staff, and procedures performed) to a three-year weighted average of collections, seller’s discretionary earnings (SDE), and earnings before interest, taxes, depreciation, and amortization (EBITDA). And unlike other dental practice brokers, PTS doesn’t just sign with dentists to get the necessary information for you to make the right decision.
Contracts in place
PTS already has the contracts in place rather than hiring an attorney to draft documents for you, saving thousands of dollars, whether you’re planning a location, new startup, quarterly performance review or legal services. Our complete counseling starts from evaluating your practice to implementing the necessary changes through evaluation, strategic planning, implementation and consulting. PTS will be by your side through the entire real estate transaction process, managing the process with landlords, banks, general contractors, architects, city building and planning departments.
And speaking of contracts, don’t hire someone with a long-term contract, allowing the broker to be passive and wait for leads to come to them and limiting the number of offers you receive. Six months to one year is standard, but PTS has a 30-day contract with no penalty to cancel. Add this to the list of questions you’ll want to ask your broker before hiring.
Enlist the professionals at PTS
Consider PTS part of your transition dream team, making sure all the agreements are in place and identifying ahead of time any issues that may arise. Avoiding a direct negotiation, PTS removes any emotions from the situation by providing a buffer between the two parties, ensuring the buyer-seller relationship doesn’t become strained during the process.
The rest of your dream team consists of an attorney who specializes in dental practices, a certified public accountant (CPA), investment and insurance advisors, and practice consultant to identify your current assets and perform a gap analysis before the sale goes through.
While many CPAs, real estate agents, and attorneys think they can sell a practice, only trust a professional transition broker, such as PTS, just like you won’t ask your chiropractor to perform a full arch fixed dental implant bridge.
Focus on your bottom line
Your primary focus during the selling process is to maintain the success of your practice. Both you and your buyer will suffer consequences if the value of your practice decreases with a decrease in production. Your time is better spent focusing on the well-being of your practice and its employees and patients before hanging up your proverbial hat.