December 15, 2022
Looking for a Dental Practice Broker? An Industry Insider’s Advice
By Ty Ramsey, principal at Ramsey Consulting, LLC
If there’s one thing I’ve learned in my almost 20 years of working in the industry, it’s not all brokers are created equal when it comes to dental practice transitions. Since becoming an independent consultant, I’ve developed a bit of a niche. Think of me almost like a sports agent for dentists. One client even referred to me as “Jerry Molar Maguire.”
My job is to make my clients look like superstars to both the brokers who represent them and to the various dental service organizations (DSOs) and other groups who want to purchase their practice. As sell-side representation only, my goal is to get my clients the best possible outcome from their practice transition.
I start by evaluating my client’s practice and then matching them with the appropriate broker. Once matched, the brokerage and I co-represent the doctor throughout the transition process.
Why would you need a broker when it’s time to sell your dental practice? Think of it this way. You wouldn’t go into a trial without being represented by a lawyer, and you shouldn’t market your practice without being represented by the proper brokerage. That’s why I work to match you with the appropriate brokerage with one goal in mind: to get you an exponentially better outcome than you could on your own.
Here’s what I prioritize when matching a dental practice broker with any of my clients.
Match with a broker who shares your philosophy
The broker you are working with should have your long-term interests in mind. My philosophy has and always will be, “serve first, sell later.” Brokers who share this philosophy tend to also work with groups and DSOs that share a similar sentiment.
My goal and the goal of the broker I match you with is to find you a clinically agnostic group with which to partner — one that doesn’t tell you how to practice clinically. In addition, I like to focus on groups that will allow for the name of your practice to stay the same, allow for you to continue practicing how you want, and ensure you retain your current staff at their current wages or higher. Ideally, the group you partner with should handle the administrative burden of running a business and allow you to focus on your passion of practicing dentistry.
I find it necessary to open the lines of communication and go at the doctor’s pace rather than pressuring them into a situation they are not ready for or comfortable with. Unfortunately, some brokers are looking to transact at all costs, and this can leave the doctor’s best interest by the wayside. It’s a competitive environment to find partners who align with the doctor’s goals for the practice, and the doctor shouldn’t feel pressured along the way, as they’re the ones living with this decision for years to come.
Find an equitable fee structure
Much like a real estate agent, a dental practice broker shouldn’t get paid until the seller does. One of my favorite partners for sophisticated transactions is Professional Transition Strategies (PTS). PTS employs a team of experienced industry-specific advisors who compile comprehensive information about the doctor’s practice and then create a prospectus.
The best part is they do all the up-front work pro bono, whereas in some cases, it could cost up to $10,000 to get it done by other brokers; fees are only collected if the doctor sells their practice.
Seek out short-term listing agreements
Another thing my clients love about PTS is that they only require a 30-day listing agreement. This basically guarantees performance in the short-term without tying you into a long contract.
Beware of brokerages that lock you into long-term contracts and/or seemingly charge what seems to be a low fee on the surface. Always read the fine print. Some brokerages have their fee structure tied to enterprise value, which is based on a projection of value in the distant future rather than cash in hand. Don’t pay a fee based on a projection.
Use a broker who has a great track record and substantial industry reach
It is advantageous for practices to partner with consultancies that have a great track record of success in the industry. Every time I’ve partnered with PTS, my clients have received multiple offers to choose from. It’s not uncommon to have more than 30 inquiries on a successful practice in the first week after going to market.
From here, we normally pare it down to a short list of four to 10 potential buyers and then conduct interviews. The eventual deliverable is a comparative scorecard that has all the offers listed side-by-side for the doctor to evaluate. That way, they can find the best transition plan based on their needs — which, interestingly enough, isn’t always the highest cash offer. Company culture and work-life balance changes also affect many decisions.
Look for red flags
Some dental practice brokers will all but guarantee financial outcomes before even taking your practice to market. This is also known as quoting multiples. Consider this a red flag, as there is no way to know exactly what the market will bear without bringing your practice to market.
Any type of commitment before preparing a practice evaluation/prospectus and going to market is negligent and not in your best interest. As a dentist, you would say, “prescription before diagnosis is malpractice.” The same rule applies here. You can’t come up with a plan without first figuring out where you want to go and how to get there. My recommendation to clients is to always start with the end in mind.
Another red flag to watch out for is determining if a brokerage that is biased toward a specific group. Sell-side representation yields the best possible outcome as all bias is removed from the equation. Beware of anyone who may have a biased point of view due to their position.
This is an exciting time for doctors exploring the transition options available to them. To get the most out of any dental practice transition, it’s important to find the right broker for your needs by keeping these tips in mind.
Ty Ramsey is a dental consultant that has been in the dental industry since 2004. Ty earned a bachelor of Business Administration from the Red McCombs School of Business at the University of Texas. Ty has transacted more than $80,000,000 of dental equipment in his career and is known for maintaining great business relationships with his clients. In early 2022, Ty started his own consulting firm and spends most of his time as a mergers and acquisitions consultant in the dental and medical space. Ty acts as a liaison between private dental practices and thousands of dental investors, including individuals, DSOs, DPOs, private equity funds and many other institutional investment firms. He can be reached via email at firstname.lastname@example.org, via text/phone at 469-360-1031, or on his website at www.tyramsey3D.com.