Get the right advice before selling your dental practice

Not wanting to spend money foolishly, the dentist selling his or her practice wants to know what to do to prepare the practice for sale. One of the first steps is for the clinician to meet with the dental certified public accountant (CPA) or financial adviser. These talks will assist the dentist in learning whether the dental practice is ready to be listed with a dental practice broker.

Bruce Bryen, CPA, CVA.

The listing should be based on whether the dental practice and the dentist have conveyed the desired goals and if those goals are achievable with the estimated sales price and net proceeds.

If the dental practice and the dentist have not retained a dental CPA or financial adviser who possesses strong expertise in the dental profession, one should be hired quickly. These professionals will have a good understanding of what the profit and loss statements will offer to a potential buyer as to the reasonableness of value and the ability to finance the acquisition.

Before an experienced dental practice broker can be retained, however, having experienced financial people on board is a must to understand what the financial data will mean to a buyer and the tax effect it may have on the seller.

The importance of experience

A dental practice broker with a history of experience should be interviewed. Since there are many brokers to choose from, conduct interviews with those with the intent of soliciting their feedback about how they would improve the practice's appearance.

Questions about the readiness, age, and capabilities of the equipment should be on the agenda. The tax consequences should be discussed as well based on the estimated sales price.

Having an experienced financial person with a good background in the dental community is a terrific counter to a broker who may try to give the dentist an unrealistically high value to secure the listing agreement. A discussion regarding the equipment is important, because the buyer will want to know how soon the equipment will have to be replaced and at what cost.

These are some of the things that a dental CPA will probably not know, since he or she is primarily interested in the financial side of the dental practice. The dental CPA will look at the administrative systems and the accuracy of the bookkeeping.

The broker, on the other hand, understands that equipment (and its age) impacts the listing price of the dental practice and offers from potential buyers. Offers to acquire the practice will have a lot to do with how long potential buyers and the broker estimate the equipment will continue to work and what it looks like to a patient. Additionally, there may be adjustments made to the purchase price according to those estimates. If there is no adjustment to the acquisition cost, at least the buyer understands that he or she must review the practice budget for the expected addition of the equipment cost.

A necessary assist

An experienced dental practice broker and a dental CPA work as a team to assist the seller in preparing the practice for sale. To quote an old phrase, "Timing is everything." The need for cooperation between the broker and the CPA allows the owner to complete essential tasks before the listing date.

There are several key points to be aware of before starting the process. The practice and practice owner should retain a dental CPA who has experience working with many dental practices. He or she should have an understanding of the process and the timing of dental practice sales.

Since this sale is probably a rare occurrence for the dentist, the reliance on the CPA is critical. If the CPA is not experienced with these events, a new one should be retained.

The same advice should be adhered to with the broker. How many transitions has the broker represented selling dentists? There should not even be a question by the owner about the retention of a specific dental practice broker compared to a general business broker.

Knowing the difference

The main difference between a general business broker and a dental practice broker is that one can create a loss of thousands of dollars for the selling dentist. The dental practice broker and the general business broker should discuss goodwill during their interview with the practice owner. They should be asked to list examples of personal goodwill compared to enterprise goodwill.

Additionally, they should list some of the attributes of personal goodwill versus enterprise goodwill. The answers should greatly assist the owner in whom should be retained to represent the practice in the sales process.

It might be good for the practice owner to receive tips from the CPA about what questions to ask the brokers being interviewed. Additionally, the CPA may want to attend some of the interviews with the brokers (based on availability and charge) to help the dentist or to ask tax-oriented questions of which the brokers should be aware.

Bruce Bryen is a certified public accountant with over 45 years of experience. He specializes in providing litigation support services to dentists, with valuation and expert witness testimony in matrimonial and partnership dispute cases. Bryen assists dentists with financial decisions about their practice, practice sales, evaluating whether to join a dental service organization, practice evaluation during divorce proceedings, and questions about the future or financial health of dental practices. He can be reached at [email protected].

The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.