Not ready to sell your dental practice but thinking about selling part of it?
Looking to retire from your dental practice in the next few years and thinking about only selling part of your practice now and the other part later? Sounds like you need a dental consulting professional to help you make sense of this kind of transaction. Our dental transition experts talk about the things you should consider before taking that step and will provide dental practice management tips and insight that will ultimately help you boost your dental practice sales.
Hello everyone. My name is Matt Sherer with PMA Practice Transitions, and have Adam Smith and Doug Sellan with me. Adam covers Indiana, Northern Kentucky. Doug covers the Western part of Ohio and Northern Kentucky. And I am in the Eastern part of Ohio and Western PA. And we assist dentists in transitioning out of practice ownership. And gentlemen today, the topic is going to be, is it possible to sell my practice a portion at a time? And I think the simple answer is yes, you can sell your practice in parts, if you will. So, 20%, 20%, 20% or 50% now and 50% down the road. But I think there’s a few things you need to consider when doing that. And it’s really… A lot of it’s on the buy side of the house because when a buyer goes to the bank and gets financing for, let’s say 50% of the practice today, or a portion of the practice. They, at some point down the road have to go back to the bank and get financing for the rest or the other portions.
And each time they go back to the bank, if rates have increased, that could cause them obviously, their note to be a little bit higher than they would want it to be based on the portion of ownership that they currently have. So really got to take that into consideration. And then what happens if the buyer, all of a sudden had some life-changing event and now their credit has been affected. And now they’re going back for financing for the other half or the other percentage of the practice that could be detrimental to the whole deal. So definitely something to consider. Doug, anything to add on that, on the sell side of it?
Just a couple of things is first before you even considered doing any type of fraction of a sale, does a facility support more than one person, a one practitioner? You’re giving up 20, 30, 50% of your business. Is that going to be enough for you? And I’m enough for this person coming in to have the lifestyle that you both need to have. Does the facility support both. It Sounds great, I’m going to bring in an associate and I give he or she a percentage of ownership. And over time, they’re going to take over the business. Before you get to that point, or you can start at that point, you got to make sure that the facility can support it. Not only with the number of operatories, but the number of patients that you’re going to be seeing and the types of dentistry that you’re going to be doing. The things that you’ve been referring out is an upside opportunity for this person, but it’s hard to sell something to someone for something that is not doing, that makes sense.
Absolutely. And that’s a great point because I do see that a lot. Where the selling doctor does not want to slow down much, if any, wants to bring in an associate or sell a portion of their business. That buyer has to be able to live and support themselves. So their income has to be enough to do that. So great point. Adam, anything to add on that front?
Yeah, certainly. I mean, just the relationship itself, making sure that it lasts stands the test of time, if you are selling in chunks or so to speak. Playing devil’s advocate, what were to happen if after he or she purchased the first half of the practice you find out you’re not getting along so well, and that things aren’t running smoothly, where do you go from there? So it does kind of cause a little bit of a hiccup or speed bump in a smooth transition versus selling it out in chunks or in percentages.
And the last thing I would add to that is that each portion, the percentages, if you are doing percentages, they need to be predetermined. It it can’t be based on, oh, we’re going to revisit this in 24 months and see where we are and where we are and where we are. To protect yourself and that person coming in, it’s going to be a much better situation if he knows exactly what the dollar amount will be and what dates that’s going to be occurring on.
Absolutely. Thank you both for your input. Great points. If you’d like to learn more, please visit our website PMAgroup.net. And don’t forget to hit the like button or share the video with your colleagues. Thanks.