Selling a dental practice to an associate can be a complex process that requires careful planning to avoid potential problems. To minimise these issues, it’s important to have a clear understanding of the terms of the sale and to communicate them effectively with the associate. This includes outlining the purchase price, payment terms, and any contingencies that may affect the sale.
It’s also important to ensure that the associate has the necessary financial resources and experience to successfully take over the practice. To further reduce the risk of problems, it’s a good idea to have legal and financial professionals involved in the sale process, who can help navigate any legal or financial complications that may arise. Additionally, having a solid transition plan in place can help ensure a smooth transfer of ownership and minimize any disruptions to patients and staff.
When dentists sell with their hearts rather than their heads, they often fail to see the pitfalls involved. If you consider moving on and retiring, you are likely to have great relationships with your dental practice associates. It may seem as if an associate is the best candidate to buy your practice, but sadly, this isn’t the case. Approximately 5% of dental practice sales go to associates, according to our estimates.
An associate sale isn’t an easy process, as one dentist found out and has plenty of positive and negative considerations. If you want to achieve the best result for you and the associate, you need to understand the dental practice sales process. This includes accepting a potentially lower purchase price and protecting your practice’s legacy.
Selling your practice to an associate – is it better the devil you know?
When it comes to selling your dental practice to an associate, the question of whether it’s better the devil you know is a subjective one. While there may be advantages to selling to someone already familiar with your practice, such as a smoother transition and the ability to maintain existing patient relationships, there are also potential downsides to consider.
For example, an associate may not have the same vision or goals for the practice as you do, which could lead to conflicts down the line. Additionally, selling to an associate could limit your options for finding a buyer who may be willing to pay a higher price or bring new ideas and perspectives to the practice.
Ultimately, the decision of whether to sell to an associate should be based on a careful evaluation of the individual’s qualifications and compatibility with your vision for the practice, as well as a consideration of all other potential buyers and their respective advantages and disadvantages.ƒ
Why we were able to help
We worked out an agreement with our listing agent after listening to the dentist’s concerns. Prior to selling to an associate, however, they had to explain that there may be compromises in the asking price or payment terms. Although your associate might seem like the best option, you should remember that they are trained dentists, not managers and that they may lack key knowledge or have plans that are different from yours.
Both parties were able to communicate openly with the agent’s assistance, which helped both parties agree on a sale direction and outcome they would be happy with. A dental practice finance lender then offered the buyer the money they needed after helping our agent prepare a funding application.
During the process, the seller was helped and eventually realised that their initial asking price might not be achievable – which meant exploring options such as shared profits and deferred payments. Even though it may seem like a compromise, it allows the associate to become the owner when the capital is not enough to match the capital possessed by a corporation, allowing you to have someone you trust operating the business.
By facilitating a smooth sale, we ensured that both parties were happy, and the practice would reap the benefits of the reputation of the former associate’s patients.
Why was there a problem?
In the case of this dentist, we knew they were in for a challenge when they approached us to sell to a partner. While a dentist with experience, the buyer had no business acumen and no idea how to finance their purchase.
As a result, the seller was in a tricky position, having agreed to let the seller purchase the practice, but having no real funding options.
Read more: Selling your practice to a corporate group
About dental practice finance
Dental practice lenders are often reluctant to lend to people who cannot offer them a lucrative investment opportunity, so finding an associate who wants to buy your practice opens a number of new opportunities for you.
It is therefore important to hire a selling agent who can help your associate develop a funding application that maximises their chances of success and, in turn, helps you achieve the price you want.
Read more: Dental clinic practice loans
Conclusion
Selling a dental practice to an associate can come with its own set of challenges and potential problems. One of the most significant issues that may arise is the question of financing. Depending on the purchase price, the associate may need to secure funding from a bank or other financial institution, and their ability to do so may impact the sale.
Another potential challenge is the question of valuation. It can be difficult to accurately assess the value of a dental practice, and disagreements over the price could cause delays or even derail the sale entirely. Additionally, there may be concerns around maintaining patient relationships and staff morale during the transition.
The associate may need to be prepared to reassure patients and staff that the practice will continue to operate smoothly and provide the same high level of care as before.
Finally, there may be legal or regulatory hurdles to navigate, such as ensuring that all necessary licenses and permits are transferred to the new owner. Overall, careful planning and open communication can help to mitigate these potential issues and ensure a successful sale to an associate.
Lee Jones is a seasoned Business Finance Specialist with over two decades of invaluable experience in the financial sector. With a keen eye for market trends and a passion for helping businesses thrive, Lee has become a trusted advisor to countless organizations seeking to navigate the complexities of finance.