Having an associate ready and willing to buy your practice may sound ideal, but the process is rarely as straightforward as it seems. Alison Bates, practice valuation manager at Mediestates, explains why a third-party helping hand is essential to see the transaction through
Selling to one or more trusted associates is often seen as a less complicated and stressful transaction than putting a practice up for general sale. The buyer is someone already working in the practice, who knows the staff, patients and the day-to-day operations inside out.
For a principal dentist who has identified a buyer for their practice without having to go to the open market, it probably seems that a lot of the hard work has already been done. They may feel there’s no need to instruct an agent, as a buyer is already in place and the transaction can move ahead with the minimum of bother. However, even for those with a buyer already in place, there is still a need for a tailored brokerage service to help them navigate any number of hurdles they will find along the way to make the transaction go as smoothly as possible.
A tailored brokerage service
The first step is always a practice valuation. Even if a principal is selling to an associate, it’s important to understand the true value of the practice under current market conditions. A good broker will always value a practice as if it was going onto the open market to get a fair price for the vendor, without the risk of them accepting a lower valuation just because they are selling to someone they know.
A broker should look to handle all the negotiations with the buyer. As a business owner, it can be difficult to negotiate a deal with a colleague, as personal feelings can become involved, relationships can become fraught and it’s difficult to be objective. A third-party broker can remain objective and ensure negotiations are conducted in a fair way for all parties. At the same time, it reiterates to the buyer that this is a serious transaction and they are going to have to pay a fair market price.
Having a ‘plan b’
Unfortunately, in our experience, we know that selling to an associate is more likely to fall through than selling on the open market. What may have seemed a wonderful idea in the first instance can turn out to be unfeasible for any number of reasons a few months down the line.
Often, if a deal does fall through, the principal is forced to go back to square one and start the process of finding a buyer all over again. It’s on occasions like this where having access to a third-party’s extensive database of prospective buyers can be invaluable. With the valuation complete and the sale process underway, it’s only natural to want to continue to push forward and be able to immediately invite offers from other interested parties.
Once a principal accepts an offer on a practice, the broker will ask the buyer to sign a deposit schedule and ask for a deposit to secure the sale. This acts as a financial commitment to show the buyer is serious about proceeding with the transaction. It also acts as a financial protection measure to the vendor to cover any abortive fees should the sale not go through for any reason.
Guiding you through the sale process
Once an offer has been agreed and finance is in place, there is still a way to go. On average, the sale of a dental practice can take up to nine months to complete, so brokers need to keep in regular contact with both parties’ solicitors to ensure they are working towards the same goal. This helps to alleviate any issues that may crop up, such as requests for funding, indemnities, warranties and redemptions and ensuring the necessary paperwork and information in relation to the business is in place ready for inspection by the buyer’s solicitor.
Satisfying the Care Quality Commission (CQC) is potentially the most complicated, but essential, part of a practice sale. There are a number of important stages to complete and timings are crucial. Failure to follow CQC procedures or mistakes in the application process can seriously delay the sale process. The team at Mediestates has extensive experience in this sector and its expertise means it is ideally positioned to provide support specifically tailored to individual requirements.
Here to help
Our experience has shown us that when selling a practice to an associate, having professional help from an experienced broker from the outset can ensure a stress-free and smooth transaction. If you are ready to sell your practice with a buyer in place, contact Mediestates, a specialist broker of dental practices, today to get everything moving in the right direction.