Four ways to sell a dental practice

In no particular order, these are the four main ways I've seen dental practices sell in the last 15-20 years.

Internal private sale
On the face of it, this type of transaction seems relatively straightforward. The immediate positive is that you already know exactly who you’re selling to. You’re familiar with how the dentist works, your patients, their patients, the practice, and the practice staff.

Things can become more complicated, however, when you start talking about value and what the sale price should be.

As the purchaser, you can sometimes feel like you’re effectively buying the value you’ve helped create yourself. On the other side, vendor dentists are typically pretty nice people who don’t want to be overly aggressive during negotiations. As a result, they can sometimes look back afterwards and feel that they sold for too little.

Tony's tips for this type of transaction are:

1. As the purchaser or associate dentist: Try to include something in your contract at the beginning of, or during, your employment with the practice that sets out how a future purchase will be handled. Ideally, the valuation methodology and sale process should be agreed upon in advance, so both parties know where they stand when the time comes.
2. As the vendor or selling dentist: Get an independent valuation before entering negotiations. Ideally, this should be done through LANZ, giving you an objective starting point for discussions. Also, be mindful of the point above about who has actually created the value within the practice and how that should be reflected in the final sale price.

Having these conversations early can make the eventual transition much smoother and help both parties feel that the outcome is fair.

Selling to a corporate
This was once a fairly frowned-upon option, but selling to a corporate has typically delivered some of the highest sale prices.

Since I’ve been involved in practice sales, I’ve seen 100 or more practices sold to corporates, from major groups like Lumino through to smaller operators. The vendors who understood the opportunity knew they could sell their business at or close to full market value — while keeping their job.

Not a bad deal, really.

The smarter vendors also recognised the value of retaining their property and becoming the landlord. This worked amazingly well for me when I sold Ponsonby Dentist. If a better opportunity hadn’t come along, I’d probably still be there today.

Tony’s tips for selling to a corporate:

1. Get good legal advice: Not because corporates are necessarily trying to be tricky, but because you need to properly understand the true value of the offer. This isn’t a job for your usual trusts-and-leases lawyer. You need someone who regularly deals with business sales and complex commercial transactions — a top-tier lawyer who understands the deal you’re entering into.
   
2. Don’t assume: Don’t assume what valuation methodology they will use, and don’t assume the terms of your ongoing employment will be the same as those offered to other dentists. Every deal can be different. Bespoke arrangements are definitely possible if you have the right advisors negotiating on your behalf.
   
3. Don’t wait too long: Quite a few dentists we’ve spoken to over the years have said, “I’ll just wait and sell to Lumino.” The problem is that waiting for a particular corporate to come along may mean waiting indefinitely. We’re not aware of Lumino acquiring individual practices for quite a few years.
   

The key takeaway is that selling to a corporate doesn’t necessarily mean giving up everything you’ve built. With the right advice and the right structure, it can provide an attractive combination of a strong sale price, continued employment, and potentially the opportunity to retain the property.

DIY
You can absolutely market and sell your practice yourself. There’s no question that this can, and does, work for some people.

The same can be said for selling your house. You can list it yourself on Trade Me and manage the sale without a real estate agent. I’m just not convinced you can always do as good a job as an experienced agent when it comes to achieving the best possible price. And I’m even less convinced that every dentist can do as good a job as a professional broker when selling their practice.

There’s also a lot more to the process than simply finding a buyer. Something as straightforward as the sale and purchase agreement will need to be prepared by your lawyer, and the legal costs can add up quickly.

Tonys tips for this type of transaction:

1. Establish the sale and purchase process upfront: Get your lawyer involved at the beginning and have them prepare the sale and purchase agreement. Make sure you get a clear quote for the legal work before you start. It’s worth noting that this is a service a broker would typically provide as part of their process at no additional cost.
   
2. Get a professional valuation: Have the practice professionally valued before you go to market. You may also want to share that valuation with prospective purchasers, as it establishes a clear starting point for negotiations and gives everyone a common understanding of the practice’s value.
   
3. Be prepared for the tyre kickers: Selling a practice yourself can generate plenty of interest, but not all of it will be genuine. Be careful about who you allow access to “the books” and other commercially sensitive information. Make sure prospective purchasers are properly vetted and have a genuine interest in buying — rather than competitors looking for an inside line on your business.
   

DIY can work, but it’s important to recognise that selling a dental practice is a specialised transaction. The more you understand about the process before you start, the better positioned you’ll be to protect both the value of the practice and your own time.

Use LANZ.Dental
At LANZ, we have a highly experienced team, having now been involved in more than 100 dental practice transactions.

The process starts with establishing what your practice is worth. We can provide a professional valuation, talk you through the result, and identify areas where there may be opportunities to improve the practice or its presentation before going to market.

From there, we can tailor the sale process to suit you. LANZ can market your practice widely through our established channels, or take a more discreet approach by presenting the opportunity to a select group of qualified purchasers.

Jeremy and the team will manage the process for you — vetting potential purchasers, handling the many questions that inevitably arise, and managing negotiations — allowing you to stay focused on running your practice.

We bring significant experience and industry-specific expertise to the negotiation process, and can assist with the legal documentation, including providing the seller’s sale and purchase agreement.

Tony's tips for this type of transaction:

1. Don’t start planning the overseas trip or new holiday house just yet: These things take time. From the initial conversation through to settlement, a practice sale will usually take many months. It’s important to allow enough time to get the best possible outcome rather than rushing the process.
2. Choose a broker with dental-specific experience: There are other business brokers out there, including some who specialise in healthcare. But selling a dental practice requires industry-specific knowledge. At LANZ, we understand the dental market, the buyers, the valuation considerations and the issues that can arise during a transaction. With more than 100 transactions behind us, we have a proven track record of successfully selling dental practices.
   

The biggest advantage of using LANZ is that you don’t have to become a practice broker yourself. We handle the process, while you continue doing what you do best — looking after your patients and running your practice.

So, if you're thinking of selling your practice in the next 5 years - get in touch with the LANZ.Dental team today for a confidential chat.