By: Chase Howard
Thinking About Selling Your Practice? Preparation is key and the difference between a successful sale and seller’s regret.
Step 1: Call Your Financial Planner
- Be sure that you can afford to leave the business
- Most buyers will require a comprehensive non-compete and you should be certain that you are financially prepared to retire, sell, or move before signing any restrictions.
- You will also want to ensure that you are planning for the income you are about to receive. Are there vehicles in place or options that are best to ensure the purchase price is put to its best use for you.
- Consider post sale options if not retirement – are you going to be employed by the buyer? Are you selling to an associate and will phase out? Are you just moving and will need to find new employment/open a practice?
Step 2: Visit Your Accountant
- Your business is only worth as much as can be defined on paper.
- If a potential buyer cannot make sense of your accounts and assets, you may leave significant value on the table.
- Get your financial history in order by reviewing tax returns, profit statements, AR reports, and payroll history for prior 3-4 years.
- Clean up creative bookkeeping – you will have to promise the buyer that your financial statements are true and accurate.
- Have your accountant help value assets of your business – or use an appraiser if necessary.
- Discuss company structure – there may be restructuring needs or you may need to transition to a different structure for tax purposes.
Step 3: Call Your Healthcare Attorney
- Avoid handshake deals!
- A sale of a dental practice will require significant paperwork to protect you from any outstanding liabilities.
- A buyer will also require significant promises from you in order to pay you the full purchase price.
- Review your corporate structure and documents – do you need to do anything per your operating agreement, do you have renewals coming up, are you selling stock or only assets. Is the business in your name or a generic name?
- Notices must be sent to insurers, vendors, CMS, AHCA, and similar entities advising of a potential sale.
- You’ll want to discuss the process and timeline of a deal – drafting of documents and due diligence can take some time.
- You’ll also need to review any contracts/loans that are important to your business.
- If you already have an offer that outlines transition employment or payment terms – have your counsel review these options with you before moving too far forward.
Step 4: Prepare For Due Diligence Period
- Preparation is the key to a smooth and efficient process versus a long, drawn out process with potential pitfalls.
- Gather all of your business documents, contracts, records, licenses, certifications, policies, procedures, loans, etc. together. This includes anything that affects the practice or will go to the buyer.
- The more organized the better. Having these electronic as well is key, as large packets will be shared with the buyer, financing team, and buyer’s counsel.
- Disorganization might scare off buyers.
Step 5: Working with a Broker?
- You may be approached by a buyer – Private Equity, larger group, new practitioner, current associate.
- You may need to list your business with a broker so people know it is available.
- Before signing with a broker consider the following:
- Is the scope of service clearly defined?
- What services are provided?
- Who will negotiate?
- The Broker should not be able to bind or obligate you as the seller to any third party. They can help facilitate, but you need to grant final approval.
- Who is representing you?
- Is it one broker? A team? You want to have a clear understanding of who you’re working with.
- Are you clear on terms of commissions and fees?
- These are large commissions and should only be paid in full if earned and the sale occurs.
- Is the scope of service clearly defined?
Step 6: Negotiate a Letter of Intent with your Purchaser
- Prior to diving into a large purchase agreement, prospective buyers will present a letter of intent that outlines the major points of the deal.
- The LOI is a guideline for both parties, as well as their attorneys and accountants, in order to finalize the main purchase documents.
- This LOI is negotiable and should be reviewed by your counsel ahead of signing.
Finally: Prepare for a potentially long process leading up and through the sale. Have patience and prepare for the next step of your life.