A Legal Guide to Selling a Dental Practice

Selling your dental practice is one of the most important financial decisions you will ever make. Working with a dental practice sales attorney from the very beginning can mean the difference between a smooth transition and a costly dispute. Below, our experienced attorney outlines the most important steps when selling your practice so you know what to expect.

Know Your Assets

Before you can even start negotiating a sales price, you need a full understanding of your assets and equipment. Knowing what is included in the sale will shape every conversation you have with lenders, buyers, and your lawyer. The assets to consider include:

• Tangible assets: Tangible assets include physical property such as computers, sterilization equipment, digital X-ray systems, and dental chairs. Due to the fact that tangible assets have a concrete market price and depreciation schedule, they are fairly easy to value.
• Intangible assets: Most of a dental practice’s value is in its intangible assets. The practice name, patient records, staff goodwill, referral relationships, and established workflows are a large part of what purchasers are buying.
• Valuing goodwill: Goodwill in your practice refers to both your personal goodwill, such as your reputation among patients, and the goodwill of the business itself. The goodwill of the practice is more valuable to purchasers because it is transferred with the business. Valuing personal goodwill is more complex. It’s important to speak with a dental-specific CPA about how to allocate the purchase price between personal and corporate goodwill.

Obtain a Professional Valuation

A professional valuation is essential when entering negotiations. Without a valuation, it is impossible to be certain about a reasonable sale price, and buyers will use that to their benefit. The most important factors influencing the sale price are as follows:

• The amount of active patients you have and your patient retention rate
• Annual gross revenue and net collections for the past three to five years
• The age of the facility, the condition of the equipment, and the lease terms
• Staff tenure and the likelihood that key staff members will remain on after the sale

Select the Right Buyer

The buyer you ultimately choose will have serious implications for the terms of the sale, your role post-sale, and your exposure to taxes. An attorney can help you determine which of the following is the best fit:

• Individual dentist: Selling to an individual practitioner, perhaps even an associate currently working in your practice, is the most straightforward option. These individuals often want to preserve the patient relationships and culture you have built in the practice.
• DSOs and private equity buyers: Private equity buyers and dental service organizations (DSOs) move quickly and their contracts protect their best interests, not yours. These transactions are far more complex and often look great on paper but don’t translate into as much money as some sellers expect. These deals often require you, as the selling dentist, to stay on for an extended period of time to continue working for the company. It is critical to work with an attorney in a sale to a DSO or private equity buyer to ensure you have a full understanding of the transition.

Our Dental Practice Sales Attorney

The above are just a few basic steps when selling your dental practice. At AGS Law, our dental practice sales attorney can advise on the others and guide you through them so the process is as easy, and as profitable, as possible for you. Call us now at 801-477-6144 or contact us online to schedule a consultation and to get the professional advice you need.