Here are 5 things buyers are looking for right now
Thinking about putting your practice up for sale? Here are five things buyers are looking for in a practice.
- Space Most new buyers are used to working in large dental practices with multiple providers. Typically, these practices are high volume and require the associate dentists to work out of up to three rooms at a time. When these dentists are ready to purchase their own practice, they can’t imagine how a dental practice can operate out of any less than four treatment rooms. If your practice has only three chairs, but room to add a fourth, you might consider doing that before putting your practice on the market. If your practice doesn’t have room to add a fourth, it will have a negative impact on the value of your practice and limit the number or purchasers willing to entertain it. However, a physically small practice could also be a good candidate for a merger into another, larger office nearby, depending on the lease.
- Visibility Long gone are the days when dentists want to be tucked away in professional buildings with no road signage. Buyers are very concerned about new patients and most feel as though it is imperative to have good visibility. If potential patients are driving by your office and have no idea you are even in there, buyers will have some concerns to work through. However, don’t run out and build out a new space down the street to gain more visibility. Just understand that it might take a little longer to find the right buyer for your practice.
- Procedures As most dentists near retirement, they begin referring more procedures out. This is a good thing to buyers! They want to make sure that, not only can they do the procedures done by the selling dentist, but that there are a few that they can add to the practice. Adding procedures to the practice allows the buyer to increase revenue without having to add a single new patient to the practice. This is the kind of potential buyers can easily understand.
- Cash flow What the practice owner takes home after paying all of the practice related expenses is considered the cash flow. Although revenue is important, buyers are more concerned about what they will put in their pocket if they buy your practice. It is good to understand if your overhead is in line with industry standards or if you need to make some adjustments. Not sure what those benchmarks are? Ask a transition expert or your CPA. Keep in mind though, most buyers will use your last tax return to determine cash flow, so this could take some time to really change. Banks will also look at the cash flow to determine how much they will lend someone to purchase your practice. Not having enough cash flow could potentially leave you having to carry a note or walking away from a good buyer.
- Lease If you are leasing your space, it is a good idea to have it reviewed by a real estate specialist to make sure it is fairly priced and the terms are reasonable. Most buyers are concerned about paying too much in rent and a bad lease could cause you to lose many qualified buyers. On the other hand, if your lease is coming up, it might be a good time to consider a merger. Mergers are a great way for established dentists to increase their patient base, and a great way for a seller to be able to stay on and work after the sale. If you choose to renew your lease, you might consider hiring a lease negotiator to handle it for you. You would be surprised how much more favorable the terms can be when a real estate professional is working on your behalf. Best of all, most of them don’t charge the tenant a dime!
This article was published in the September 2016 issue of the GDA Action.