Your practice is your baby. Even if you purchased it from another dentist, you still put in the hard work to make it your own. You’ve toiled, fretted and challenged yourself to reach new heights. And now it’s nearing the time to move on. When the time comes for selling, it is critical that realistic expectations are set. If not, the ultimate goal may never be achieved.
Thankfully, the market has not cooled since the beginning of the pandemic. This is proof that healthcare is pandemic resilient. Vendors need not be afraid to sell if they believe the time is right for them. People choose to sell for a variety of reasons. Those who have owned for 30+ years simply feel it is time to hand over the reins. Some feel that owning a practice is stressful – HR issues, attracting new patients, retaining existing ones, dealing with landlords, etc. For others, it is the desperate search for work-life balance. After all, managing a practice and a young family is no easy feat. There are also those external and internal events: divorce, health issues, death, partner disputes, loss of a partner or a family member, having to relocate or issues with children. All types of different external and internal events can cause a practice owner to want to sell their office.
Regardless of the reason, vendors do need to enter the sale process with the right mindset. The practice itself represents so much more than patient charts, equipment and the physical location. Regardless of how long the individual has been an owner, the practice represents them, their efforts, successes and failures. It is a symbol of fierce pride and accomplishment. All these reasons are valid, which is why the sale of a practice has an emotional component whether an owner wishes to admit this or not. The harsh truth is that once the decision has been made, the vendor must be realistic in how the process will unfold and, more importantly, how a buyer will view their office. It is not uncommon for a vendor to believe that the buyer should be grateful to acquire such an amazing practice. However, a buyer, while happy to have the ability and opportunity to purchase the office, also believes they are paying the vendor a fair price. This is where things get a bit tricky. During the negotiations, the vendor feels the buyer should agree to all of their terms because they are presenting them with an office in which they can simply walk in and take over, unlike the vendor who had to work exceptionally hard to establish and build. The buyer on the other hand, feels that their requests should be accepted because once again, they are paying a healthy price. Whenever money changes hands, the potential for ugliness to rear its head most certainly can be expected.
Many vendors believe any purchaser of their practice will be successful if they simply treat their patients well. This is partially true, but a buyer likely must make some improvements, engage in a marketing plan, and most importantly, have the staff rally around them to ensure their success. Buyers, unlike the current owner, are also carrying a significant loan. Therefore, the room for error is quite slim. If a vendor wants to stay working for whatever period, many will demand 45% to 50% as an associate compensation. While this certainly makes sense given the level of experience and maturity the vendor has, the reality is that if this vendor worked for a large corporation, the compensation would be 40%. In addition, more times than not, the numbers simply do not work for the purchaser by the time the bank loan is repaid along with the overhead and some type of draw to cover personal expenses.
Another expectation that must be addressed by the vendor is the relinquishing of control. It may be your patients and staff today but on day 1 of new ownership, these fine people are now the buyer’s patients and staff. This can be a very tough thing to accept particularly if the vendor wishes to remain working post sale. Vendors are very protective of patients and staff. They are always worried that the new owner will not be accepted easily. They worry how staff will be treated. Buyers worry about this too. They also worry that they will not be seen as the owner and that staff will constantly run back to the vendor. When the vendor wants to stay post sale, they must accept the changes made by the purchaser regardless of whether they agree or not. It is difficult to change ways after 20 or 30+ years of being in charge. The vendor must be prepared that their opinion is not required regarding new technology, schedule changes, treatment planning and staff motivation (or lack thereof). The vendor must also be willing to accept additional growth generated by the new owner. One cannot have regrets when the buyer increases revenue by 20 or 30 percent, or even more. There will almost always be opportunities for improved efficiencies, expanded hours, etc. It is not a sign that the vendor did not maximize potential or failed to reach a certain level of success. A vendor needs to understand that it is normal for a level of comfort to set in, particularly when the practice and perhaps even personal debt is paid off or at least nominal.
Selling a practice can be quite emotional for some vendors. It is so critical to be prepared because an owner does not want to suddenly be faced with a good offer and yet back out of a sale midway through the transaction because they did not prepare themselves psychologically for what happens next. Fear of the unknown can be paralyzing, and no one can make the best financial decisions if the proper time was not spent planning for the next phase. Transition planning looks different for every practice owner. The common thread is the need to proactively prepare for both the financial and emotional aspect.
With the right advisors, vendors can successfully go through the sale of their practice with few battle scars. Change is always scary, but it is also important to remember that none of us are simply defined by our professional occupation. There are so many other facets of our lives that we should be aware of and be grateful for. Life post sale can be exciting if one only chooses to make it so.
About the Author
Jackie Joachim graduated from the University of Toronto with a Bachelor of Arts degree in Business and has close to 30 years of experience in the health care sector. She is currently the COO at ROI Corporation. Jackie has developed and delivered seminars to healthcare professionals across the country, and coached hundreds of practitioners for planning, marketing, patient education, human resources and financial management.