Selling your dental practice is not just a transaction; it’s a complex process that requires careful planning and foresight. However, many dental practice owners approach this significant milestone as if it were a simple event, leading to costly mistakes. Selling your business should be viewed as a process, not just an event. Here are the most common pitfalls, and how to avoid them.
Lack of Foresight: Consider the Opportunity
The key to success lies in understanding the “unknown unknowns”—the factors you may not even realize could impact the value of your practice. Rushing into the market without thoroughly addressing these areas can leave significant sums of equity on the table. This is a unique opportunity to build wealth; leaders would be wise not to try to move too quickly and miss out.
Rushing the Process: Impatience Can Be Costly
Once dental practice owners decide to sell, there’s often a rush to get the deal done. However, preparation is the most important step in adding value to the business. Impatience can not only lead to poor decision-making, but also can cause sellers to miss out on critical opportunities to add value, potentially leading to less favorable terms. The sales process, including marketing, due diligence, and closing, can take anywhere from 5 months to over a year.
Failing to Prepare: Clean Up and Improve Before Selling
No business is perfect, and dental practices are no exception. Before going to market, it’s crucial to clean up any issues and potentially improve areas that could increase the valuation. This could involve addressing operational inefficiencies, improving financial records, or enhancing patient retention strategies. And, includes giving your time to see these updates through.
Not Defining Your Priorities
Understanding and defining outcomes for a sale can ensure that your values and needs are met. Carefully thinking about your desired future role, next stage of your career, and considerations for debt and retirement are all critical factors. By knowing your needs, your advisors can align the transaction accordingly.
Overlooking Your Post-Sale Role
Your role in the practice after the sale can significantly impact the transaction’s value. If you’re a key player in the business’s success, the buyer may require you to stay on for a few years to ensure continuity, which could result in a higher sale price. On the other hand, if you plan to exit immediately, this could lower the practice’s value.
Ignoring the Long-Term Potential
Depending on your risk tolerance and financial goals, selling a business gives you options. Equity comes in many forms, and a trusted advisor can help you identify your options, and which one suits your needs. For instance, some buyers often project significant returns on equity rolls over a 3 to 5-year period, which can substantially increase your total return from the sale.
Choosing the Wrong Advisors
Many brokers and M&A advisory firms are focused solely on closing deals quickly, defining success by the mere completion of a transaction. However, this approach often leads to suboptimal outcomes for the seller. A purely sell-side advisory firm may push you to market prematurely, without considering whether your practice is in the best possible shape to command a high price.
Selling your dental practice is a complex process that should not be rushed to achieve maximum value, and can depend on the time needed to improve the business, complete the sale, and fulfill any post-sale commitments. Honor your life’s work by taking the time to work with firms that provide growth consulting or fractional COO support to help maximize EBITDA before selling.
Learn about how to avoid these common mistakes by connecting with a sell-side advisory expert, or learn more about the process to improve your business through consulting or fractional COO support.
