How Dentists Can Av in Practice Sales and The sale and/or acquisition of a dental or dental specialty practice can be an overwhelming undertaking. The purpose of this article is to highlight common pitfalls that buyers and sellers can, and should, avoid during the transaction process. When these mistakes are avoided, the parties are far more likely to experience a successful transition into the next chapter of their professional journeys. FAILING TO PLAN Selling a business takes time. Dentists who fail to plan for the sale of their practice often miss opportunities with the right buyer. Sellers should maintain current records and keep a sales portfolio readily available. Planning may also include cleaning up old accounts receivable, ensuring associate dentists are bound by appropriate restrictive covenants, and avoiding unfavorable contracts that are difficult to terminate. Buyers and brokers quickly recognize when a seller has prepared, which builds confidence in the transaction and reinforces that desperation does not drive the sale. RUSHING INTO CONTRACTUAL NEGOTIATIONS Before incurring the time and expense of negotiating and drafting a definitive agreement, parties should consider entering into a letter of intent (LOI). An LOI outlines the preliminary terms of the transaction and establishes expectations regarding purchase price, anticipated closing date, payment structure, employment terms, holdbacks, escrows, and other material provisions. While generally nonbinding, LOIs often include binding provisions such as exclusivity and confidentiality. No-shop and exclusivity clauses prevent the parties from pursuing other transactions during negotiations, while confidentiality provisions protect sensitive information. These terms are critical to protecting both parties during the negotiation phase. ENGAGING IN INADEQUATE DUE DILIGENCE A transaction should not close until the buyer is satisfied with the due diligence process. Proper due diligence requires a clear understanding of the practice’s assets and liabilities, along with an inspection of the premises, inventory, financial statements, accounts receivable, employment agreements, leases and contracts, insurance policies and benefit plans, and any required governmental approvals. Buyers should also conduct searches against the seller and its owners to identify liens or claims against practice assets, including judgments, tax liens, lawsuits, or UCC financing statements. LEGAL CORNER LESSONS LE
Stan’s Monthly Rant One of my favorite authors is Dan Kennedy. He’s one of the most profound writers on marketing and business success I’ve ever encountered, and I’ve read hundreds over the years. I wholeheartedly recommend his “No B.S.” book series. The concepts are genuinely life-changing. I also recommend his “No B.S. Magnetic Marketing” newsletter. If you would like to learn more, check out “Direct Response Marketing: Books & Strategies” by Dan Kennedy. In a recent issue of his newsletter, Dan coined a phrase to describe a business owner who was unwilling to heed advice. He described that person as having “one foot in the grave and the other on a banana peel.” That image certainly paints a picture. I know that many, perhaps most, readers of this newsletter will never put a single idea contained here into action. That’s unfortunate. While that does not mean you are headed for your “practice grave,” it does suggest missed opportunity. And that is regrettable. Every practice owner is free to decide what they will or will not do with the recommendations offered here. More important than any specific idea related to practice growth or your eventual exit is this one principle: Be intentional. What do I mean by that? It’s not complicated, just exactly what the words imply. It’s critically important to be deliberate and thoughtful about your practice’s growth and how its terminal value fits into your broader financial and life plans. Your practice can become what you want it to be, but only if you act with intention. Think and act proactively, not reactively. Most people never realize that the choices they make from moment to moment largely determine the circumstances of their lives. Instead, they drift, constantly reacting to external forces. Bottom line: It’s up to you. Success or mediocrity, it’s your choice. The starting point for your journey toward practice success begins with recognizing that your hands are on the wheel. Your intention will determine your direction and destination. Without it, you drift, and there’s no telling where you may end up.
My colleagues and I are here to help in any way we can. I will climb down from the soapbox now.
8 · DentalGrowthAndExit.com
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