The Cost of Selling Your Dental Practice | Dental Brokerage Baltimore MD
Dental Practice Sales & Transitions
You probably already know the answer to the question, “How much does selling a dental practice actually cost?” It varies.
Every sale is unique, and there are a variety of factors and ways to handle each aspect of the sale. They all have an impact on the price. We will review some of these factors, offer an overview of associated costs, and discuss ways to minimize or avoid these costs. An experienced dental broker can assist you in these areas.
Regardless of which approach you choose, here are the top cost drivers to consider when selling a practice:
A majority of banks state that they do not require a valuation in order to provide loan funding, though most would like to see a valuation and prefer it to be performed by an accounting firm or independent company.
There is a wide range of prices for valuations. There are some companies that do a basic analysis of the practice’s performance and assess local data that might affect the range of value. However, some valuation companies employ elaborate methodologies that include multiple valuation formulas and a weighted average of the results. They come with nicely bound books that can serve as marketing tools for your practice, essentially a “sell sheet” to share with potential clients.
A dental practice is only worth what someone is willing to pay for it, regardless of what the valuation says. Some dentists are stubbornly clinging to valuations even when buyers consistently offer a lower price. You can do this if you have the time and resources to wait for the right price. Try not to get too attached to a specific price. It is always worth spending more money on having a well-documented valuation with multiple methodologies, but most practices will fall within a range related to production and profitability.
When selling a business, you should work with a lawyer who has experience drafting and evaluating legal documents. If they have experience in dental practices, even better. Make sure you hire a lawyer in your own state, since many regulations differ from one state to another.
Such lawyers usually charge by the hour.
As part of our service, we provide checklists and worksheets defining all the information a lawyer will need to complete the necessary paperwork. Obtaining and preparing this information in advance can reduce the lawyer’s time and your out-of-pocket costs.
Fees associated with business consulting or brokering.
In most cases, this is the most expensive part of selling a practice. Brokers typically charge 10% of the practice’s value as their fee. If negotiated correctly, this fee can be reduced. Check for any exclusivity clauses and make sure you understand what is and is not included in the fee. While there are many excellent brokers on the market, the fees can be significant, so it is important to understand what you are getting before signing any contract.
Your underlying real estate needs to be considered, whether you own or lease your current clinic. A number of selling dentists seek advice on the value of the underlying leased or owned real estate.
Upgrades and repairs might be needed before a buyer purchases a practice, but this is all part of the overall price negotiation. In some cases, these repairs go beyond cosmetics and are necessary for the building to meet building codes.
Advertising fees may be incurred if you decide to list your practice on a website or in a dental journal. Certain brokers include these costs in their fees; others charge separately.