Retirement is an emotive subject for anyone, but if you have your own business, there is far more to consider than just giving up work. This is especially true for dentists who will have spent many years and invested so much in building and managing their practice.
Being a dentist is about caring for people, and their practice is the culmination of a life-long dedication to providing this invaluable service, so choosing to sell or close their practice can be a difficult decision to make. In most situations, selling the practice would offer the best financial outcome, providing a substantial lump sum with which to start retirement.
The sale of part or all of a practice is one of the most important, and probably one of the most stressful transactions of a dentist’s professional life. There are many things that must be considered, beyond just the bricks and mortar. As with all big life changing decisions, preparation is key, so it is important to ensure that all the necessary elements are covered so the process can run as smoothly as possible.
One of the first things that should be done is to assess what the current situation is at the practice, specifically with regard to any contractual obligations that may exist. It is important to remember that any expense sharing agreements may provide the expense sharing partner with the right to purchase the retiring partner’s share in the practice before it is offered on the open market.
Therefore, it is crucial that if there is more than one partner in the business, the first action for the retiring dentist should be to discuss their intentions with their professional partner before a sale begins. Not only is it important to consider any contractual obligations that may exist, but also a partner could also be a potential buyer
Potential buyers will come in all shapes and sizes and it should be remembered that the buyer no longer has to be a dentist. An associate, a therapist, a practice manager or a consortium of these may be eligible to buy the practice as will a dental corporate.
Before the practice is put on the market, all documentation and paperwork should be up to date and readily available to pass on to the solicitor of a potential buyer. Accounts should be clear and current as they will not only be required by a buyers lawyer, but also by a buyers funder, the absence of these documents can lead to a significant delay in the transaction.
In addition, any documentation relating to staff must be in order, such as PAYE records, contracts of employment, employee handbooks, as well as policies and procedures including benefits, health insurance, pensions and certification, training or license documents.
It is important to collate CQC paperwork, health and safety information, pressure vessel and x-ray test certificates. It will also be necessary to have an inventory of all surgery and office equipment drawn up, with serial numbers, warranties and service or maintenance agreements and records.
Enquiries relating to the property will require documentation such as energy performance certificates and details of any asbestos audits or notices received. If the property is leasehold, then the amount of time left on the lease can be a crucial factor. If the period left is less than ten years, then consideration should be given to approaching the landlord to extend the lease as most lenders will require a lease with at least ten years left as a condition of agreeing to provide funding to a potential buyer.
The practice will need to be valued, and to ensure a realistic price this should be conducted by an experienced professional dental practice valuer. Many believe that the value of the practice is based on a percentage of turnover – this is not true as there can be a wide difference in profitability between practices with a similar turnover. The true value of the practice is based on the practice’s ability to generate profit for the buyer.
With the current complexities of the GDS and PDS contracts and also the various capitation schemes in operation, it is vitally important to bring in a solicitor with the knowledge and experience of the relevant issues to conduct the sale of the practice. Firms like Goodman Grant specialise in the sale and acquisition of dental practices and will be able to ensure that the transaction goes smoothly. The sale of the practice will of course incur expenditure on the part of the seller. This is not only to cover the legal costs, but to pay the fees of agents and accountants.
A number of internal and external factors will affect the length of the process and it will vary from sale to sale. It is impossible to determine exactly how long a sale will take, though on average it tends to be about 6 to 7 months.
The sale of a dental practice can be a long and stressful process, but it is a necessary one for many dentists as retirement approaches. By enlisting the assistance of a solicitor with a specialist knowledge of the dental industry, the sale of a dental practice will be a simpler, less stressful time.
John Grant of Goodman Grant Lawyers for Dentists – a NASDAL and ASPD member
A NASDAL and ASPD MEMBER