Selling a dental practice is a huge life event for a practice owner and will have a significant impact on their quality of life after the sale. In previous articles, we discussed the reasons for hiring a dental practice broker and their role in the transition process. While it is important to understand the role of a broker and the importance of utilizing their services, it is also imperative that you hire the RIGHT dental practice broker to represent you in the sale and facilitate a smooth transition. When selecting a dental practice broker, consider asking the following questions before signing a listing agreement:
What experience do you and your team have with dental practice transitions?
Your dental practice broker and their team should possess a significant amount of experience in practice transitions/sales and a diverse skill set including an understanding of finance, accounting, marketing, and professional sales. Since the broker will be involved in valuing your practice prior to a sale, it is essential they are able to effectively work through your practice financials, reports, and equipment list to arrive at a fair market value which is in line with current market conditions. Experience in marketing (both traditional and internet) and social media is also necessary to give your practice as much exposure as possible to potential buyers. You will also want to inquire about how many transitions the broker has been involved with in your area over the course of their career and particularly over the last couple of years. This will give you sense of how active they are in the local market and is a reflection of their experience in pricing practices properly, marketing effectively to potential buyers, and working with all parties to successfully close practice sales.
Who do you represent in the transition?
It is our belief that a dental practice broker should work diligently to structure a win-win transaction but represent only the seller’s interest in the sale. By exclusively representing the seller, clearly disclosing this fact to the buyer, and assisting both parties in building a strong team of advisers (including a knowledgeable CPA and attorney), the broker has the ability to represent the seller’s best interest while ensuring the buyer has proper representation and is positioned for success following the purchase. Beware of working with a broker who advocates dual representation, in which they represent both the buyer and seller. Under this arrangement, the broker is obligated to share all details with both parties, including any statements made by either party concerning pricing or terms. Since the seller’s and buyer’s interests are typically converse to one another, it is nearly impossible for the broker to fairly represent both parties under the dual representation arrangement.
In Part II of this article, we will discuss a couple of additional questions that you should ask your potential practice broker prior to signing a listing agreement.
This article is brought to you by David McLerran and Brannon Moncrief of McLerran & Associates, specializing in Dental Practice Broker in Texas.