As practice brokers and transition consultants, we are regularly involved in the negotiation of letters of intent, asset purchase contracts, restrictive covenants, partnership buy-in agreements, associate employment agreements, lease agreements, space sharing agreements, listing agreements, commission agreements, real estate purchase contracts – a fairly long list! Some negotiations go very smoothly, both parties are satisfied, and the particular deal is completed in a timely manner. Other negotiations can be bumpy, with emotions running high, and seemingly no end in sight to the deal being completed.
In advising dentists on how to buy a dental practice, and on how to sell a dental practice, we communicate to them that there are negotiating strategies and behaviors that can be learned and applied to produce positive, long-term results for both parties.
In his classic book on the subject, “The Art of Negotiation”, originally published in 1962, Gordon Wade Rule offers a definition of negotiation:
“Negotiation is a peaceable procedure for reconciling, and/or compromising known differences. It is the antithesis of force and violence. A negotiation will be fruitful or completely meaningless, depending upon the existence of two essential elements . . . good faith and flexibility. Both must be present on both sides of the table – one without the other on either side is a fatal defect.”
Rule’s target audience were diplomats and government procurement personnel, so some of his recommended do’s and don’ts probably do not relate to how to buy a dental practice (like the “do” of sending the other party your documents in both English and their own language). However, some of his recommendations that we feel apply include:
- Do analyze and understand the type of person with whom you are dealing.
- Do try to have a sense of humor, but not overly so.
- Do have a positive attitude that issues can be resolved and worked out between the parties.
- Do negotiate your issues in a way that any concession you make on your flexible or “give” points will bring you closer to agreement on your less flexible or “must points”
- Do not make concessions without getting something you want in return.
- Do not try to drive too hard of a bargain.
- Do not try to be overly friendly or popular in the negotiating process, but try to foster genuine respect and cordial relations with the other party.
- Do not treat or talk with the other party as though you are superior to them.
Utilizing proven, successful negotiating skills is especially important in dental practice sales and transitions because of the personal goodwill involved in the transaction. In these situations, the seller usually has built very solid relationships with the stakeholders in the practice – the patients, the staff, the local community, vendors, etc. The buyer who does not convey a respect for those relationships is less likely to have the seller feel that he or she should give their best efforts in transitioning that goodwill after closing. Conversely, the seller that does not show respect for the young, relatively inexperienced, buyer, may be less likely to win concessions from that buyer.
There are many other resources available to improve one’s negotiating skills while learning how to buy a dental practice. By studying and applying the information from those resources, you will be prepared to have a less stressful and, ultimately successful, transaction.