Most brokers and advisors will tell you selling your practice is largely about the numbers. By now you have heard scenarios like 65-85% of gross sales. Sometimes CPA’s use the term EBITA or gross multipliers. All of these methods are important to making sure the office is listed for the appropriate number. After all, if the price is too low you leave money on the table and if the list price is too high it may never sell. Regardless of which valuation method is used or how the price is calculated, getting the right price is important to the transaction.
However the non-revenue aspect of the deal may be just as important. This may confuse you because you figure if you can sell for the number you want all is good! Let me give some specific examples of what I am talking about to better illustrate this picture. If you opened your office 25-35 years ago your office is more than a business. Staff and patient care is extremely important to you. Sure money is a big deal but after this long now its about more than just money. Some staff members have become family. People have worked for you for over 20 years. How will they be treated by the new ownership? Moreover, you have a “culture” in your office that everyone is used to. Will that “culture” continue with the new owner? Additionally, all dentists have a certain dentistry philosophy. Different people practice different ways. It is not all black and white and just as simple as creating a treatment plan and adhering to it.
So when you engage your broker have these discussions up front. Use the discovery method to find answers.
Questions medical professionals should ask when selling or buying a medical practice or office space
Who is the ideal buyer?
How long do you want to keep working?
Can you give up the control?
How involved and how long do you want to stick around?
Answering these simple questions now will insure you sell your business to the “right “ person! For a free consultation reach out to Charles Feitel at 240 372 4867 or email@example.com. View our current listings at www.hprgrealty.com.
Our clients story about their Medical Space lease agreement
We just sold a practice in Washington, DC that ultimately worked out but it was “touch and go” until the end and I would like to recant the scenario for you. Our client had a lease with a little less than three years remaining. Our client did not have an option to renew the lease. The buyers bank, as is typical, required a minimum five year lease term to finance the sale of the business. Banks do not want the buyer to be without a location so typically look for at least five years between remaining term and option periods. Even a ten year term is better for the lenders.
LEASE EXTENSIONS AND TERMS
The buyer was hoping to do a two year extension on top of the 3 years left on the original term to satisfy their lender. Originally the landlord was fine with that scenario but changed their mind in the ninth inning of the game and many months of back and forth and big legal fees to both parties. The deal changed to a new eight year lease with a five year option. Terms were eventually agreed to but a lease needed to be generated and signed to “close” the deal. The landlord was a big institution with a long complicated lease agreement. Both parties were under severe deadlines and if the deal did not close it may not have because the lenders are now preoccupied with SBA and PPP loans making conventional loans a major hassle.
Frankly, without 25 years of real estate experience in the market the deal would not have happened. Most dental office sales have some real estate component but the business brokers do not have the experience or license to handle the real estate aspect of the transaction. When looking to sell or buy a practice get a consult on the overall real estate situation. A licensed, experienced broker will not charge for that assessment. Every deal has a practice broker, lender and lawyer, but a real estate broker HAS to be part of the equation. The deal has many parts and you want to make sure you have properly considered every part involved.
For a free consult please contact Charles Feitel at 301 365 6940 or email him at firstname.lastname@example.org.