Well, the simple answer to that is “YES!”
There’s a saying in real estate which goes along the lines of, ‘The best time to buy property was 10 years ago, the second best time is now.’ Switch that around and it’s very similar to selling a dental practice. To coin another real estate saying, ‘It’s a seller’s market at the moment,’ and probably has been for the past few years in dental practice sales. The window is well and truly open to maximise the realisation of your business asset but that window will close at some stage, it may be months or a few years, but eventually that opportunity will pass you by. And it’s not a one size fits all.
Whether you are a multi-chair, multi-practice business, or a smaller 1-3 chair one, there are buyers around to suit your long term goals. We speak to many principals, some who are keen to sell their business and move on and others who are selling and remaining in the practice for 3 or more years to manage staff and keep business as usual, with great returns.
Let’s first look back a few years. For the larger practice sales that occurred 5 or so years ago, they were the initial success stories amongst the corporate takeovers. Shares, as well as capital, were offered which have since realised impressive returns. Since then principals (and their advisors) fall into two camps with regards to corporate takeovers, in that they either love them or hate them. Of course there have been bad outcomes as there have been success stories. Often the decision on whether to sell is hindered by accountants and other unqualified advisors, urging their client not to sell their practice at any price. It is not in their interest to advise selling because they will lose a client so are unable to offer an unbiased and independent opinion.
So who should consider selling? Over the past 12 months we have spoken to many principals who are ‘not quite ready’ to sell, some of their reasons are understandable, some are questionable at best ,but all of them should at least be open to the opportunities currently out there.
I will give you a couple of real life examples:
Example 1
A principal of a very large practice, which would be perfect to sell to a larger group, is not ready to sell just yet, maybe in a couple of years and then because it will be a corporate acquisition, remain in the business for a further 3-5 years to maximise its sale price. Fair enough you may say until I tell you the principal is aged 65+. Now we are not ageist but put yourself in a buyer’s position; would you offer a premium price or a business and realistically expect the vendor to stick around, or be able to stick around at full capacity, for another 7 years?
Example 2
The principal is keen to sell but wants to grow the business first to get the maximum price possible for it. Again, this is a dangerous game to play. Once that business is at its peak to sell, can they guarantee the window of opportunity and ‘seller’s market’ will still be there? Also, we work with some corporate groups that assist in the expansion of a business once they have acquired it and, furthermore, give a percentage of those increased profits to the principal who they acquired it from.
These are just two examples of principals who should at least be open to selling, with no obligation attached. Understandably, it is a minefield out there, negotiation fatigue is common and the work involved in sales discussions should not be taken lightly.
Ultimately, it comes back again to that window of opportunity which, once closed, is unlikely to be open so wide again.