IMPROPER VALUATION – Most practice owners do not have access to sufficient and pertinent market data to properly value their practices. The popular Rule of Thumb approach is overly simplistic and statistically correct only a small percentage of the time.
VAGUE EXIT PLANS – The Selling doctor has no firm strategy for when and how he will exit the practice. Hoping to just “work something out” will result in disappointment as the collections and/or seller’s health begin to slip, as they almost always do.
NO TRIGGER POINTS – When a contract has been proposed for some sort of a buy-in/buy-out, there is often a lack of definitive time and dollars amounts that detail when the seller will exit the practice. The prolonged waiting time will eventually cause the Buyer to move on to other ownership opportunities.
BUYER NEEDS – While sellers will hear the facts and figures surrounding the financial obligations of a Millennial buyer, they fail to absorb what effect that has on practice ownership. Practices with inadequate historical annual revenue will be difficult to sell as an ongoing business entity.
INADEQUATE INFORMATION – FSBOs (For Sale By Owner) fail to collect and properly format enough information about the practice for a Buyer’s Prospectus or even more importantly, a loan application. While the bar is relatively low for a buyer’s access to capital, post-recession lender documentation requirements are at an all-time high.
MISREPRESENTATION OF FACTS – All of us want to present ourselves and circumstances in the best light. However, being blind to the realities of their practice or facility is a good way to receive a firsthand education about our legal system. While not intending to do harm, not all FSBO sellers are able to maintain their objectivity.
UNQUALIFIED BUYERS – Yes the bar is low but some buyers are still unqualified, perhaps as a result of inadequate experience, credit history or a flawed business plan. Failure to properly qualify a buyer almost always ends badly, often after weeks, if not months, of trying to make a square peg fit in a round hole. FSBOs believe every prospect is a buyer.
POOR LEGAL REPRESENTATION – Not that the attorneys involved are bad attorneys, but FSBOs often take the path of least resistance and retain friends and relatives as counsel that has little if any experience in dental practice transitions. The price may be right but the experience will be painful.
BREACHED CONFIDENTIALITY – DIY marketing almost immediately results in a loss of confidentiality. Soon everyone knows “the Deal” and has an opinion. Colleagues, buyers, students, patients, vendors, staff and referring doctors will all soon know your business.
OBSOLETE OR OVERPRICED REAL ESTATE – Often the seller’s beloved building is unattractive to the potential practice buyer. Failure to be realistic about its value and functionality has killed many deals.