Practice Transition Deal Killers – Part Three

An Article in Five Parts – 

Many people assume that the sale and transition of a dental practice is a small and simple process. After all, how difficult can it be for a Mom and Pop sized business to transfer to new ownership? Well the fact is, there are many long and tedious steps involved in getting from a listing to a closing, directly involving the lives of the sellers, buyers, office staff and often thousands of patients. While most issues can be resolved by negotiation in good faith, there are a few things that can pop up which will have a direct effect on the value of the transaction and often, the feasibility of a sale. In some cases a little pre-sale planning might have averted disaster but often the problems are inherent to the business. In this series of posts, I’ll take a look at five elements that effectively kill off a practice transition. In it, we’ll examine a few circumstances that bubbled to the surface in the past – but rest assured, there are probably other land mines waiting to be discovered.

Part 3: Sometimes You Picked the Wrong Buyer.

One of the observations we have made watching doctors try to sell their own dental practice is their belief that every prospect is the buyer. We know that is not the case much like a realtor knows that not every drive-by is the buyer for their listing. With some vetting of buyer prospects, you may find that;

  1. They are not clinically capable of treating the volume of patients at the target practice.
  2. They do not have adequate credit ability or financial resources to close the deal.
  3. They may have issues with their immigration status.
  4. They may not have a current license in your state.
  5. There may be spousal objection to the practice location.
  6. The buyer may have personal problems such as addiction issues, dental board scrutiny or a pending divorce that will ultimately get in the way of closing a deal.

Watching doctors cruise the dental schools looking for a buyer reflects some lack of knowledge about who the potential buyer for a practice might be as, unlike in the era of Baby Boomer graduation days, less than five percent of the current graduating classes go directly into practice ownership. Grandma would say you are barking up the wrong tree or as one of my colorful southern friends might say, “this dog ain’t never gonna hunt.”

Dr. Steve Wolff – UMKC Class of 1977

Up next: The understandable choice of the wrong bank is another deal killer.