3 Considerations Before You Sell Your Dental Practice

Posted by Guest Author on Aug 15, 2022 9:00:00 AM

As a dental entrepreneur, investing in the real estate or lease for your practice was a crucial decision that has helped you drive long-term success throughout your career. But did you know that your dental practice can also be a piece of your retirement strategy? 

In addition to the rest of your thoughtful planning, selling your practice can set you up for success in retirement

You’ve spent your career building your practice, so it’s important you sell your business to a qualified professional who will effectively carry on your operations and legacy. Below, we’ll walk through three real estate-specific considerations to make before you list your dental practice for sale. 

 

1. The Location of Your Practice

The demographics, data, and competition ratios surrounding your location have likely changed since you first opened your practice.

Before you sell your practice, it’s critical to know the strengths and weaknesses of your location before going into a sale, even if your property report isn’t perfect. By working with a good broker, they’ll be able to turn a demographic liability into an asset to seal the deal. 

The Takeaway

Some practices can be sold based solely on their location. Even if the prior owner lacked management skills, a successful broker could highlight the location to a qualified buyer. Often, this is through a site selection report, which shows nearby businesses that can bring in patients, the dental practice competition, and general demographics in the area. 

Before you sell, ask a transitions broker for a site or property report. Find out how strong your location is in today’s terms so you’ll know how to market your location and practice to potential buyers. 

 

2. Your Current Lease Terms

Selling a dental practice is a multi-step process that takes careful planning. If you don’t own your property, one of the most important considerations is the terms of your lease agreement. 

If your lease is up for renewal before you plan to sell your practice, work with a real estate broker to negotiate the terms. The following lease terms can impact your valuation:

  • Rental rates. As a practice owner, your real estate is the most significant overhead expense. It should be reasonable and fair.
  • Important dates and lease length. This may include the due date for rent, the number of days from an incident that you have to file a complaint with the landlord, and other lease-related dates. 
  • Tenant improvement allowance. In certain circumstances, landlords are willing to provide the new tenant money to upgrade the property, which could be a great benefit to a new dental practice owner who is looking to improve the space. 
  • Free rent. Before you resign your lease, try to negotiate free rent for the beginning of the new lease term. This can be an incredible incentive for potential tenants. 
  • Amicable landlord. Your landlord is a critical part of your lease and is a long-term consideration for the person who is purchasing your dental practice. If you have a good landlord who is willing to invest in a potential buyer, you’ll be able to showcase this during the selling process. 

The Takeaway

While affordable rent is important, it’s not the only factor that potential buyers will consider. For example, a landlord who is never around, who doesn’t communicate effectively, and who doesn’t appreciate the value of your practice likely isn’t the landlord potential buyers will want. 

Before you list your dental practice, request a lease abstract from a medical/dental real estate broker and get to know the details. 

 

3. Guaranteed Exclusivity

Exclusivity is another factor to consider because it determines your potential buyers and marketing strategy. 

For example, if you started out as a general practitioner, but have since added orthodontic services to your practice, it can be troublesome if another orthodontist moves into your retail center later in your career. Due to the direct competition, other orthodontists will not likely be interested in your space. 

In addition, you’ll want to consider the businesses within your business park or building. While the right surrounding businesses can draw clients in, the wrong stores around you can have the opposite effect and create long-term issues for your business. 

The Takeaway

Understand the exclusivity language in your lease or contract. If you’re up for renewal before you plan to sell your practice, consider negotiating exclusivity so potential buyers can have confidence knowing the practice they’re taking over will be protected from direct competitors. 

If you own the office space and do not have exclusivity, you can market to dental professionals who are unique from the others in your area. 

 

Successfully Prepare for Retirement 

If you’re nearing retirement and plan to list your dental practice for sale, know the impact on your valuation through property reports, lease terms, and more. By understanding each of these areas, you can strengthen your position among buyers and potentially receive a higher price for your practice.

In addition to selling your practice, there are other financial considerations to make as you take the necessary steps for retirement. These include preparation items, such as:

Get started successfully planning for your retirement! 

About the Author

This blog was written by the team at Practice Real Estate Group, a full-service real estate firm focused on healthcare providers. 

About Treloar & Heisel

Treloar & Heisel, an EPIC company, is a financial services provider to dental and medical professionals across the country. Our insurance and wealth management divisions assist thousands of clients from residency through retirement. We strive to deliver the highest level of service with custom-tailored advice and a strong national network. 

Topics: Retirement Planning, Dental Practice Business Tips, Guest Blog