Fair Market Value
Fair market value is determined by both an in-depth analysis and thorough documentation of your practice. This is the first step to a successful sale.A qualified and professional appraisal will determine the fair market value by direct comparison to actual, recent open market sales of similar practices. An accurate appraisal is also a very important tool for the purchaser to use when arranging financing, which is generally the final step to ensure the sale of your practice.
Financial Institutions are reliant upon appraisals to make proper and timely decisions. The appraisal provides critical information, necessary to both purchaser and vendor.
The fee for an appraisal is a tax deductible expense.
Practices rarely sell within a few months. The complicated and difficult process for a purchaser to investigate available practice opportunities, compare the alternatives and identify the right practice, is only the start. A purchaser must then acquire complete knowledge of all details of the practice. After being satisfied with this, a review with an accountant and/or business advisor is usual. At this stage negotiations for an offer normally begin. Once the intricate terms and conditions are worked out in draft form, a purchaser will likely seek legal counsel. Upon acquiring this advice, the buy/sell agreement of purchase and sale, and all supporting documents are finalized for presentation.
Assuming you have received a satisfactory offer, your acceptance will constitute a binding agreement. However, while your practice is “sold”, closing must still occur. This process again involves many steps. Conditions of the offer (usually financing), if any, are to be met and lease(s), if applicable, have to be assigned.
Following this are various activities, such as, staffing arrangements and preparation of closing documents. Once all this has been done, a successful sale is finalized, money changes hands and the purchaser assumes ownership responsibilities.Allow yourself one to two years to sell your practice. Have time on your side and not working against you!
Both you (as the vendor) and a purchaser require confidentiality. It’s in your best interests to maintain confidentiality, to protect the goodwill value of your practice.
Open knowledge of your selling could lead to staff resigning or, in the least, concern for their job; patients changing dentists; landlords considering alternatives for your office space; decrease in referrals from existing sources and a continuing barrage of questions from everyone about your personal plans, health and/or finances.
A purchaser also expects the goodwill value to be protected. Rumours of a new dentist taking over may lead to negative implications. A purchaser will be reluctant to buy if the value of the goodwill is questionable or may want to pay a decreased price for the goodwill.
In planning for your retirement, perhaps you should consider semi-retirement first. If your practice will support more than one full-time dentist, sell your practice upon the condition that you remain as an associate with the new owner. This will enable you to reduce your hours, enjoy continuing income and relieve you of practice management headaches. You will also have the opportunity to invest the cash proceeds of the sale (received up front).
Bringing in an Associate just prior to the sale of your practice may complicate your plans.
If the Associate does not purchase your practice, you have the concern of the potential impact on the value of your goodwill if the Associate draws patients away to a nearby location. Purchasers will be wary of this possibility and will be reluctant or unwilling to pay you a fair market value for the goodwill of your practice.
Our Purchaser Professional Services Include:
Structuring your offer
The likelihood of your offer being accepted and the vendor’s expected high standard of its presentation will require professional attention.
You want to present the most comprehensive terms that reasonably satisfy both yours and the Vendor’s objectives.
With our extensive experience in this area, we will structure your offer in a manner that will enhance its acceptability and meet your needs.
Assisting with the financing of your purchase
We can help you put together your presentations for financing and introduce you to several reputable and experienced lending institutions. We do not accept referral fees from any finance company as we believe this would be a direct conflict of interest.
Analyzing the terms of your financial proposals
Borrowing options can be confusing at the best of times and in today’s highly competitive financial markets, the proposals are even more complex.
You want to be confident that you understand all the conditions of financial proposals and the effective rates. The full details and terms should always be obtained in writing from the lender in a timely and professional manner. We will review any proposals with you and/or your accountant.
- Call all of the brokers that advertise in Oral Health Magazine. You are obligated to contact each broker because we do not share our listings with each other like residential real estate agents do. In other words, there’s no Multiple Listing Service (MLS) and if you only call us, you will not be aware of all the different opportunities available to you.
- In order to investigate the entire market of practices for sale, you should also write or call each of the “For Sale by Owner” (FSBO) advertisements. These are private sales. They can usually be found in the classified advertisements and they sometimes use a Box Number at the magazine to screen their inquiries. Unfortunately, it takes a long time to get a reply from a box number, and sometimes you get no reply at all because they receive dozens of letters from all over the world.
- Find a good accountant you can trust. They will become your most trusted source while looking at all the different financial information you will receive while investigating practices. Most accountants charge an up front and/or an annual fee to help you to find the right practice. They will also prepare proposals for the bank and help you with personal and tax planning.
- Establish a relationship with a financial institution. The chartered banks and leasing companies are willing to review the appraisals you have borrowed to pre-approve your loan. However, they are often reluctant to go through the entire credit application process until you show them an accepted offer to purchase.
- After looking for one to two years, you may identify the “right” practice. At this time you should see a lawyer and begin discussing your Offer to Purchase. Most brokers will draft an offer for you, at no charge, and will fax or courier it to your lawyer. The broker should also process and make the changes your lawyer wants to have the final offer ready for your signature in triplicate.