24 Steps In Practice Sale Process
For the typical practice the sale process is long and its complexity exceeds what most sellers expect before beginning the process. The steps of the process that must be accomplished by you, or by your practice broker or transition consultant if you utilize one, include the following:
Note: If you’ve already found a potential buyer, the steps noted by green are those that you won’t have to accomplish to find a buyer. The steps noted in blue are those that you won’t have to accomplish if your potential buyer has been working for you for some period as your associate.
1) Advance Planning
Determine your financial objectives, time-frame for retirement, and ongoing income needs. Analyze your practice, the type of buyer it will require, and the type of transition structure that will be required to meet your financial objectives and to make the sale and transition feasible for the buyer. Ideally, this should be accomplished 2 to 5 years before your anticipated sale date. If this 2 to 5 year window has passed, it’s now time for your sale and you did not plan in advance, then all of the factors that would have been considered in advance planning must be quickly considered now before determining your sale structure and beginning the marketing and advertising of your practice.
2) Practice Information & Data Collection
3) Practice Appraisal (Valuation)
4) Sale & Transition Structure Selection
Determine the correct sale and transition structure to:
5) Taxation Estimate
With your practice’s value and likely selling price range now known, consult with your accountant to determine the amount of taxes that may have to be paid on your sale price.
6) Marketing Plan
Develop a marketing/advertising plan that is consistent with the chosen sale and transition structure and that is directed at the type of buyer that is most suited to your sale and transition structure.
7) Practice Information Package
Prepare a comprehensive practice information package to provide to inquiring dentists. Parts of this package will also be needed by the buyer’s accountant and bank. Create a PDF file that it can be easily and quickly sent to inquiring buyer prospects.
8) Establish Buyer Inquiry System
In response to your ads, will buyers be instructed to call you, email you, contact you by mail, contact your broker, etc.?
Place ads or use direct mail to advertise your practice. Repeat or continue as may be necessary.
10) Prospect Screening
Screen prospects that inquire to make sure that they match the opportunity, are qualified, and obtain a confidentiality agreement from those who are to then receive practice information packages.
11) Provide Practice Information
If the prospect seems to qualify and match based on the returned confidentiality agreement and questionnaire, provide the comprehensive practice information package for review before consideration of arranging a meeting. Buyers will expect that this package can be sent by email.
12. First Follow–Up
Follow up with prospect after he/she has reasonable time to review practice data. Further develop his/her interest if it then exists and answer further questions. Rule out the prospect if there is not significant interest.
13. Office Visit/Seller Meeting
If the prospect seems to have a degree of serious interest, arrange a visit for the prospect to see the practice and talk with you.
14) Second Follow-Up
Follow up with the prospect after the visit.
15) Major Issue Negotiation Phase
Negotiate major issues such as:
16) Explain Remaining Steps/Process
If the prospect then wants to purchase the practice at the negotiated terms, explain the basic steps of the process that will follow and the timetable for each.
17) Obtain Buyer Purchase Loan
Help the prospective buyer find a source for the purchase loan, and assist with the application process as needed. Obtain a loan approval and a loan commitment letter from buyer’s bank. (If the buyer will work for you for a long period of time as an associate before the sale closes, it won’t be possible to get a loan approval far in advance of the sale. In such case, request financial information and credit report information from the buyer so that you can judge the potential for the buyer to get a loan in the future.)
18) Plan for Seller Debt & Lien Releases
For the intended closing date, obtain loan payoff amounts from your banks or lenders for any practice related debt that you may have and that will have to be paid-off from sale proceeds at the closing in order to provide the buyer with clear title to the assets you’re selling. A lien search [UCC filings] should be performed to make sure that there are no old liens on you practice’s assets that you don’t know about that are from your previously paid-off loans for which the banks failed to file lien releases.
19. Sale Contract Development
Develop and sign sale contracts and documents.
- Develop draft #1 of all sale related documents. Depending on your sale and transition structure, they may include such documents/agreements as:
- Review draft #1 of all documents. Discuss them with your attorney and accountant. They should be revised, as needed at this point to make them fully acceptable in all ways to you, your accountant, and your attorney.
- Present the documents to the buyer for his/her review, and for review by the buyer’s attorney and accountant, or consultant or other advisor that the buyer may utilize.
- Follow up with the buyer to see what he/she may want changed in the documents or what his/her attorney wants changed.
- Negotiate issues as needed.
- If and when all issues are resolved, the final draft of all documents is then prepared and signed.
20) Pre-Sale Closing Preparations & Contingency Fulfillment
Take care of all things that must be accomplished by the buyer, seller, accountants, banks and others before the sale can close. Some of the contingencies may be contained in the sale contract or there may be ones specified by the buyer’s bank loan approval terms. Each sale and transition is different and will have different contingencies. There can be others, but common contingencies include:
21) Coordinate with Bank
Coordinate the closing with the buyer’s lender.
22) Conduct Closing
Any office space leases or real estate sale contracts should be signed or closed on concurrently with the practice sale closing.
23) Possession Transfer
Possession of the practice transfers to the buyer.
24) Post-Closing Actions
These are acts that need to be completed on the day of closing or immediately thereafter. These include, but are not limited to, such things as:
Preliminary arrangements for many of these types of actions must be made prior to the closing of the sale, so that forms are complete and ready, and filing them with the appropriate parties can then be completed quickly, with no unanticipated problems.
Experienced Assistance Is Available
If you utilize the guidance and assistance of an experienced practice broker or sale/transition consultant, many of the above steps will be performed for you and you should receive help with and guidance for those few that you must perform yourself.
George D. Stollings, DDS