Dental Practice Brokers and How to Select Them
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If you are looking for insight into how to select a dental practice broker, we have put together a comprehensive and insightful guide below, to help ensure you select the broker that is best for you.
Dental Practice Brokers and How to Select Them
A dental broker is a professional that handles every stage of the transitioning of a dental practice- be it buying or selling. Dental brokers walk clients through every moment of a dental practice transition including valuation of the dental practice, purchase or sale of the practice, negotiations, and contracts, and smooth transition from one owner to another.
Dentists employ dental brokers to help them navigate their dental practice transition or retirement. Before going into how to select dental brokers, let us take a quick look at some of the reasons why you may need to hire the services of professional dental brokers.
Benefits of Employing Dental Brokers
Many still wonder if they really need to employ dental brokers in the transitioning of their dental practice. Firstly, dental practice brokers are professionals and they know the intricacies of transitioning process. You can be sure to get the best deals from them rather than going on your own. Here are some other reasons why you may need the services of a good dental broker.
Accurate information regarding the general value of the practice is essential whether you are planning to buy or sell a practice. If you’re looking to sell a practice, you sure will want to get a good value not only of the physical assets of the practice but also of other invisible assets such as the time and effort you’ve put into building the practice.
If you’re looking to buy one, on the other hand, you will want to purchase for a fair price, while knowing you have all the necessary information about what you’re getting into. A good dental broker uses any of the various methods of valuation and ensures all required information is made available, in a form that is easy to interpret.
Dental Practice Negotiations and Contracts
Dental service brokers are also in charge of handling negotiations, as well as all the hassles involved. Good dental brokers ensure they have no conflicting interests, and fight for the best interest of their clients when things start to move after the valuation stage.
When things have moved past the going back and forth stage, and an agreement has been reached, legal contracts need to be created and dental brokers still come in handy at this point. They are responsible for creating and reviewing contracts and clearly communicating the contents of the contract to the client so the client can make informed decisions about the transitioning of the practice.
Dental Practice Transitioning
Once sale or purchase contracts are finalized, the transitioning phase is next. Truly, handing off the required documents in order to finalize the sale of a business you’ve built for years or stepping into an erstwhile unfamiliar territory may be overwhelming, dental brokers have the responsibility of easing the transition process. Good dental brokers facilitate transitions by ensuring the seller has fulfilled all required legal obligations and the buyer has everything they need to run a successful dental practice.
Choosing a Good Dental Broker
Getting the right person to represent you in the sale of what is probably your most prized asset, or in the purchase of a dental business is indeed a critical decision, and it is important you get it right. But how do you choose the right dental broker?
Dental Practice Consultations
The first and one of the most important steps in this process is consultation. It is important you conduct some research and consult with accountants, attorneys or even colleagues to get recommendations. The dental broker to be chosen should have a proven track record of representing the best interest of previous clients and should fit your needs.
It is also important you are straightforward from the onset and the broker should understand your expectations. Ensure you ask all questions that come to your mind and be sure to determine if your expectations and goals match those of the broker. Though there is no fixed list of questions, here are some questions that may help you choose a good broker.
What experience does the dental broker have with dental practice transitions? A good dental practice broker should have a significant amount of experience in dental practice transitions. They should also possess a wide range of skill sets, covering finance, marketing, accounting, etc. The dental broker should also be able to feed you with some notable deals they have closed and client referrals.
Knowledge of the Local Community
How involved is the dental broker with the local dental community? It is imperative the dental practice broker has an intimate knowledge of the local community and a good understanding of the dental market. To gain a good understanding of the market, the dental broker must have carried out a number of deals in the community and should also be involved in the general dental practice of the community such as involvement with the local dental society and networking with the dental supply companies, accountants, attorneys and other allied professionals. If the dental broker is found wanting on this front, their suitability for your transition may be questioned.
Marketing Technique or Strategy (Important!)
How will the dental broker market the practice to potential buyers? The dental broker should at least have a website and a strong online presence to market your practice as well as educate potential buyers on the necessary steps in purchasing a practice.
Furthermore, state and local dental journals should also be used by the dental broker in marketing the company and listings. As necessary as these steps are, they should only be considered as the starting steps. The dental broker should also be ready to spend time with a potential buyer who inquires about a listing and develop relationships with them.
Amount of Deals or Businesses Handled
Do they handle dental deals only or are into other businesses? A good dental broker should handle dental deals only. Working with a dental practice broker that is into multiple businesses may not be advisable. An exclusive dental broker would have mastered the terrain and is likely to be better equipped in handling the dental practice transition. It is also better to work with dental brokers who run a full-time practice rather than part-time practice brokers. Full-time brokers often have a larger pool of buyers and tend to work harder.
What valuation method does the dental broker use in determining the value of the practice? Several methodologies for valuing the dental practice exist. You must ensure you understand the valuation method used by the dental broker and you are in agreement with it as you, and not the buyer bear the risk if a buyer is not in agreement with the valuation approach.
What are the short-term recommendations of your dental broker for increasing the value of the practice? To be honest, not much can be done at this stage but good dental practice brokers generally recommend several short-term changes that may increase your chances of getting a good deal. The changes may include minor renovations such as repainting, changing floor cover or replacing worn out furniture.
What additional service fees will you be required to pay at closing? Often, you are required to pay a lawyer and an accountant. A good dental broker should inform you about this and should also give an estimate of the fees payable.
How long on the average does it take the dental broker to sell or purchase a practice? This question is necessary to ensure your expectations match theirs. Dental brokers vary in the length of time they take to complete deals and having a knowledge of the average length of time it takes a particular dental service broker would assist in deciding whether the dental broker is ideal for you or not.
What are the dental broker’s charges and when are they payable? Charges should not exceed 8-10% and most dental brokers collect this on closing the deal.
Type of Representations
Dental brokers are known to make use of either single or dual representation. Single representation entails the dental broker representing either the buyer or the seller while dual representation is a situation whereby the same dental broker is representing both the buyer and the seller. Dual representations are relatively common in dental practice transitions although they are seldom practiced in other businesses.
Pros and Cons of Single Representation
Single representation offers a higher level of trust since you are sure the dental broker represents you alone and will always have your best interest at heart. The broker is also motivated to work harder as single representation brokers tend to have fewer deals on hand, and receive payment from only one party. The major disadvantage of single representation, on the other hand, is that brokers will not match potential buyers to the practice because it represents a conflict of interest.
Pros and Cons of Dual Representation
No conflict of interest exists when matching buyers and sellers. Dental brokers also talk to much more buyers than sellers and the process of finding a buyer is accelerated. The flip side to dual representation is that there is no assurance that the broker has your best interest in mind since he is representing multiple parties in the same deal.
Going for a single or dual representation broker comes down to a personal decision, after carefully examining the circumstances surrounding the transition. It is, however, important that the pros and cons of both should be critically examined so you can make the best decision. Though dual representation is the trend among dental brokers, it is still regarded as a questionable practice by some due to the conflict of interest involved. If a quick sale is what you desire, however, dual representation might just be ideal for you.
There you have it! All the above are some of the ways you can choose the ideal dental service broker for you. However, it is very important that the dental broker you are choosing has the necessary experience and skills to effectively handle your transition and ensure you receive the best value possible for the sale or purchase of a dental practice. By asking the questions listed here and requesting referrals from your colleagues or advisors, you can be sure you have chosen the right dental broker to handle your transitioning.