Selling Smart: How to Exit on Your Terms

Speaker A: 00:00:01

Two dentists, same town, both retiring the same year, same size practice, roughly the same collections. One walked away with a sale that funded his entire retirement, kept his team employed and let him slow down over 18 months on his own schedule.

The other took a low ball offer from the first group that knocked on his door, watched his beloved team get gutted within a year and left tens of thousands, maybe hundreds, on the table. The difference wasn't luck. First, Dennis started preparing three years before he sold. The second started the week he decided he was tired.

That gap preparation versus reaction is the whole ball game when you go to sell. And today we're going to show you how to be the first dentist. So welcome back to the Dental Business Podcast.

I'm Phil Cole and this is part three of our four part transition series. Now we've covered what a practice is worth and we've covered buying one. And today is for the dentists on the other side of the table.

This is for the seller. This might be the most emotional episode of the series because selling your practice isn't just a transaction.

It's the closing chapter on something you built with your own hands.

You want a great price, of course, but you also want your team protected, your patients cared for the way that you cared for them, and you want your legacy intact. The good news is you can have all of it if you sell smart and if you start early enough. So let's get into it.

The single biggest mistake sellers make is starting too late. I cannot emphasize this enough. By the time most dentists decide to sell, they're already burned out.

And burned burnout makes you a motivated seller, which is exactly the wrong position to be in when buyers come to smell you out. Basically, here's the truth the the ideal time to start preparing to sell is minimum two to three years before you actually want to be done.

Why so long? Because the levers that maximize your sale price take time to pull.

Remember from episode one, value comes from cash flow, clean books, low owner dependency, and as much reduced risk as possible.

So you can't fix bloated overhead or wean the practice off your personality, or produce three years of clean reviewed financials in the final 90 days. Sometimes we can within 30 days. That work has to start while you still have the energy to do it.

Starting early also gives you something priceless, and that's optionality.

When you're not desperate, you can wait for the right buyer, you can make sure that you get the price that you want, and you can walk away from any bad offer. The dentist who Starts early, sells the dentist who waits well, they get sold too.

The best time to prepare your practice for sale is was three years ago. The second best time is today if you're thinking three to five years from now.

So even if you're not sure you'll sell or you think you've got a decade left, get a baseline valuation now, get your books in order and start reducing the practices dependency on you now. Future you will be grateful and it definitely is going to be richer now. Not all buyers are the same.

And the type of buyer you choose shapes everything. Your price, your structure, your team's future and how long you stay. Let me walk you through the main types.

The individual dentist or first time buyer. Right. Often a young doctor or an associate that's stepping into ownership. These buyers frequently care deeply about your team and patients.

And they're buying a career, not just an asset, which can mean a smoother, more value aligned transition. The trade off is they're usually financing the whole thing through a lender.

So the deal depends on the practice qualifying and the buyer being approved. You have the DSO or group practice, which is dental service organizations and larger groups that can move fast.

They can pay strong prices and sometimes offer structures that individual buyers can't. Equity rollovers, earnouts, continued employment. But the structure is way more complex and I think it's something that we can't stress that enough.

And it's never understood by the seller. And you need to understand it deeply because the headline number and the number you actually take home can be very, very different.

Some DSO deals are okay. Some are designed so that the attractive part of the price is contingent on things that may or may not even happen.

You need to have an advocate when you read the structure and tell you the truth about what the DSOs are actually going to get. We sell to private practices. We're not a fan of the DSO model, the neighboring practice or now let's look at the strategic buyer.

Sometimes the best buyer is a practice down the road looking to expand. They may pay a premium because they can fold their patients into existing capacity and cut duplicate overhead. These deals can be efficient.

But again, the details of how your team and patients are absorbed by matter enormously once again to your legacy. There's no universally best buyer.

The best buyer is the one whose goals line up with yours on price, on timeline and on what happens to the people and the patients that you're leaving behind.

Defining what you actually want before you go to the market is what lets you choose well, instead of just accepting whatever Shows up at your doorstep. Structure is everything. And so this is the part sellers underestimate the most. So listen closely. The price is not the deal. The structure is the deal.

Two offers with the same headline number can leave you with wildly different amounts of money in your pocket on wildly different timelines and on wildly different risks. So here's what to understand. Asset sale versus a stock sale.

Most dental practice sales are asset sales where the buyer purchases the assets of the practice rather than the legal entity.

This has major tax consequences for you because how the purchase price is allocated across different categories of assets, which would be goodwill, equipment, supplies, non compete that determines how much your proceeds are taxed at favorable capital gains rates versus ordinary income. The allocation is negotiable. And getting it wrong, well, it can cost you a fortune.

This is where having tax expertise at the table literally pays for itself. Cash at close versus earnouts and holdbacks. A deal that's a million dollars might be a million in cash at closing.

Or it might be 700,000 at close with 300,000 tied in future performance over several years. Those are not the same deal.

Understand that earnouts and holdbacks aren't automatically bad, but you need to know exactly what they're contingent on and how realistic those targets are. Money promised, you have to understand, is not money received.

And too many times we find people think that the money promised will be guaranteed money received, the transition period and your role afterward. Most sales include some period where you stay on to transition patients and relationships.

Sometimes a few months, sometimes a few years, especially with groups. But understand what's required, how you'll be compensated for it, and whether the terms fit the life you actually want.

Post sale a great practice tied up to three years of working under someone else's rules. Well, it may not be the win it looks like the non compete in the real estate.

Expect a non compete restricting you from practicing nearby for a period. Make sure it fits your plans though. And if you own the building, the real estate is once again a separate entity. And it's a sec.

It's a second negotiation. Whether you sell it, lease it to the buyer, or hold it as an income producing asset in retirement.

That lease can become one of the best parts of your deal. If it's structured right. Sellers obsess over the price and ignore the structure.

The pros do the opposite because the structure is where the price either becomes real or it quietly disappears. Protecting your team and legacy. For a lot of you, this part matters as much as the money does.

You spent decades building relationships with the team who showed up every day and the patients who trusted you with their health. You don't want to sell to somebody who will torch all of that the moment you're gone.

You have more power here than you think, but only if you build it into the deal properly. You can prioritize buyers whose values align with yours. You can negotiate for team retention and protect your key people.

You can structure a thoughtful transition that introduces the patients to the new owner rather than springing it on them. None of that happens by accident. And none of it happens if you take a reactive lowball offer from the first group that knocks.

It happens when you sell from a position of strength, with an advocate making sure your priorities, not just the buyers, are going to be written into the agreement. Selling your practice well.

It should be a celebration the moment all those years of work pay off on your terms, with your people protected, I should say, and your legacy staying intact. But that outcome doesn't happen reactively.

It happens because you prepared, you understood your options, and you had someone in your corner fighting for your number and your values. At Class Solutions, we represent sellers through the entire exit.

Preparation, valuation, finding and vetting the right buyer, having the structure that maximizes what you actually will take home while protecting everything that you built. Because we're not just a broker chasing a commission. Our advice is honest. Even when honest means you don't want to sell it yet.

If a sale is anywhere on your horizon, the smartest move is is to start talking about it now. Have a conversation early. Reach out to us at Class Solutions, classsolutions.com It'll be confidential. There's no pressure.

Just have a discovery call. Make sure that you are set and prepared for your future transition. Now, in the next episode, we close the loop. The deal is signed. Now what?

Because the transition itself is where great deals can still go sideways, and I'll show you how to land it. I'm Phil Cole. Thanks for listening. And go build something worth owning.