By Danny Chan
When undertaking a complex task, it is wiser to entrust it to the person who has performed the same task 100 times than give it to someone doing it for the first time. This straightforward principle can be applied to the buying and selling of a dental practice, says Simon Palmer, Managing Director of Practice Sale Search.
Simon is espousing the merits of accumulating trade-specific knowledge that comes with consistent industry exposure and hands-on experience, the kind of insight you won’t find in textbooks or training courses. Perhaps, it’s also the kind of expertise you would like to have on your side of the negotiation table when you’re selling a dental practice.
With more than 12 years of experience in dental recruitment and dental practice sales, Simon is a practice sales broker with intimate knowledge of the Australian dental industry. Coming from what he calls a “dental family” – his father, uncle and cousins are all dentists – Simon’s professional background is also intrinsically tied to the oral care profession.
Since graduating with an economics degree about 20 years ago, he has been involved in the business of dental recruitment and practice sales. Four years ago, Simon sold off the recruitment portion of the business to focus on the latter, hence renaming the company Practice Sale Search. The brokerage firm provides comprehensive, confidential practice sales/purchase services, exclusively for dental practices Australia-wide.
Business, Simon says, has been trending upwards: PSS sold 50 practices in 2015, followed by 65 in 2016. Simon’s recognition as an expert in Australian practice sales circles – where his views are regularly sought and heard via dental publications and seminars – might have something to do with it.
“Buying or selling a practice is more complex than it looks. What we do may appear similar to what a real estate agent does, but it actually involves a lot more moving parts. For example, in addition to a real estate agreement for purchase or lease of the premises, practice sales also involve the business sale contract, and often a work contract for the vendor post-sale,” Simon explains.
“For any given project, we can be dealing with three lawyers: One for the business owner, one for the landlord and one for the buyer. We need to make sure all the moving parts work together – more than just the straight sale of an asset.”
The work contract governs the working period that the dentist-seller has agreed to carry out post-sale as a component of the purchase agreement – lasting anywhere from 6 months to several years, depending on the nature of the deal. Corporate acquisitions typically stipulate a longer work contract than private ones.
“We are essentially providing a consulting service. Besides having to understand the business side of things, we need to analyse the commercial and lifestyle needs from the buyers’ standpoint – whether the location is viable, close to home, within manageable distance from a second clinic, or whether the buyer can replicate the clinical work and hours that the vendor is currently putting in.”
Negotiations typically take a few weeks, although documentation easily adds another month to the process. Just think of the amount of paperwork involved: Historical tax returns, financial statements, complete inventory of equipment and furniture, depreciation calculations and schedules, patient records, insurance arrangements, premises lease, etc.
Of course, employing the services of a brokerage firm is as much about dealing with the complexities as it is about securing the best possible deal.
“Besides helping our clients save time – from having to deal with accountants, lawyers and contracts – we also help them get a better result.
“From our ability to generate competitive tension, and based on our knowledge of the market and pricing benchmarks, we can easily beat the valuations of a private seller who is selling to his or her own buyers in isolation.
“Furthermore, the broker can also provide a level of objectivity absent from the buyer or seller’s decision-making, perhaps blindsided by emotional attachments.”
Simon’s talk at the recent Dental Practice Owners Conference 2017 in Melbourne, titled “Exit Options: How To Make Your Practice More Saleable”, provided useful tips to an appreciative audience – comprising practice owners from all across Australia – eager to learn how they can capitalise on a buoyant marketplace. If recent trends in corporate aggregation, low banking interest rates and growth in the number of dentists buying are anything to go by, 2017 already looks like a boom year in practice sales.
Where exit options are concerned, Simon opines: “It’s horses for courses. I don’t think that there’s an exit option that suits everyone. It depends on where your practice is at and other influencing factors, ranging from commercial interests to the type of lifestyle you prefer.
“If the dentist wants to get a market appraisal for their practice, all I need from them is profit and loss documentation for the last couple of years. Based on their responses to a list of standard questions and my visual assessment of the practice, I am able to provide a verbal appraisal for free.
“Whatever the client chooses to do with the appraisal, we can ensure that the entire process remains discreet and confidential.”