SHOULD YOU SELL YOUR DENTAL PRACTICE IN 2020, OR SHOULD YOU HOLD ON?
Presently, we are in the grips of a significant health and financial crisis. Depending on your age, this is a partial list of the events you have weathered in the course of your professional career:
1) 18-20% interest rates early in your career
2) The 1980s Savings & Loan crisis
3) The 1987 stock market crash
4) The Kuwait War
5) The Oct. 27, 1997 mini-crash
6) The early-2000s dot-com stock market meltdown
8) The financial crisis of 2007-2009
9) The Oct. 2018 stock market meltdown
10) The Covid-19 financial meltdown and health crisis
These events, and the everyday challenges and responsibilities you face as a practice owner, have all taken their toll. Maybe you’re thinking that it’s time to ride off into the sunset and let a young dentist purchase your practice. If you are a practice owner, and you are financially able to sell, here are some pros and cons of selling at this time…
1) Buyers put extra emphasis on the the most recent calendar year’s gross revenue. You had a good 2019, but 2020 will very likely show a decline of practice revenue.
2) Buyers are still looking to purchase, and banks are still open for business. If you begin today by having your practice evaluated (which would take 2-3 weeks), and a buyer is found within a short span of another month, the writing and negotiating of contracts and setting up a time for closing on your sale would typically take another 60-90 days. By that time, this crisis will very possibly be over, or at least will have become significantly more manageable.
3) Interest rates are at historic lows. Buyers want to take advantage of these low rates.
4) Even though business is currently almost at a standstill, the mandated closure of dental practices is creating a tremendous backlog of need for dental services. You know how busy you are when you come back from a one-week vacation. Most of us have avoided long vacations for this very reason. This pent-up demand for dental services presents a good scenario for buyers, and we are making them aware of this.
5) Concerning practice sales, we have been in a seller’s market. Age demographics have been suggesting that a buyer’s market is inevitable; baby boomer dentists are eventually going to sell their practices in large waves. This current health/financial crisis is likely to hasten the development of a buyer’s market. If you’re considering selling, you’ll want to be at the front end of a buyer’s market; competition increases and prices drop as that market establishes itself. Several doctors have shared with us in the past few weeks that this current crisis is the final straw for them. Expect the wave of practice sales to grow because of the combination of these factors.
6) It’s time to leave business behind and enjoy the fruits of your labors. You only live once. Every economic downturn and/or significant world event takes something out of you, especially as a business owner. How many more of these events do you want to endure?
1) There could be an economic boom after this crises resolves, making this hardship a relatively small blip in the big picture. This may or may not happen.
2) Being a dentist is fundamental to your identity, and you want to keep going for as long as you can do it. We get it, and we applaud you!
3) There will always be buyers. That’s true. However, in a buyer’s market, there will be many other practices for sale. As new sellers flood the market with dental practices, the strongest practices in the prime locations in the biggest cities will sell the fastest (even though they will sell for less than in today’s market). Smaller practices in smaller urban areas or rural areas will have fewer buyer candidates.
4) You’re in the middle of a long-range, strategic plan to build up your practice and sell at X time. It may make more sense to stick with that plan. 5) Even though you may be financially able to retire, it may not be the the best time strategically for you to sell with regard to your overall financial strategy. That’s a decision for you, your spouse, and your financial/legal advisors.
6) You decide you want to sell on your own terms. You’re not going to let an outside event determine your timeline. Again, we get it!
Whatever your decision is, good luck in this difficult time. Consider your future as you deal with the present. We hope that things work out the best for all of our fellow dentists!
Copyright 2020, Kim Sena DDS, Erick Rupprecht DDS
Michigan and Ohio Analysts; Legacy Practice Transitions At Legacy, we do not take a commission on the real estate portion of your sale.