Using a business broker
If you needed an operation, you would no doubt want a surgeon with years of specialised training and experience to carry out the operation successfully and to be back on your feet quickly, getting on with your life. If your car broke down, you would probably want to use a mechanic that had diagnosed and fixed hundreds of problems like yours before, to get the car fixed and back on the road as cost effectively as possible. If you’re selling your business, you’d engage the services of a skilled…hang on, you could do that yourself couldn’t you? Surely selling is simply about finding someone who wants to buy, agreeing a price and signing the paperwork your solicitor puts in front of you? Deal done, practice sold and money saved on broker fees. Simple.
Some practice owners do feel that they can sell their businesses themselves. After all, who knows the business better than they do? Often these owners become sellers by letting their accountant ask around their limited contacts, or by placing an advert in a dental journal and then waiting. Will the phone ring? If it does, it may be a local dentist wanting to find out what is for sale and for how much. If some potentially interested parties do come round to view, they will ask a ton of questions and then leave – possibly for you to never hear from them again. What about confidentiality? Proper pricing? Negotiation? Closing the deal?
Selling your business
Selling a practice is one of the biggest business decisions you will make. Much more complex than selling a house, transfers of business ownership demand considerable time and effort. So when considering a sale of your practice, think about how you would reach qualified and serious buyers, without disclosing your intention to sell and whilst maintaining confidentiality. How would you evaluate your business objectively to ensure that you receive top dollar on your investment and avoid costly negotiating tactics? How do you prepare and present the information to prospective buyers in a way to capture their interest? How do you create a competitive market around the sale of your business, bringing numerous serious buyers to the table, maximising exposure to potential offers, while minimising potentially damaging public exposure to customers, competitors, employees and suppliers? How do you successfully sell your business, diverting significant time, effort and resources to that process, while continuing to manage your ongoing business productively? A reduced focus on the operational side of the business resulting in a performance downturn is the last thing that you want to happen if you want to maximise your sale price.
All too often, the owner who attempts to sell his own business ends up with much less than it is actually worth – if they ever manage to conclude the sale at all.
This is where using a professional, specialised dental broker adds inherent value – at a fraction of the cost of what you could lose by going it alone. They have the expertise, tools, resources and connections to market and sell your business successfully and studies have proven that using a specialist will not only increase the likelihood of a successful transaction, but also will achieve a better price.
Typically, a seller ‘going it alone’ will deal with one buyer at a time, often for months without really getting anywhere. When there are multiple parties interested in buying a practice, two very good things happen: firstly, the seller has much better chances of getting a fair market value and secondly, the risk that a sale is never consummated is greatly reduced.
We recently acted on behalf of a client who had commenced independent negotiations months earlier with a group buyer for the sale of his practice but quickly felt uncomfortable and lacking in knowledge about the specifics of the deal and of what was achieveable in the current market. Picking up the negotiations and within just one week, our expertise resulted in the offer being increased by the not too small sum of £400,000! Widening our focus to include other interested buyers, the resulting simultaneous negotiations resulted in a higher offer and significantly better package being secured from another buyer source – and another very happy seller.
Choosing your broker
To paraphrase author George Orwell, all men (also read here: ‘dental brokers’) are equal – some are just more equal than others.
Your broker should be a trusted adviser in the dental community and respected by his peers. Ask around about their reputation. Are they regular speakers at the BDA, recognised as experts by leading dental accountants and solicitors? Is their reputation built on excellent service, shared ethics and integrity – all of which are critical to good broker/client relationships and to creating successful business transactions.
Some brokers charge for a marketing appraisal of your business, others don’t and operate a ‘no sale, no fee’ service to give you complete peace of mind whilst you are exploring your options. Some smaller ones have a limited database of buyers, more established ones have thousands, built up after many years of investment and time in ‘creating a market’. Each will have their own USP, but whoever you engage as your agent, be wary of those out there who will ‘flatter to deceive’ – over-egging the valuation just to gain your sales instruction (and invariably fail to deliver their high price promises). If the large dental corporates cannot command anywhere close to a multiple of 10 times adjusted net profit for businesses of their size, then I’m afraid that anyone claiming that they will achieve that for you is probably out to mislead.
At the outset of your discussions, a professional broker will analyse your goals and objectives for selling, taking an interest in learning the mechanics of your business and asking questions that provide insights about your business model, which will be invaluable during the marketing and negotiation stages. Having then completed further analysis and discussed an accurate valuation with you, their skill lies in preparing a strategy for marketing to source not just any buyer, but the right buyer for you, and at the best possible price. Always acting in your best interests, for every extra £1,000 they add to the achieved sale price, they benefit from a small percentage as a fee (remember that client mentioned earlier? He had a net gain of over £390,000 even after payment of our fee – not a bad investment).
The success of your business sale will be influenced by your relationship with your broker. Trust their advice and decisions – whilst passionate about selling your business for you, they are not emotionally involved in it and will work efficiently to guide you gently around the inevitable obstacles that arise during any transaction. A skilled broker will act as a ‘buffer’ between the two sides, diplomatically fielding and addressing sensitive questions and issues that if left directly between the seller and the buyer, might damage or ruin the prospects for completing a deal. Brokers that can address the concerns of one side without offending the other are invaluable to the negotiating process.
When selling your business, you don’t want just any buyer, you want the best buyer and the best overall deal. Even if you already have an idea about what you want from a business sale, a reputable broker will be sure that the right questions are asked to help you organise your thoughts, review your priorities and understand what the market is saying. In the end, you’ll find yourself in a much better position to evaluate your options and make a considered choice about your future, whilst ensuring the best possible financial outcome for you and your family.