Best way to sell a dental practice

Selling a dental practice can be a major life event. The business you will have invested in so heavily over the years will suddenly be out of your hands.

Selling a dental practice requires a lot of planning and administration. Sellers will want to ensure their practice is in a condition that appeals to potential buyers. They will also need to estimate the value of the practice.

This guide will walk through the main stages and considerations of practice sales. It will also introduce some of the best experts in the field to make your sale a success.

Reasons for selling a dental practice

There are many reasons for wanting to sell a dental practice. These may wanting to retire, being in poor health or wishing to relocate. In these situations, selling your practice makes a lot of sense.

However, some may feel that it is time to move on as things are not working out as intended. For example, you may have staffing issues or be unhappy with the level of administration. In these cases, selling up probably is not the answer. Other actions can be taken to improve your practice and make it thrive.

Selling a dental practice is a major decision, and your reason for doing so should be seriously considered. Buyers will also want to know why you are selling up – so make sure you have a good reason.

How long does selling a dental practice take?

The entire process of selling a dental practice can take several years. It is best to give yourself a run-up of around two years before you hit the market. This gives you time to prepare. You should use this time to ensure your practice is of a high standard.

Stages of selling a dental practice

There are many steps to take between deciding to sell your practice and completing a sale. The major stages are:

• Valuation
• Marketing
• Offer letter (a head of terms)
• Due diligence (done by the buyer)
• Completion.

Each of these stages will be addressed in more detail below. First, there are other areas to consider as well to make your sale successful.

Working at the practice after it is sold

An important issue to consider at an early stage is whether you are willing to continue working at your practice even after it is sold. This is usually determined by your buyer.

Corporates will usually require you to continue working for three to five years following the completion of sale. This is so that they can have time to benefit from the revenue you bring in. It also gives them time to find someone to replace you. This will obviously delay whatever you plan to do next. If you were planning to retire, it means your final day of work will come several years after the sale.

If you sell to an associate or another third party, you may be able to retire immediately or after a shorter transition period.

When are you paid in full after selling a dental practice?

You are not likely to receive the full agreed amount at the time of sale. Instead, you will probably get around 60-70% of the payment upfront. The remainder will be paid several years later. This is known as deferred consideration.

The remaining sum will only be paid if the practice performs as expected after it is sold. As such, it will be tied to financial targets.

This benefits the buyer because it reduces their exposure to risk. It can also benefit the seller, as they may be able to demand a higher overall price for the practice.

The full price of the purchase is known as total consideration.

Refurbishments ahead of going on the market

It is important that your practice is at its best before it goes on the market. Potential buyers will be looking for a purchase that requires minimal further investment.

However, it is important to strike a balance.

For example, make sure your equipment is in full working order and the practice is clean and tidy.

But spending large amounts of money on refurbishments and new equipment will not necessarily lead to a higher sales price.

That’s because the value of your practice is calculated as a multiple of earnings before interest, taxes, depreciation and amortisation (EBITDA). Spending extensively on renovations and the latest equipment would, therefore, most likely not be reflected in the sale price.

Selling a dental practice to a corporate or a dentist

Different types of buyers have different terms.

Most purchases are made by dentists themselves. And you are legally obligated to first offer your existing partners or associates the opportunity to buy the practice.

As mentioned above, corporate buyers will generally want you to work at the practice for several years after the sale.

Hiring a practice sale consultant

A practice sale consultant is not mandatory, but they will likely be of huge benefit. The sales process can be taxing. It can be easy to lose focus of your day-to-day operations while navigating the sales process. This can result in a drop in value.

Practice sales consultants will have experience. There will be fewer surprises on the way. They can also help you to find an appropriate buyer using their own contacts.

Your practice is likely to sell for more money with their help.

Keep staff informed

Keeping your staff informed of your decision to sell mitigates the risk of harm to your team’s morale. Be clear with your staff about the process and the implications for them.

This is important for several reasons. First, as a good employer, it reduces unnecessary stress and uncertainty among your team. A byproduct of that is that staff will remain happy and productive, making your practice more appealing to buyers.

The sale might also be conditional on some of your staff remaining in position. Keeping them informed in the process will make retention more likely.

Process of selling a dental practice

After you have taken all of the above into consideration, it is time to get the process in motion. For this, we will return to the six main stages of the sale.

Valuation

The valuation of your practice is an important part of the process. Buyers will make offers based on the original valuation.

The value of your practice will be unique and will require careful calculations. In order to get the best price, do not leave valuation to the potential buyer. This can often be the case when selling to corporates.

The value of your practice will be calculated based on EBITDA. This gives an overview of your practice’s operational performance and its potential to generate income.

The best way to get an accurate picture of your practice value is through maintaining accurate financial records. This should be standard practice, so make sure all work is properly invoiced using your practice software, for example.  

Your management accounts will be vital in calculating the accurate value of your practice. If everything has been recorded accurately, it also helps to differentiate between management costs and personal costs.

Good record keeping also shows that you are an efficiently run business. This will make it more attractive to potential buyers.

If a buyer makes an offer, they will then move on to the due diligence stage. If, at that point, inaccurate records are discovered, they may be unwilling to pay their original offer price. Lengthy negotiations may follow, and you could face a reduced price or even the sale falling through.

Marketing your practice

It pays to market your practice to a wide audience. You want to find a buyer who will pay a good price and, potentially, has a similar ethos.

You can use advertising, online forums and your own contacts to find the right buyer for you. Just be careful about how much information you share about your practice.

This is an area where a skilled sales agent can be especially useful.  

Offer letter

An offer letter, or head of terms, sets out criteria that need to be met for the sale to go through. It may demand that the levels of staff costs, rent and turnover are maintained until the due diligence stage takes place, which may be several months later.

It is important to let the buyer know of any changes you make to the practice during this term and seek their approval. That might be changes to contracts or increasing staff numbers. Otherwise, they may feel that the deal is no longer viable and drop out or reduce the price.   

Due diligence

Due diligence is the stage at which the buyer collects information about the practice they want to buy. It helps to be able to provide them with the information requested as quickly as possible. This speeds up the process and increases buyer confidence.

It can take anything from a couple of weeks to several months for a buyer to complete due diligence. The length of time can usually be shortened if you have put the work in beforehand.

Documents they will want to see include:

• CQC registration information
• Inventory
• Compliance documents
• Financial records
• Patient records
• Supplier contracts
• NHS pay statements
• Employer documents.

Completion

The process is complete after due diligence and any negotiations or alterations arising from it. The sale will be settled. Don’t forget to tell the Care Quality Commission about the sale. You may now need to continue working for some time or move on to the next chapter of your life.

Buying guide

Christie and Co

Regulated by the Royal Institution of Chartered Surveyors (RICS), Christie & Co work to the highest professional standards. Its ‘whole of market’ approach ensures that the businesses it sells are offered to a range of quality buyers. This maximises value for clients. No buyer registration fees or ‘preferred’ buyers means that clients receive the best advice.

Christie & Co’s consultancy, advisory, marketing and support teams provide expert advice. It maintains personal relationships with key trade buyers, together with private equity companies and other investors that are active across all its sectors. Its regional office network assures detailed knowledge of local markets and a wide network of contacts to find the right buyer.

Christie & Co has 11 offices across the UK. Its regionally based experts can access the widest possible pool of buyers and leverage longstanding personal relationships to:

• Provide the best advice
• Drive maximum returns
• Deliver a smooth process with the right buyers.

This extensive reach is fully integrated using its Salesforce CRM system. This allows Christie & Co to run highly complex processes and provide accurate, real-time reporting.

Trusted and tailored advice

Christie & Co is the only company accredited by the Royal Institution of Chartered Surveyors (RICS) to sell and value UK dental practices. It holds a unique position to provide clients with precise and tailored advice.

Christie & Co sells hundreds of trading businesses each year, including dental practices. These range from the smallest independents to large corporate portfolios.

The company is committed to excellence. It is guided by its RICS accreditation.

Christie & Co in numbers 2024

• Advised on, valued or sold 900+ practices with a combined value of over £840m
• Arranged over 500 viewings
• Received in excess of 330 offers
• Sold 125+ practices
• Achieved an average of 108% of asking price.

Expertise

Christie & Co has the knowledge and experience to navigate the challenges of the dental market. It is fully compliant with all industry standards.

Its extensive networks in the UK mean that Christie & Co can provide expert insight at national, regional and local levels.

Christie & Co offers unparalleled professional services. These include:

• Dental practice sales
• RICS-related valuations
• Commercial due diligence
• Lease advisory
• Brokerage
• Financial solutions.

What Christie & Co offers – stage by stage

Stage 1: planning ahead for your sale

Start early stages of exit planning

As a practice owner, you may have an approximate exit date in mind. It makes sense to take professional advice well in advance of that date. This ensures you are fully aware of all the financial and commercial implications of your sale. Many clients contact Christie & Co months or even years in advance of a potential sale. The team are always happy to chat with practice owners about the current market, even if the time is not quite right to sell.

Conduct an initial appraisal

One of the most important considerations is to arrange an accurate and realistic assessment of the worth of your practice. Your Christie & Co agent will visit the business at a time to suit so that they can understand your objectives. They can then provide a detailed appraisal of the practice. This is based on trading and operational information and their own experience of selling similar businesses to yours.

Adding value to your business

There may be opportunities for you to enhance your practice’s saleability and attractiveness to potential buyers. Through a thorough evaluation of your business, Christie & Co will advise you precisely where these opportunities are.

Keep abreast of the market

Your agent will remain in touch with you after your initial meeting. They will update you on market changes and relevant business sales in your sector and area. Christie & Co can also amend its appraisal if there are material changes to your business at any stage.

Understand who’s buying

It is often important to business owners to whom their business is sold to. Christie & Co can advise about the different types of buyers in the market (independent, small groups, corporates). It will also explain the pros and cons of each to help you decide which fits your business best.

Marketing strategy

Christie & Co will advise you on the optimum time to market your business, likely buyer types, the time it will take to sell and approximate sale price. An appropriate strategy will be agreed to suit your requirements. Once you’ve instructed Christie & Co to progress, the team can speak with your accountant and solicitor. 

Stage 2: On the market

Prepare the business for sale

Once you are ready to sell, it is vital to be fully prepared to go to market. Christie & Co will prepare an in-depth marketing report to present your business in the best possible light. The team will also prepare a pack of supplementary information to provide the interested parties.

Launch the business for sale

Once everything is agreed, it is time to launch the business for sale. This can be explicit or confidential, depending on your requirements. Christie & Co makes direct approaches to its contacts in the sector who is seeking businesses similar yours. It provides them with information and answers for any initial questions.

Managing viewings

When interested buyers wish to view the business, Christie & Co will brief you on their background and the reason they are interested. Their colleagues at Christie Finance will ensure the party has the necessary financial resources.

When you show an interested party around, it is always good to accentuate the positives. However, do not be afraid to point out areas where you feel the business could be improved. These represent opportunities for a potential new owner.

Viewing feedback

Following a viewing, Christie & Co provide and ask for feedback from the prospective buyer. If they are genuinely interested, further information is provided to them to enable them to formulate an offer.

Review offers

Once a serious buyer has viewed the business (often more than once) and reviewed the further information provided, they may make an offer. This will be reported to you in writing with evidence of the buyer’s financial position.

Christie & Co will carefully review any offer conditions and advise you on the strength of the offer. This means you can make a fully informed decision. It is often helpful to include your solicitor and accountant in these discussions. This helps to ensure you have considered all legal and financial angles. Christie & Co will take time to discuss the merits of the offer with you. You or your team will never be put under any pressure to accept an offer.

Dental Elite

Experienced team

The Dental Elite team has a strong understanding of the dental sector. It provides the right advice at the right time. It will also draw on its team’s knowledge to help you achieve your goals.

Its team of handpicked dental practice specialists have a successful track record. These experts know how to respond to complexities that may arise during a practice sale. They can prepare you for what your potential buyers need to see. This can include building regulations certifications, financial statements and X-ray test certificates.

Free no-obligation dental practice valuations

Dental Elite offers free valuation reports. It comes with no obligation to sell with the company. The valuation includes factors such as your patient base, practice location and staffing costs.

In addition, Dental Elite will help guide you on how best to approach your exit strategy and increase the value of your practice.

The report also tries to identify potential problems for when you come to sell.

Dental Elite valuation reports include:

• A cost base analysis to show how you compare to similar dental practices Dental Elite has valued
• The profitability and occupancy rate of your hygiene chair
• Exit planning and an indication of likely post-sale commitments
• A line-by-line breakdown of how your practice value has been calculated.

Marketing to the right people

Your personal consultant will agree on a prospectus with you when you are ready to go on the market. They will also help to organise your paperwork.

Dental Elite has more than 5,500 buyers in its database. All of them are actively looking for practices across the country.

Getting the best deal when selling a dental practice

There are various agreements you can enter into with buyers when selling a dental practice. Your Dental Elite personal consultant will work with you and your solicitor to guide you through the process. They will make sure that the marketing and transaction aspects run smoothly.

Due diligence

Dental Elite estimates that 70% of its service is provided after a buyer has been found, during the due diligence stage.

Its team will help you through the complexities of the due diligence process. This includes negotiations, contacting stakeholders and preparing your CQC de-registration.

It will also ensure your buyer is properly prepared in terms of their banking.

The team will additionally help you populate your due diligence questionnaire and inventory. This will help to protect you from unwarranted price renegotiations.

Regulatory frameworks

The dental industry has strict regulatory frameworks. This can make selling a dental practice extremely challenging in the current climate. You need to consider concluding treatments with returning patients and maintaining staff morale. You also need to consider essentials, such as transferring NHS contracts and re-registering the practice with the Care Quality Commission (CQC).

Dental Elite prides itself on its efficiency, industry knowledge and commitment to getting the job done right. 

An arrangement tailored to your goals

As a leading dental broker, Dental Elite prides itself on finding clients arrangements that are tailored to their goals.

Dental Elite will offer you a main point of contact throughout the entire process. They will bear ultimate responsibility for your sale.

Your consultant will:

• Conduct the initial meeting with you
• Complete your dental practice valuation
• Write your valuation report
• Prepare you for the market
• Oversee your entire sales process, covering everything from viewings to agreeing on the heads of terms.

Dental Elite’s consultants are supported by office-based sales progression and business support teams.

Frank Taylor and Associates

Valuation

Frank Taylor and Associates promises that its valuations are completely independent and without bias.

The value of your dental practice is not just about the net profit and EBITDA. A comprehensive dental practice valuation should consider upwards of 30 factors and draw on a current portfolio of comparable dental practice valuations and sales.

Frank Taylor and Associates have access to a wide range of market comparisons. This ensures your dental practice valuation is accurate. Values can change within a six-month period, so a lack of current data can lead to distorted market valuations.

Buyers and bank lenders will need reassurance that your valuation is accurate. Frank Taylor and Associates work closely with all bank-appointed valuers to ensure valuations are fully understood.

Its in-depth dental valuation service will provide you with accurate market values for your practice’s goodwill, equipment, fixtures and fittings.

Frank Taylor and Associates only markets dental practices that have been valued by one of its experienced valuers.

Marketing

Frank Taylor and Associates promises a comprehensive understanding of demand in different regional locations. It also claims to have the most comprehensive database of qualified potential purchasers.

All practices sold with the company are put onto the open market, subject to your wishes. This is to build competitive pressure and achieve true market prices.

Practices are presented confidentially, ensuring your patients and staff only know about the sale when the time is right. This confidentiality is maintained until a deal is well progressed. Your practice address and personal details are withheld from marketing material.

After the sale

Frank Taylor and Associates provide the following services once a sale has completed:

• Introduction to tax specialists: the company’s team of specialist tax planners can help minimise any tax liabilities that result from the sale
• Certification: Frank Taylor and Associates can arrange your Energy Performance Certificate, a legal requirement, if required
• Commission fees: the company will only realise commission fees after a sale has been completed. It does not accept commission fees from the purchaser.

Frank Taylor and Associates adheres to the voluntary Practice Sales Promise code of conduct. This sets minimum standards withing the dental practice sales market. It aims to promote transparent and straightforward sales processes.

PFM Dental

Expert valuations

PFM provides accurate valuations for associate and principal-led models. It also provides advice on enhancing practice values.

The company has been valuing dental practices since 1990. It is one of the leading valuers across England, Scotland and Wales.

Dental practices are valued based on a multiple of EBITDA. This is the profit of the practice, once relevant adjustments have been made. There are two different financial models that should be calculated: principal-led and associate-led.

The EBITDA is multiplied to determine the value. PFM knows what multiples the market is achieving but also how to calculate an accurate EBITDA. Making sure this is accurate can save up to hundreds of thousands of pounds in otherwise lost value.

Detailed report

Accurate valuations by PFM’s professional advisers take the guess work out of the process. Our expert knowledge is used for your specific practice.

PFM also offers a line-by-line breakdown of valuation calculations. It always uses exact figures, not estimates.

The company will use your valuation to determine what sort of buyer your practice is most suited to.

Its report also includes calculations for both principal-led and associate-led models of your practice.

Increasing value

When the in-depth review of your finances is complete, PFM suggests ways to improve your EBITDA.

Marketing and sale

PFM offers access to thousands of pre-vetted buyers, including individuals, small groups and all major corporates.

It will also negotiate the sale on your behalf, ensuring you a better price.

The team at PFM will provide assistance throughout the ensure process. It works with solicitors, buyers and the CQC to help ensure a smooth sale.

In-house legal expertise

PFM has specialist dental solicitors with expertise in commercial law, property law and CQC processes. It aims to make the sales process smooth and to safeguard you during and after the deal. Its wealth of sector knowledge means it can help you prepare everything in advance. If there is likely to be a problem, PFM often spots it in advance and take steps to avoid it.

PFM also offers:

• A fixed fee: this ensures that costs will not spiral
• NHS contract transfers: PFM will liaise with the commissioners for a smooth transition
• CQC registration: PFM will support you with CQC de-registration or any other necessary changes
• Property advice: the company will provide advice on leasehold and freehold properties
• Due diligence: PFM supports you getting all the information together for your practice sale
• 24-hour retirement: the team can ensure a smooth process for drawing your pension while continuing to work
• TUPE and staff transfer: PFM will support you throughout the process of transferring existing staff
• Fee-free sale: a high proportion of our practices sell to priority buyers meaning the purchaser covers the agency fee.

Conclusion

Selling a dental practice can be a complicated process with many hidden pitfalls. Even if the process goes relatively smoothly, it takes a large amount of time and commitment to get the best price.

This guide has talked through many of the steps involved in selling a dental practice. It has also introduced you to several of the companies offering expert advice and services to help you along the way.

Taking the time to get it right and calling on advice when needed will ensure a smooth sale for the maximum amount.