It’s typical for dental practice sales to take anywhere from 6 months to a year from the listing date to the final close. While it is recommended to approach the sales process more methodically, it’s possible to shorten the timeline by removing typical bottlenecks that slow negotiations and due diligence.
Most of this streamlining is achieved by running standard steps in parallel instead of sequentially. Combined with the right preparation by the seller, timelines are immediately reduced, which saves you time, minimizes the chances of last-minute changes, and avoids undue stress as a large financial deal hangs in the balance.
To help keep your dental practice sale on track, we’ve outlined key steps that may make a 90-day closing possible. While not guaranteed, these steps can help streamline the process and attract strong bids.
A 90-day timeline is aggressive, but technically possible.
In every successful case, the practice seller adhered to our 3 key strategies that allowed the sale to move at maximum speed.
One important variable that also impacts the sales timeline is who your buyer is. An individual dentist and a DSO or private equity-backed buyer finance and negotiate deals differently, which affects where delays are likely to show up.
But even then, the biggest threat to a fast timeline isn’t usually due to the buyer or the financing; it’s the seller not having their documentation and strategy in order before the sales process starts.
The buyer’s attorney typically drafts the purchase agreement, and it goes through a few rounds of revisions before both sides sign. How quickly that happens often depends on how familiar the attorneys are with healthcare transactions. Those who work in this space regularly move through redlines faster, while those who don’t may treat standard terms as unusual and add unnecessary back-and-forth.
That’s why we recommend speaking with a few of the dental attorneys we work with most often, whose clients have consistently had positive experiences with them.
In most scenarios, buyers and their lenders are going to ask you for the same documentation. Assembling this properly before you list will have the biggest impact on a dental practice sales timeline.
Buyers and their lenders will generally want at least 3 years of previous tax returns. Depending on the structure of the practice, they may also want 3 years of personal returns from the owner.
If your goal is an accelerated timeline, have these ready in clean, complete form, including all schedules. If there are discrepancies between your tax returns and your P&Ls (common if you run personal expenses through the business), be prepared to explain the add-backs with documentation. Don’t wait until questions come up to address these issues.
Buyers will want to see your profit and loss statements for at least the most recent trailing three years. That should also include the current year-to-date. You’ll also want these statements broken down by month, and not just annual totals.
This allows buyers to understand any seasonality or fluctuations in the numbers. Without this granularity, they’ll have to ask questions, which slows down the process and will set back your target timeline.
If your books are kept on a cash basis, make that known up front when providing the documents. Buyers will normalize the numbers, but letting them know saves time and keeps the due diligence process moving smoothly.
These reports will get pulled from your practice management system, such as Dentrix or Open Dental. Export these in a shareable format so that buyers can examine your production metrics along with the P&L statements.
This gives buyers full insight into metrics like production by provider, production by code, new patient numbers, hygiene reappointment rates, or payer mix. When combined, production reports along with P&L statements show buyers that the practice is healthy, and the numbers aren’t being propped up by recent activity.
Having these reports ready and properly categorized in their own folders can take one to two weeks off the standard closing timeline. Avoiding any back-and-forth, such as the buyer asking for more data at each step, is what keeps the closing moving forward and also builds trust in your listed valuation figure.
This is another area where transactions can run slower than they need to, and there’s an easy fix for it.
Many sellers wait until after the due diligence process to start looking into the property leasing situation. Buyers generally wait until the purchase agreement is nearly final before submitting that information to their lender.
The problem is that your landlord already has a contract with you, so they have no financial incentive to move quickly when you approach them about a lease transfer. They’ll generally want to do their own review of the buyer before approving a clean lease transfer, which will take time.
This is often one of the most time-consuming delays in dental practice transitions. Everything else is in place, and then both parties have to wait to work out the new lease details.
The fix for this is straightforward, and an experienced broker will already have this ready. The fix is to begin working with the landlord right as the buyer and seller enter into a contract. This way, lease terms are worked out in the same window as financing and financial review.
Part of streamlining dental practice sales negotiations is understanding the balancing act between efficiency and just rushing things along, which can cause buyers to lose confidence.
Keeping the following key negotiating strategies in mind during the entire process will help maintain the buyer’s trust and ensure that the process never stalls or creates unnecessary delays.
Details such as the allocation of purchase price, seller financing (if any), transition length, and non-compete terms should all be settled before attorneys start drafting. Having to renegotiate these terms will immediately add weeks to the process and push the timeline past the 90-day target.
Some dental practice sellers want to challenge every clause or detail that the buyer introduces. This can slow down the process dramatically, and doesn’t always lead to better terms for the seller. Before the process starts, decide which points you need to stand firm on (such as listing price or transition details) and which terms you want to be flexible on to facilitate smooth negotiations and a fast sale.
If your goal is a fast sale, setting a response time at the start of negotiations helps to keep things moving forward. For example, both sides agreeing to a 48- or 72-hour reply deadline prevents negotiations from stalling out as one side waits a week or more for a response. These response delays can quickly add up, adding a month or more to the sale.
A buyer’s accountant can review production reports while attorneys are still working through the purchase agreement. An experienced broker can help maintain this type of parallel workflow to drastically cut down the due diligence and negotiation period.
Just keep in mind, the goal of an accelerated sales timeline isn’t about rushing the process or leaving any critical details out for the sake of speed. Instead, it’s about removing the typical bottlenecks that slow down the sales process, so everything moves smoothly, and both sides have trust in the process.
As a dental practice owner, managing a sequential sales process can be overwhelming if you try to do it alone. An experienced dental broker not only helps during this process, but also pre-vets buyers so you never waste time on unqualified buyers or buyers who have unreasonable demands.
A broker will also have extensive lending experience working with different types of buyers and lenders, such as SBA-financed individual buyers, DSO-backed buyers, and private equity buyers. Each of these buyers has different requirements, and your broker can help you tailor your documentation and negotiation strategy to fit each one as needed.
If you’re considering selling your practice, it’s never too early to contact a broker and start building a foundation so you can have the most profitable exit possible. The sooner you prepare, the more leverage you’ll have when it comes to negotiations to ensure you get your asking price.
Contact Lakeshore Dental Brokers today for a free consultation. Our experts can help you understand your options and also give you valuable insight into the current dental practice market.
Understanding your baseline is the first step toward maximizing your worth. Let’s start with a free, no-pressure valuation – and I’ll walk you through the whole process from there.
Prefer to talk it through? Contact Lakeshore Dental Brokers.
