Selling can take longer than expected

Selling a dental practice can be a significant decision for any practitioner looking to transition into retirement, pursue a career change, or move on to other opportunities. However, many practice owners are surprised to learn that the process of selling their practice often takes longer than anticipated. This extended timeframe can be influenced by several factors, including market conditions, the complexity of the practice, and the financial considerations of both parties.

Factors That Contribute to a Longer Sales Timeline

1. Valuation Complexity One of the first steps in selling a dental practice is determining its value. While this seems straightforward, it can be a complex process that requires in-depth knowledge of various factors such as the practice’s financial performance, patient base, location, facilities, and the general market conditions. Dental practices may be valued based on their profitability, patient retention, and growth potential, among other factors. To find out more about what's involved in getting your practice valued click here. 
2. Buyer Financing Securing financing is often a major hurdle in the sale of any business, and dental practices are no exception. For most buyers, obtaining the necessary funds to purchase a practice involves securing loans from banks or financial institutions. In New Zealand, lenders will typically require extensive documentation, including financial statements, tax returns, and detailed business plans.
   In many cases, buyers are unable to secure financing immediately, which can extend the overall timeline. Even after a buyer is pre-approved for financing, the formal approval process can take weeks or even months, depending on the complexity of the practice’s finances and the lender’s requirements.
   
3. Finding the Right Buyer Unlike other industries, finding a buyer for a dental practice is not always a quick process. The pool of potential buyers is often limited to those with the specific skills and qualifications needed to run the practice. 
   
4. Due Diligence Process Due diligence is a critical step in any business sale, and it is particularly important when selling a dental practice. During this phase, the buyer will thoroughly examine the practice’s financial records, patient files, contracts, and compliance with regulations. This process ensures that there are no hidden liabilities or risks that could affect the sale.
   The due diligence process in dental practice sales can take time because of the need to review numerous documents and ensure that everything is in order. If any discrepancies or concerns are found, this can cause delays as both parties work through them. 
5. Transition Period When a dental practice changes ownership, the transition period is another factor that can affect the overall timeline. Many sellers are required to remain with the practice for a certain period after the sale to ensure a smooth handover to the new owner. This can involve training the new owner, introducing them to patients, and ensuring that the new owner is comfortable with the practice’s operations.
   A smooth transition is crucial to maintaining patient loyalty and ensuring the continued success of the practice under new ownership. However, this process can sometimes take longer than expected, especially if the seller and buyer have different expectations about the level of involvement required during the transition.
   

Market Conditions and External Factors

Market conditions play a significant role in the length of time it takes to sell a dental practice. In times of economic uncertainty, buyers may be more cautious and reluctant to make significant investments, which can slow down the process. Interest rates have an impact on borrowing capacity, in a lower interest rate environment, the purchasing power of the buyer is stronger and the Practice can become more affordable. On the other hand, a thriving economy may encourage more potential buyers, but it can also mean higher competition and longer negotiations.

How to Expedite the Process

While selling a dental practice can be a lengthy process, there are steps that sellers can take to potentially shorten the timeline:

1. Work with Professionals: Engaging a business broker who specialises in dental practices can help sellers navigate the complexities of the sale process. The LANZ.Dental team can assist with the valuation, finding buyers, and negotiating terms, which can expedite the process.
   
2. Ensure Financials are in Order: Ensuring that all financial records are up-to-date and transparent can help speed up the due diligence process. This includes tax returns, profit and loss statements, and balance sheets.
   
3. Prepare for the Transition: Sellers who are prepared to stay involved for a smooth transition can make the process easier and quicker. Having a clear plan for how the transition will work can reassure buyers and lead to a faster sale.
   
4. Be Realistic with Pricing: Sellers who are flexible with their asking price and open to negotiations may find the process faster. Overpricing the practice can result in long delays as potential buyers walk away or take longer to negotiate.
   

Selling a dental practice in New Zealand can take longer than many practice owners initially expect. The process is often more complex than anticipated due to factors such as valuation challenges, buyer financing, finding the right buyer, due diligence, and the transition period. While the timeline may seem lengthy, understanding these factors and preparing accordingly can help sellers manage expectations and navigate the process more effectively. With patience and the right support, sellers can successfully transition their practices to new ownership and achieve their desired outcome.

Contact LANZ on 021 229 7070 and we can answer any questions you may have about what's involved in successfully selling your practice.