Similar to selling any business, selling a medical or dental practice should be well planned. There are many factors to consider before going ahead with a sale and you may not be aware of them all. That is why engaging an experienced legal representative becomes essential. Working with the right legal team will ensure you have a strategic exit plan, limit your risk and maximise your sale. Planning is key to a successful sale.
Well established practices are generally in high demand and business owners are often in such a hurry to sell, they do so at a loss, or the sale falls through due to them having missed important timelines that would have made their sale profitable and seamless.
To ensure you have a successful sale and to safeguard yourself and/or your business from incurring any costly delays or being caught out in unwanted disputes, some of the more important points that you should consider before diving in are listed below.
1. Lease of the Building
The conditions of the lease:
It’s vital to be well informed about all clauses in the lease that will be assigned to the prospective purchaser. Rental amount, repairs, outgoings liability and any other stringent terms that are to be followed must be disclosed to the purchaser.
Assignment or transfer of lease:
You must have approval from the landlord to transfer the lease agreement to your prospective purchaser. If you are in breach of the lease, the landlord can refuse the transfer. You should ensure that all terms under the lease are met by you, allowing the landlord to provide consent to the assignment/transfer of the lease with no hassles.
2. Schedule of Plant and Equipment
Before you initiate the sale of your practice, you should sit down and prepare two detailed lists. One list of plant and equipment that you will be including in the sale and another list of exclusions.
All equipment leases must also be disclosed in your sale. A search of the Personal Properties Securities Register (PPSR) will reveal the details of such transactions. Once you have this information, you should contact the relevant companies to begin the process of arranging any discharge certificates or transfers that need to be made. As the seller, you will need to confirm to the purchaser that there are no charges or other encumbrances over the plant and equipment that could potentially restrict the sale.
3. Price market
We suggest that you consult with a business broker or an experienced professional valuer in the field of dental or medical practices. You want to make sure that your practice is correctly listed from the beginning. As the owner you may decide to offer to stay on for an agreed period after the sale. This can increase the value of your practice and the buyer will be more inclined to pay a premium. Most importantly, start planning early to maximise the value of the sale.
4. Confidentiality agreement
A common scenario that will pop up when selling your practice, is that your competitors will be VERY interested in your sale. This is why you need to be on high alert and selective about the initial information that you give a prospective purchaser. If you easily give out valuable details about your practice, your competitor can incorporate and mirror your practice in their own practice.
Further, dentists and doctors must comply with laws and regulations surrounding health records. It is vital that you have all prospective purchasers sign a confidentiality agreement and a non-disclosure agreement before proceeding any further. This will protect the sale of your practice from being used for competitors gains and ensure important documents such as client lists and financial records are not being shared. It is only once you have a signed sale of business agreement in place, that you will then share all your confidential information with the prospective purchaser.
5. Other factors that buyers may attract buyers
A buyer will usually have a checklist when looking to buy a practice and although profitability will be high on that list, they also take other factors into consideration. Other areas that they may find attractive are:
- An impressive business structure;
- Excellent company culture with loyal staff and low turnover;
- Modern infrastructure; and
- Well performing IT systems;
If you have these factors in place, we have found that these will add to your sale price and attract higher interest in your practice.
Although there are many other factors that need to be considered, the list above provides you with a brief overview to get you ready for your sale. To ensure you comply with specific laws relating to your practice, and ensure you have a smooth transaction, reach out to our commercial team today to guide you through the process on 03 9743-1333 or 08 6183-3753 .