The sale of your dental practice may be one of the most significant transactions of your life. You have invested your time, money, and energy into building this business. When it comes time to sell, you want to ensure that you are doing right by yourself and everything that you have built. As such, it is worth taking more than a moment to talk about and consider negotiating the terms of sale for your dental practice.
Negotiating the Terms of Sale for Your Dental Practice
It will likely come as no surprise that the sale price of your practice will be one of the biggest terms you negotiate when selling your dental practice. To help streamline negotiations on sale price and be clear enough to avoid easy misunderstandings, there are a few things you can do as the seller to help. For starters, you should make a list of everything that is not included in the sale price and what is included in the sale price. It is more likely than not that any potential buyer will ask after these things anyways, and it can be helpful for you as the seller to be prepared. Dealing with these kinds of things upfront can help things move forwarded unimpeded by disagreements.
While it is easy to get distracted by and focus on the asking price for your practice, it is one of the many important terms of sale that you will want to consider prior to signing on any dotted lines. Sale price is, of course, one of the first things that will end up being negotiated when setting the terms of sale, but there are many others that will be discussed in the early stages of negotiation. For instance, the allocation of the sale price can be critical to help ensure tax consequences for both you as the buyer and the seller are properly handled. Sale price is divided into different categories included:
- Tangible assets
- Intangible assets
- Restrictive covenants
The allocation agreement between you and the buyer can have big tax implications. Be sure you have received sound tax advice on these matters before executing any legally binding agreements.
Accounts receivable will also be a big area for negotiation when ironing out the terms of the sale of your dental practice. Should the buyer be set to purchase active accounts receivable, this should give them quick access to cash flow from the practice. As such, the seller is likely to have the amount of money they need to borrow, for things such as operating capital, significantly reduced. When negotiating the value of accounts receivable, factors such as the age of the accounts can have a notable impact and will likely lead to a discount on the account’s actual value. Make sure that you establish a discount rate that you and the buyer are comfortable with.
If you wish to remain employed by the dental practice after the sale, during a transition period, then this should also be included as a negotiated term of sale. The practice will need to be substantial enough to support your continued role in the practice after the sale. This means that the facility will need to be big enough and the patient base strong enough that the practice revenue can support you and the buyer of your practice.
Dental Law Attorneys
These are just a few of the big terms of sale that you will want to consider when you sell your dental practice. Help ensure you are getting what you want and what you deserve for the practice you have built by reaching out to the team at Mahan Dental Law for assistance. Contact us today.