Yes, interest rates are down and possibly going down this year. And that’s good news for sellers because it makes the cost of borrowing money cheaper, which means buyers can offer more money for practices (increase practice values).
But inflation is also creeping up, along with unemployment, labour costs and general market uncertainty, which is all weighing down on practice sales and values.
And those are just the Macro factors. And those are largely beyond our control as lawyers or you as dentists. We vote with our wallets and with our ballots and with our intentions, thoughts, feelings and actions. And we are definitely powerful in and of ourselves, but we are also drops in the broader economic bucket.
Micro-factors also have an equally important impact on practice sales. Things like: a good long-term lease (e.g. 10-15 years with renewals) with no nasty clauses (like demolition or relocation clauses), team members on proper contracts, and good overall metrics (healthy active patient count, new patients coming in, 30-40% hygiene program, lots of referrals being sent out, little to no marketing being done, controlled wage costs and rent, opportunity to open more hours and days, selling dentist taking lots of time off, etc.).
Given the challenges posed by Macro and Micro factors, you definitely need a professional team to get you through your practice sale. And you need the strongest quarterback and team possible to do so.
And that’s where dental lawyers like us come into play. Sure, we can tell you what the overall market has been doing historically (because we’ve been doing practice sales for a long time and we run open houses and we even help dentists buy practices too – not when we’re representing the seller, mind you!). And we know what buyers and their professionals (banker, accountant and lawyer) are scrutinizing and what they’re looking for.
We also have have a sense on whether practices are under or over valued (because we run open houses and we can see the turnout of prospective buyers, the number of offers that come in and the quality and competitiveness of those offers).
We also know that things like a bad lease or no staff contracts MAY impact practice sales. And we can do things like review your lease paperwork for nasty clauses and talk to your landlord about amendments (adding more years, removing/pushing back demolition clauses, etc.) and also introduce staff contracts to manage the liability. And only we lawyers can and should be doing it. No one else – accountants, real estate salespeople, consultants – should be engaged in reviewing or negotiating important legal documents. They didn’t spend countless years in law school studying legal texts and cases and they don’t have the experience or skillset required to mitigate legal and litigation risks. In fact, if they do get involved and mess it up, they can get sued and if they gave legal advice (which they’re not allowed to), they can get sued.
On top of mitigating risks, we also do things like corporate re-organizations – i.e. clean up your dentistry professional corporation prior to a sale in order for you to sell and save taxes.
Make sure, if you’re thinking about selling now in the next 3-5 years, that you speak with us first. We will review your practice metrics (to assess a range of current value given market conditions), corporate minute book and financials (from a tax perspective), your lease (to see if it’s a tenant-friendly lease with lots of years left and no nasty clauses), your staff contracts (to ensure compliance with the latest legal changes) FOR FREE. We do this all the time and we’re happy to do it before giving you a quote of what our pricing would be to actually prepare, list and market your practice for sale on DentalPlace.ca.
