Preparing to sell
Phillip Barker offers his top tips for those preparing to sell.
Selling a practice is one of the biggest undertakings a practice owner will make and there are numerous things to consider. Here are my top tips for those looking to sell their practice:
Get your house in order
Before you even get a valuation of your practice, it’s important to check all your contracts with both internal and external people. For instance, many practice owners have informal verbal agreements with their staff but when looking to sell it’s crucial that employment contracts are formalised so that the buyer can understand their obligations and an accurate valuation of the practice can be made.
Satisfying contracts also includes hitting your UDA targets, if applicable. Any potential purchaser will want to be sure that the practice is meeting its NHS contract. Under performance will be a red flag to a buyer, and may raise concerns about underlying inefficiencies.
Satisfy the Care Quality Commission (CQC)
This is potentially the most complicated part of a practice sale. Firstly, you need to check that your practice is correctly registered. If it isn’t you need to rectify this immediately.
When selling a practice, the practice owner usually has to apply to enter a ‘partnership’ with the incoming buyer. But beware – it’s crucial that the application form is completed correctly first time as it will be rejected if a mistake is discovered.
Timing the application is also critical as you don’t want to submit it too late, but you also don’t want it to be too early; if your application is accepted by the CQC but isn’t invoked for an extended period of time, it may become invalid, in which case you will have to apply again.
Be prepared for the bank’s valuation
I always advise buyers to obtain indicative terms from their lender as early as possible and part of that process is the practice valuation. From a seller’s perspective it’s vital that the valuation is as accurate as possible and completed by experienced valuers who know the market. If there is a shortfall between your valuation and that of the purchaser’s bank the buyer may need to find significant funds personally before the sale can continue, causing untold delay and frustration. To avoid this, choose a broker with experience in the dental market and knowledge of latest market trends and current bank valuations.
Be prepared for indemnities, warranties and redemption requests
It is standard for buyers to request that a number of indemnities and warranties are written into the contract when negotiating the terms of a sale. For example the buyer might insist on being indemnified against any possible claim for defective work completed by the vendor or to cover failure of equipment. It may also include an undertaking that the seller will not work within a certain radius of the practice for a period of time, or that the seller remains working in the practice for a specified period after the sale to ease the transition process. Vendors should also be prepared for a buyer to request that a percentage of the purchase price is held in reserve. This happens most commonly when there is a certain amount of private revenue expected, but not guaranteed. It is the responsibility of the vendor to have all the paperwork and information in relation to the business ready for inspection by the buyer’s solicitor. We always encourage vendors to put aside some dedicated time in order to complete this task which can be time consuming. The more prepared you are, the easier the sales process will be.
Choose the right professionals
Maintaining the momentum of a transaction is often a difficult area and selecting the right professionals to support you can be a big help. Choosing an experienced and proactive dental solicitor is one area that is crucial to a seamless practice sale. They need to understand NHS dental contracts, have knowledge around CQC compliance and be easy to communicate with. There’s a lot involved in selling a practice and our advice is to surround yourselves from the start with trusted advisers, who have good experience in the dental sector.