Several months ago, I received a call from a dentist I had been talking to about his retirement plan. Immediately after I said "Hello?" I heard "One of my associate dentists heard I had been talking to you and asked if I'd be willing to sell her my practice.
What do I do?"
Fortunately, the right thing to do was to call me and get a second (non-emotional) opinion because while selling internally can be a great option, there are some pitfalls to address.
First, remember that the dynamics of negotiating with someone you work with and know well are very different than negotiating with an arms-length 3rd party. Arms-length parties can negotiate far more aggressively because you do not need to worry that the other side will get offended and resign their position. Additionally, if your buyer is overly aggressive, you may not wish to retain them if you're unable to reach a deal. That leaves you with no exit and no associate dentist. Aggressive negotiation in a situation where it is unwarranted is a mistake I see happen far more often than I would care to admit.
Second, you need to reach a deal that is not only agreeable to both parties but is also fair. I intentionally use the word "deal" and not "price" because it is extremely rare that your associate will be a "cash buyer". This means that you will likely be requested to provide some form of "vendor take-back" financing. Any agreement you make must ensure that the financial calculations for the present and future values are fair and agreeable to both parties.
Third. and again assuming this is not a "cash sale", you need to have the appropriate covenants in place to protect your investment in the associate. Think of it like signing for a mortgage. The mortgagee (the lender in a mortgage, typically a bank) has pages of terms and conditions that you must perform to keep the mortgage out of default. You must do exactly the same thing when financing the sale of the practice by planning for every conceivable problem that could prevent you from receiving your money, and the remedies available to you should the buyer default. Instead, imagine selling the practice where your investment is protected by requiring regular, audited financial reports and remedies - including retaking control of the practice - if things start to go wrong. You may still suffer some financial losses but they will be minor compared to "standing on the sidewalk unable to do anything as the business goes up in flames".
Failing to do this could, in the worst case. cause you to lose your investment. Imagine seeing your buyer making changes that could potentially bankrupt the practice and being unable to prevent it or retake control because your agreement did not anticipate this kind of problem. Your only real option would be to go to court. Legal action is not only expensive but without a written agreement that details the breach, the court will likely side with the buyer.
Attempting to navigate a private sale on your own is extremely risky. To protect yourself and help the process proceed smoothly, call 703.298.1690 or click HERE to schedule a Discovery Call NOW with Stan Kinder for the best options whether selling or retiring.