NDP Creates Win-Win Practice Transitions: A Case Study

The Goal

Successfully transitioning a dental practice is involves a lot more than just numbers. When all is said and done, and you’ve bought or sold a practice, you’ve spent months, if not a few years, researching practice valuations, real estate, office equipment, salaries, legal requirements, etc. For many, the idea of beginning this process is simply overwhelming. Such was the case at a general practice partnership that approached NDP looking for direction.

Challenge 1

In 2012, a practice in the Deep Rural South was home to two partners looking to make a transition. The senior partner was ready to retire, but the junior partner, who purchased into the practice five years prior, was not interesting in buying-out the senior partner. Both partners wanted to transition out of the practice; therefore, a candidate willing to purchase the practice in its entirety was needed.

The Approach

The partners decided to employ NDP to help locate a fitting buyer for their practice. NDP worked with the partners to find out what the ideal situation for the sale would look like. Because NDP knows practice transitions can often become emotionally charged events, they asked specific questions to learn more about the buyer and sellers to create the best outcome.

With the sellers, NDP worked to establish a timeline for the transition, understanding the motivation for the sale and the need for the practice to retain its reputation in the community when sold. By educating the partners on the hows and whys of practice valuations, legal procedures, financial ramifications, etc., NDP could work towards a satisfying sale for all parties.

With the buyer, NDP needed to address different aspects of a practice transition. The buyer needed to be vetted for a financial, professional and even personality fit with the practice and its current owners. Through the process of asking questions and evaluating credentials, NDP located a well-suited buyer.

Challenge 2

Though NDP was able to find a buyer who matched the needs of the practice. After agreeing on terms, however, the lender decided not to lend 100% to the buyer because he was a recent graduate and the changing dynamics of taking the practice from a two owner to a single owner structure presented additional risk. The lender was willing to loan a smaller percentage; however, both doctors wanted an immediate sale. It appeared as if the buyer and seller were at an impasse.

The Approach

Though the sellers originally intended to sell the entire practice immediately, NDP helped both parties reach a mutually satisfying outcome. The buyer would purchase the practice in its entirety, but in staggered sale where 50% was purchased immediately, and the second 50% would be purchased after 12 months- once the lender would offer the second payment. The caveat was the practice remained constant. 

NDP facilitated negotiations and the senior partner agreed to remain for an additional year, while the junior partner was bought out immediately. Though the senior partner needed to remain an additional year longer than planned, they had a guaranteed committed buyer and were able to enjoy partnership profits for the year (versus working strictly as an associate, earning associate compensation). The buyer received a firm price and was able to own 100% with a transition of the goodwill of the sellers.

Results

Throughout the sale of the practice, NDP was able to consistently facilitate communications and generate positive outcomes for all parties. The practice now brings in $1.6 mil annually and is running like a well-oiled machine.

Because owning a business is often the dream of many, parting with that business can be emotional – making objective decisions difficult. NDP dedicates itself to ensuring practice transitions are fair and in the best interest of buyers and sellers. Through painstaking measures, NDP matches candidates to practices where they can flourish and empowers sellers to feel confident their practice will continue serving the community and its values.

If you’ve considered making a practice transition, contact us today to learn how to get started.