Timing is Everything
“Timing is Everything” – it has been said at least a million times, but when it comes to selling your practice it perhaps has never been truer.
We are just now emerging from the most complicated economic and human tragedy that most of us will ever experience. In economic terms alone the cost has been staggering, well into the trillions of dollars. But of course, you know that all too well, as you have also been included in this economic crisis since day one. Some of you may have been intending to sell before the pandemic started and some of you may have decided to sell during the pandemic, but in either case, virtually nothing was actually sold during the shutdown. However, now that offices are opening up if selling was or is your intention then it is time to initiate that process.
Time and timing will need to play an important part in your decision; First of all, there is the matter of the lasting effect that the pandemic will have on the profession and secondly, there is the matter of when to actually sell.
Dentistry was one of the hardest-hit industry sectors in the economy – dental offices with a few exceptions, shut down completely – no patients, no staff, no revenue, no cash flow. One of the main concerns during the shutdown period was whether or not dentistry would return to pre-COVID levels. Many bodies including the ADA have suggested that a timely return to pre-COVID levels is unlikely or at least would take a couple of years. The nature of this concern was whether or not the fall-off in business would be temporary/short-term or permanent/long-term. A long-term fall off would lead to lower sale prices which would benefit any buyers including the corporate buyers. However, based on our most recent experiences the fall-off has not turned out to be long-term.
In our brokerage and consulting operations we deal with dentists in all parts of Canada and the United States, and much to our delight we are finding the majority of dental offices have recovered from the shutdown quite quickly, with few exceptions. As a result of the pent-up demand which has developed over the last 5 or 6 months, we are actually working with a number of offices that are producing at levels in excess of pre-COVID amounts.
The takeaway here is that the troubles appear to be temporary, not permanent. Interestingly this is because dental disease and discomfort itself are not temporary, but permanent. Unlike dinner reservations, a patient’s pre-COVID needs are still there post-COVID, in fact from a societal perspective there will be more dental need post-COVID then there was pre-COVID. The experience of our brokerages and consulting divisions across Canada is that dental offices are recovering more quickly than expected, even given the multitude of new rules and regulations. The only possible threat to this experience could be an out of control second wave.
The second timing issue is one of execution. As we emerge from the shutdown a challenge that we face is a choppy market. If your plan was or is to sell, then the timing of that sale is still not entirely clear. Some practices (usually the better ones) will sell easily while others not so much. The reason for this is that many buyers remain overly cautious about where the market is actually going. This is particularly true of buyers concerned about second waves and recessions or who are primarily interested in practice flipping. As a seller, the best way to deal with this is to have a well thought through plan and stick to it. If you want or need to sell sooner rather than later, then put your practice on the market (we suggest at a pre-COVID value) and see what happens. If the response is not what you want, then take your practice off the market and put it back on the market when things have settled down.
Currently, we believe the market will settle by the beginning of 2021 (barring a second wave.)
The takeaway here is that for the next little while we will have an indecisive marketplace.
However, this will pass.
Have your practice properly appraised with a value that works for you, use this value to create a well thought out plan, and then execute your plan, test the market, and see what happens. If your price is fair and you are not getting the result you want, then take your practice off the market and wait until things calm down.
Overall recognize that the recent declines are temporary and that dentistry will get back to pre-COVID levels of productivity and profitability. While this will be the outcome, be aware that it may not happen immediately. To ensure the best outcome we suggest the following:
- Have your practice properly appraised using a cash flow approach,
- Using the appraisal to work with your advisors, including your broker, and develop a plan designed to provide you with the unique outcome that you are looking for,
- Using the help of your broker to execute the plan and monitor its progress with a willingness to adjust the plan as may be necessary.