This article is sponsored content brought to you by Synstrat.
Buying and selling your practice are two of the most stressful moments of a dentist’s career. Generally, you only undertake each of these transactions once and, whereas you feel in total control of events in your dental surgeries, there is often a feeling of being out of your depth and ill-prepared for the issues that confront you and the attendant risks of getting it wrong.
These feelings are not misplaced. The issues can be complex and the cost of errors can be huge whether they are measured financially or emotionally. Issues for a buyer that need consideration include practice price, terms of the purchase, financing arrangements, taxation structures for owning the practice, arrangements for staff coming along with the practice, and property issues.
Missteps can be disastrous: the wrong purchase structure can lead to key capital gains concessions being missed out on, potentially incurring tens or hundreds of thousands of capital gains tax on sale that would be otherwise avoidable; mishandling the staff being acquired can lead to hefty employee liabilities being taken up by the purchaser; errors in the property negotiations can lead to failure to secure the long-term tenure of the practice in the premises and possibly miss out on the opportunity to purchase the premises in the future thus securing their strategic interests.
These issues multiply if a buyer is buying into a multi-owner practice. Never has the expression of hoping for the best but planning for the worse been more important. A buyer needs to ask what if we don’t get on? How will my interests be protected? How can I get out and at what price? How will decisions be made? Who can hire and fire? What is the procedure if I need a new chair or if I think we need an OPG? The more owners there are, the more complex the decision-making and the greater the importance of a solid framework for making decisions.
Sellers face similar issues—what to do about the property if they own it. How should I structure the deal between goodwill and equipment? What should I allow for employee liabilities? How much of the capital should I pay into superannuation? Should I sell part of my practice now and part later or all at once? If my buyer can’t raise the funds, is vendor finance a good idea and if so, on what terms?
Both buyers and sellers require good advice and support to navigate the tricky issues. Sadly, it is often the case that no one advisor can provide total coverage of all of the issues but finding an advisor who can stand with you and provide high-level guidance through all of the issues giving direction and, where necessary, directing you to appropriate other professionals is essential to avoid the pitfalls. This requires not only skills but also experience and preferably relevant experience in the dental industry. For example, determining the appropriate price requires industry knowledge and a depth of experience in valuing similar practices.
Synstrat is an accounting and financial planning practice that has been assisting dentists through their professional journey for over 24 years. We provide assistance to dentists through their career; whether that is deal assistance, tax compliance, wealth creation, wealth protection, or solving business issues, we are here to help.
For further information on Synstrat, visit www.synstrat.com.au