What if my lease only has a few years left, can I still sell my dental practice?

Hey, everyone. This is an AI conversation covering our recent personally authored blog post on our Practice Orbit website. Enjoy.

Hey, everyone. So it sounds like you might be thinking about selling your dental practice.

Okay.

But you've got this lease with less than five years left on it.

Yeah.

And you're probably wondering, is that even possible? Can I even do that?

Right.

And honestly, that's a super common question that we get a lot.

Yeah, it is.

Luckily for us, though, we've got some awesome insights from Practice Orbit. They're a platform that helps dentists buy and sell practices. And they see this situation all the time.

They really do.

And they've got this great blog post about short leases and how to handle them. And the good news is, selling is possible.

Right.

But you've got to be strategic about it.

Absolutely. Yeah. One of the first things to consider is how a potential buyer's lender is going to view that short lease.

Okay. So let's break that down.

Sure.

Like, why is a longer lease, say five to 10 years, so much more appealing to a lender?

Well, a longer lease is just way less risky from the lender's perspective.

Okay, I can see that.

You know, they're giving someone a pretty big loan to buy your practice.

Right. A lot of money.

And they want to be sure that they're going to get that money back.

Yeah, of course.

A longer lease gives them that reassurance.

Okay.

Because if a buyer has to move because of a short lease.

Oh, I see.

That could totally mess up their income.

Yeah. Yeah, that makes sense.

And that could mean they can't pay back the loan.

Makes sense.

So a five year lease, for example, is way less risky than say like a two year lease.

Oh, sure.

And that can even mean the buyer gets a better loan, you know, better terms.

Oh, really?

Potentially saving them thousands of dollars.

Wow, that's a big difference.

It really is.

So, okay, so how does this whole lease assignment thing usually work when you're selling a practice? Right. The blog post mentions it, but I'm not really clear on all the details.

So lease assignment basically means you're transferring the lease from the seller to the buyer.

Okay.

And it usually happens at the same time as the purchase agreement. It's usually handled by the buyer's attorney.

Gotcha.

They'll let the landlord know and work out all the transfer details so the.

Buyer doesn't have to start from scratch and negotiate a whole new lease.

Exactly. It's just transferring the existing lease.

Okay, that's good.

Which makes things a lot easier. Yeah, but one thing to keep in mind is personal guarantees.

Oh, right.

The buyer might have to personally guarantee the loose.

Okay, so that's another layer of complexity.

Yeah, for sure.

Okay, so that's something to keep in mind if you're listening. Now, let's talk about the short leases and what they mean for negotiation.

Okay.

The blog post said that the buyer's attorney might try to negotiate a lease extension as part of the assignment.

Right.

So what does that actually look like?

Well, imagine a buyer gets a loan based on your current lease and then finds out the landlord won't extend it past those few years. Oh, that puts the buyer in a really tough spot.

Yeah, I see that.

They might have to move, which could hurt their income.

Right.

And even risk their ability to repay the loan.

Right, we talked about that.

So to avoid that, the buyer's attorney will probably try to negotiate a lease extension right from the start.

Gotcha.

One that satisfies the lender.

Okay.

Takes over the practice with a lease term. That gives everyone enough security.

Right. So everyone's happy.

Yeah.

It sounds like being proactive can really help make things go smoothly.

Absolutely.

But what if the landlord just says no to an extension?

Right.

Does that kill the deal?

Not necessarily.

Okay.

There are usually ways to negotiate and get some good terms, and that's where a dental broker can sometimes really help.

Okay, so let's talk about brokers.

Sure.

The blog post said they're not always needed.

Right.

So when does it make sense to bring one in?

Well, a broker can be a huge help, especially when the lease negotiations get a bit tricky.

Okay.

They know the dental practice market really well, and they can use that knowledge to get good terms for the buyer.

Like what kind of things?

Well, they might be able to get some free rent for a while or some improvements to the space or even a lower lease rate.

Wow.

So these perks can make the deal much sweeter for the buyer and maybe make a shorter lease term more appealing.

I see that.

So, yeah, they can be really valuable.

Are you looking to sell a dental practice? If you're a seller, how do you find a strong list of potential buyers? There's no MLS or Zillow for dental practice sales. In such a fragmented market, with transaction costs so high, many dentists selling their practice feel discouraged. That's why I built practiceOrbit.com practice orbit is modernizing how dental practices are sold through its online marketplace platform. It brings together buyers, sellers, and their professional teams directly. Sellers can easily and anonymously showcase their practice on the site for free. Practice Orbit offers two options to sell your practice online. Option 1. For 2% of the sale price fee, you'll get access to all Practice Orbit tools to sell your practice, along with a dedicated human assistant to coordinate the sale. And you only pay that 2% if you sell through the Practice Orbit system. Option 2. Practice Orbit also offers a fully brokered option of 4 to 6% of the sale price. With our fully brokered option, you'll be assigned an experienced practice sales agent to help you determine a price, identify a buyer, and navigate the entire transaction. If you're thinking about selling your dental practice, create your free account today at www.practiceorbit.com.

But I imagine there are downsides to having a broker. Of course, they don't work for free.

Definitely not. You're right.

So what are the cons?

Well, brokers charge a fee for their services, Right. And sometimes landlords don't really like having them involved in lease assignments.

Why is that?

Well, from the landlord's point of view, there's often not much in it for them.

Okay.

Plus, having a broker involved can slow things down.

Oh, I bet that can be frustrating.

It can be for everyone.

Yeah.

So you really have to weigh the pros and cons. Does the benefit of having a broker outweigh the costs and the potential delays?

So it's a judgment call.

Yeah, definitely. Depends on the situation.

Okay, so speaking of making decisions, what's your best advice for someone trying to sell their practice with a short lease?

Okay.

What are the do's and don'ts?

Okay, two really important things come to mind.

I'm ready.

First, and this is really important, do not extend your lease before you find a buyer.

Okay, that seems counterintuitive. Why not?

Because it's risky.

Right.

Let's say you extend your lease because you think it's the right thing to do, but then for whatever reason, the sale falls through. Oh, now you're stuck with those extra lease payments.

Right.

And that can be a big financial burden.

Yeah, no one wants that.

Exactly. Best to avoid that completely.

Okay, so don't extend the lease until you have a buyer.

Exactly.

What's the second piece of advice?

Focus on finding a qualified buyer first.

Okay.

Once you've got someone who's interested, then get the attorneys to handle the lease extension on the buyer's behalf.

Gotcha.

Then that takes the pressure off you as the seller, and it gets you out of that personal guarantee faster.

Okay, that makes sense.

Remember, the goal is to make this process as smooth as possible for everyone.

Right. Keep everyone happy.

Exactly. That's right. It's all about timing and not taking on more risk than you have to.

Okay, so we've talked about the lease, but the Practice Orbit post also mentioned how a practice's specialization can affect its value.

Great.

That seems kind of counterintuitive. Wouldn't a general practice appeal to more buyers?

You'd think so, but actually, specialization can make your practice more valuable.

Really? How so?

Well, think about it. Practices that focus on in demand specializations.

Okay.

Like endodontics or orthodontics, they often sell for higher prices.

Oh, I see. So it's like you've got a niche already carved out.

Exactly. It's like a built in specialty that sets you apart from general dentists.

Okay, that makes sense.

These specialized procedures, they need extra training and expertise.

Right.

And there's usually a big demand for them.

Yeah, people need root canals.

Exactly. And that means higher earning potential for the practice.

So a buyer is essentially getting a practice that's ready to make money.

Right. They're not starting from scratch.

So if our listener is a general dentist, but does a lot of, say, root canals.

Yeah.

Could that boost the value of their practice?

Absolutely. Because they're offering a service that not all general dentists do.

I see.

It's a big plus for a buyer.

Makes sense. So specialization is something to consider.

Definitely.

But are there any downsides?

Well, yeah, there's always a flip side. Like what if you're highly specialized? It might narrow down your pool of potential buyers.

Oh, I see.

You might attract specialists but miss out on general dentists who could expand their services.

So it's a bit of a balancing act.

Exactly. You gotta weigh those factors and figure out the best approach for your situation.

So it's not just are you looking.

To buy or sell a dental practice? If you're a seller, how do you find a strong list of potential buyers? There's no MLS or Zillow for dental practice sales. In such a fragmented market, many dentists selling their practice feel discouraged. That's why I built practiceOrbit.com practice orbit is modernizing how dental practices are bought and sold. It's a platform technology. Y' all know them. Zillow, Airbnb, Uber, and OpenTable, just to name a few. These technologies do two things. First, they help match buyers and sellers by centralizing the marketplace. Second, once the match between buyer and seller is made, these technologies help them navigate the sale to a successful close. Here are a few of the features inside a Practice Orbit. Users can determine a reasonable sale price for a practice practice in just minutes. All they need is the most recent business tax return. Practice owners can use the directory to find important service providers like practice brokers, attorneys, accountants and bankers. Practice owners and their brokers can invite those service providers into the platform so all parties are coordinating the sale together. Practice owners will have a beautiful digital listing of their practice, like a home on Redfin. And importantly, the listing will be anonymous. And personal information like your address, name and pictures are only released after an NDA is signed and approved by you or your broker. Practice buyers can create saved searches to be auto notified when new listings come on the platform that fit their desired specialty and location. And hey, dental practice brokers, you can list all your practices on the site for free. By doing so, you'll get access to Practice Orbit's large pool of buyers, all of whom have created profiles and saved searches to be auto notified when new listings come for sale. You can use the platform to introduce your listings to a targeted set of buyers. Additionally, and optionally, you can use the platform tools such as a built in NDA, a customizable loi, and a workflow tool to navigate the sale from LOI to closing. In fact, you can manage all your listings on the system, from listing the practice to NDA to loi, and finally to closing the deal. Create your free account today at www.practiceorbit.com.

Just about what you do, but how you market yourself precisely.

And remember, it's not just about the procedures themselves. A strong reputation for quality care and happy patients within that specialty is crucial.

Yeah, that makes sense.

That combination is what really makes a practice stand out.

So quality matters always. Okay, let's switch gears for a minute and talk about the financial side of things.

Okay.

The Practice Orbit post emphasized the importance of a practice's financial performance.

Right.

So can you unpack that a bit?

Sure. A practice's financial health is a big part of its value.

Okay.

Buyers want to see that a practice is making money makes sense and that it has a history of stable revenue.

Right.

They'll look at things like revenue expenses, profit margins.

So it's not just about having a fancy office and new equipment. Nope.

Buyers really dig into the numbers.

They want to see the receipts.

Exactly. They're buying a business and they need to know it's a good investment.

Right.

That's why it's so important to have organized and accurate financial records.

So if you're thinking about selling even a little bit, get your financial house in order.

Now, that's great advice. And you know, it might be a good idea to talk to a financial Advisor one who specializes in dental practice transitions. They can give you some really valuable insights into your finances.

Okay.

And maybe even help you find areas to improve before you even put your practice on the market.

Like a financial checkup for your practice.

Exactly.

I like that.

It's just like getting regular checkups to stay healthy. A financial checkup can make sure your practice is in its best shape for a sale.

Okay, so we've got financial performance down, but what about the physical stuff like the equipment, the technology? Does that affect the value too?

Of course it does. The age and condition of your equipment, the technology you use, even the layout and how your practice looks, all of that can affect the value.

So if I'm still rocking that dental chair from the 70s, it might be time for an upgrade.

It might be a good idea. Especially if you're thinking about selling soon.

Yeah.

Buyers want a practice that's ready to go.

Makes sense.

They don't want to have to spend a ton of money on new equipment.

Right. It's all about first impressions.

Absolutely. No one wants to walk into a practice that feels outdated.

It's like stepping back in time.

Exactly. A modern, up to date practice shows buyers that the practice is doing well and is successful.

Right.

It projects an image of quality and care.

And speaking of image, let's talk about reputation. That's gotta be a big factor too.

Huge. A practice's reputation in the community can really affect its value.

How so?

Buyers want a practice that has a good reputation. A practice that patients like and that has a positive online presence.

So things like online reviews, word of mouth, referrals, social media, that all matters.

It's all super important. Potential buyers will definitely check those things out.

Like they're doing their homework.

Exactly. They want to know what patients think and how the practice is perceived online.

It's amazing how much online reviews matter these days.

It's like digital word of mouth.

Right. It can make or break you.

It really can. And it's not enough to just have good reviews.

Okay.

You have to actively manage your online reputation.

How do you do that?

Respond to reviews, engage with patients on social media.

Okay.

Address any negative feedback professionally and quickly.

So you're showing that you care.

Right. It shows you're invested in providing a good patient experience.

So it's like being a good digital citizen.

Exactly. Just like being a good citizen citizen in your community builds trust. Being a good digital citizen builds your practice's reputation and ultimately its value.

Okay, so we've covered lease terms, specialization, financials, equipment, reputation.

Wow. That's a Lot.

Anything else you should add to our checklist of factors that affect a practice's value?

Well, we've talked about a lot of the practical things, but there's one more thing that's really important.

What's that?

The practice is team.

Oh, right. The people.

Exactly. It's easy to get caught up in all the numbers.

Yeah.

And forget about the human element.

So true.

A well trained, experienced team that worked well together.

Right.

That's a huge asset for any dental practice. I can see that buyers know this and they value a practice with a strong team already in place.

So we're talking hygienists, assistance, office staff.

Everyone who contributes to a smooth patient experience.

Makes sense.

Buyers understand that keeping a good team is essential for a smooth transition and for the practice to continue to be successful.

It's like they're inheriting a well oiled machine.

That's a great way to put it.

They don't want to have to start from scratch with a new team.

Exactly. A practice with loyal and dedicated employees usually means it's a good place to work.

Okay.

And that there's a strong focus on patient care.

Which are both good signs for buyers.

Exactly. So if you're thinking about selling your practice, focus on building a strong team and a positive work environment.

It's an investment.

Absolutely. One that will pay off in the long run.

So building a good team isn't just good management, it's good business.

That's right.

You know, thinking about it, all these factors we've discussed.

Yeah.

The least specialization, financial equipment, reputation, the stoop.

Right.

They all contribute to the overall value of a dental practice.

You got it. It's a complex equation.

It really is.

But understanding these key things can help you make smart decisions.

Absolutely.

And ultimately get the most value for your practice when you're ready to sell.

Well, this has been super helpful.

Glad to hear it.

We've covered so much in this deep dive.

We have.

Any final words of wisdom for our listeners before we move on to the last part of our discussion? Wow. It's like we've gone through every single thing that goes into a dental practice.

Yeah.

Like we've made this blueprint.

I like that. And speaking of blueprints, the Practice Orbit post mentions something about the actual layout of the practice.

Oh, wow.

Can you talk about that a bit more?

Oh, yeah, absolutely.

Okay.

That's something people don't always think about.

Right.

But the way a practice is laid out can really affect how well it works.

Okay.

And how much buyers like it.

I see.

Think about It a well designed space. One that's efficient.

Right.

And makes patients feel good.

Yeah.

That's gonna be way more appealing than a cramped porch, poorly planned one.

So things like how people move through the office, the size and setup of the treatment rooms, even just the overall look and feel of the space.

Exactly. Buyers want a practice that runs smoothly.

Makes sense.

They want a space that's welcoming and comfortable for patients. And they want to see that the layout is practical.

Right.

A bad layout can lead to all sorts of problems.

Like what?

Bottlenecks, wasted time, a bad experience for patients.

Yeah.

And all of that can hurt the value of a practice.

It's like having a kitchen where everything's in the wrong spot.

Ha ha. I can see that.

One makes cooking a joy. The other is just a pain.

That's a great way to put it.

Yeah.

And just like you'd pay more for a house with a nice kitchen, a buyer will probably be more interested in a practice with a good layout.

Right.

One that's functional and looks good.

Makes sense.

It's about investing in a space that works for you now.

Yeah.

And will also appeal to buyers later on.

So if someone's thinking about changing their practice, like renovation or expanding.

Right.

They should think about how those changes will affect the layout.

Absolutely.

Yeah.

It's a chance to fix any problems and create a layout that makes patient care better.

Right.

And make the practice more efficient.

It's an investment that can pay off now and in the future.

Exactly. So it sounds like to get the most value out of a dental practice, you have to think about everything.

Yeah.

From the lease to the layout, to how the team works together. Got it.

It's all connected. Wow. This deep dive has really shown me how complicated it is to value a dental practice.

Me too.

It's definitely not just about the money coming in.

Right. It's like peeling back the layers of an onion.

Ha. Yeah.

There's so many things that go into a practice's worth.

It's a lot to take in.

It can be.

Yeah.

But I think the main takeaway is that knowledge is power.

Right.

The more you know about these factors, the better decisions you can make for your practice.

Absolutely. Decisions that will help you now and in the future.

That's a great point. And if you're feeling a little overwhelmed, remember there are resources out there to help.

Like what?

Well, Practice Orbit has tons of information.

Oh, right.

And they have tools like their practice price estimator.

Yeah. That's a good one.

Definitely check that out.

Okay.

Even if you're not planning to sell anytime soon. Understanding how your practice is valued can help you make smart choices.

Choices that will make your practice worth more.

Exactly. It's all about being smart and thinking ahead.

And remember, the dental industry is always changing.

Oh, yeah, that's true.

New technology, new patient expectations, a whole new business landscape.

So how can our listeners stay on top of all that?

I'd say be open to change, stay curious, and never stop learning.

Great advice.

Yeah.

So until next time.

Yeah.

Keep those minds curious.

Definitely.

And those practices thriving.