What to Consider Before Selling a Dental Practice

Quick Answer

Before selling a dental practice, consider your personal goals, timing, realistic value, buyer fit, transaction structure, tax, staff, patients, records, premises, liabilities and the role you want after completion. These issues are connected, so decisions made early can materially affect price, risk and life after the sale.

The best preparation begins before an offer arrives. An owner who understands the practice’s financials, dependencies and risks can negotiate from evidence. An owner who has not decided whether to retire, continue clinically or retain the property may struggle to compare offers.

Why are you selling?

The reason for sale shapes almost every later decision. Common reasons include retirement, health, relocation, succession, partnership changes, reduced appetite for administration, a wish to release capital or the opportunity to join a larger group.

Write down what a successful outcome means. For example:

1. I want a complete financial exit within 12 months.
2. I want to sell control but practise three days a week for five years.
3. I want to reduce ownership risk while retaining some future upside.
4. I want my team and practice identity protected.
5. I want to retain the building as a long term investment.

Without a ranked outcome, it is easy to focus on headline price and overlook conditions that make the deal unsuitable.

When do you want to sell?

Timing affects preparation, buyer choice and negotiating leverage. A planned sale allows time to clean financial records, renew key contracts, develop the team and reduce owner dependence.

An urgent sale may still be possible, but the buyer will price uncertainty and transition risk. Mia states that a practice that is already acquisition ready may move toward a transaction in about two months. This is not a guaranteed timeline. Due diligence, funding, professional structure, tax planning, employment issues and negotiation can extend the process.

If your desired sale date is several years away, use the time to build transferability rather than only short term profit.

What exactly are you selling?

A dental transaction may include some or all of the following:

1. Clinical and office equipment.
2. Furniture, stock and consumables.
3. Trading name, domain, telephone numbers and marketing accounts.
4. Lease rights or property.
5. Employment and supplier arrangements.
6. Debtors, creditors and working capital.
7. Goodwill and patient relationships, subject to professional and privacy obligations.
8. Shares or interests in an eligible entity.
9. Non clinical service businesses or assets.

The legal and tax result can differ depending on whether the transaction is an asset sale, share or interest sale, going concern transfer, property transaction or combination. The professional structure also needs specific HPCSA review.

How much is the practice worth?

Practice value is usually based on sustainable future economic benefit, not turnover alone and not the amount the owner hopes to retire with. A valuation commonly examines normalised maintainable earnings, assets, debt, working capital, risk, growth prospects, owner dependence, team stability and deal terms.

Normalisation adjusts reported results for items that may not continue under a buyer. Examples include unusual personal expenses, non recurring legal costs, owner remuneration above or below a market replacement level, and once off income.

Do not rely on a single informal multiple. Ask what earnings measure is being multiplied, why the selected multiple fits the practice and how debt, cash, equipment and working capital are treated. Price and value are also different: an earnout may increase the stated price while reducing payment certainty.

Are the financial records ready?

Buyers need evidence. Ideally, prepare:

1. Three to five years of annual financial statements or tax records.
2. At least 12 to 24 months of monthly management accounts.
3. Revenue and contribution by practitioner, location and treatment category where reliable.
4. Debtors ageing, collections, bad debt and medical aid information.
5. Payroll, contractor payments and owner remuneration.
6. Equipment register, finance agreements and capital expenditure needs.
7. Debt, leases, supplier commitments and contingent liabilities.
8. Clear reconciliation between practice systems, bank records and accounts.

Clean reporting does more than support value. It reduces the risk that a buyer changes terms late because information is inconsistent.

How dependent is the practice on you?

Owner dependence is one of the most important sale risks. If the owner produces most revenue, holds every patient relationship, approves every purchase and resolves every staff issue, the practice may not transfer easily.

Measure:

1. The owner’s share of production and collections.
2. The proportion of patients who request the owner personally.
3. Revenue contributed by other practitioners.
4. Decisions that cannot happen without the owner.
5. Referral sources tied personally to the owner.
6. Whether the owner can take four weeks away without operational decline.

Reducing dependence can involve developing associates, documenting workflows, strengthening practice management and building a brand that is larger than one person.

What will happen to your staff?

Staff continuity affects patients, value and the owner’s legacy. Review employment contracts, leave balances, remuneration, incentives, disciplinary matters, independent contractor arrangements and key person risk.

If a business transfers as a going concern, section 197 of the Labour Relations Act may apply. This can transfer employment relationships by operation of law, subject to the facts and any compliant agreement. Obtain labour advice before restructuring the team, communicating a sale or making promises.

Identify the people a buyer will consider essential. Retention plans may be appropriate, but they should be coordinated with the buyer and documented carefully.

What will happen to patients and clinical records?

Patient welfare and confidentiality must guide the transition. Consider:

1. How ongoing treatment will continue.
2. Who will hold and protect records.
3. How patients will be informed.
4. How consent, complaints and refunds will be managed.
5. Which party is responsible for treatment performed before completion.
6. How warranties or remedial treatment will be handled.
7. What information a prospective buyer may access during due diligence.

Use aggregated or anonymised data during early discussions where possible. Detailed access should be controlled under confidentiality, POPIA and professional obligations.

What is the position with the premises?

The premises can support or undermine value. A buyer needs enough security to continue operating, but an owner may wish to retain the property.

Consider:

1. Lease term, renewal rights and landlord consent.
2. Rent compared with the market.
3. Maintenance and reinstatement obligations.
4. Municipal, zoning and use requirements.
5. Expansion capacity and parking.
6. Whether specialised improvements can be transferred.
7. What happens if the practice and property are sold separately.

If you own the property, compare selling it, keeping it and granting a new lease, or separating the decisions. The highest combined price may not produce the best risk adjusted outcome.

What equipment and technology will transfer?

Prepare an equipment register showing ownership, age, serial numbers, condition, maintenance, finance and whether software licences can transfer. Identify items personally owned by practitioners or leased from third parties.

Deferred replacement can make recent profits look stronger while leaving the buyer with a major capital bill. Be candid about necessary upgrades. A buyer will usually discover them during due diligence, and late surprises can damage trust.

Digital systems require separate attention. Confirm ownership and transferability of domains, websites, telephone numbers, cloud systems, software, social media and advertising accounts. Protect credentials and patient data throughout.

What liabilities could remain with you?

The sale agreement will allocate risk for historic matters. Potential areas include tax, employment claims, professional complaints, patient refunds, equipment finance, leases, supplier disputes, incorrect billing, data incidents and warranties made to patients.

Buyers commonly request warranties and indemnities. Review their scope, duration, financial caps and claim process. The seller should disclose known issues accurately but should not accept unlimited exposure without advice.

Professional indemnity arrangements and responsibility for historic treatment must be clarified. A sale does not automatically remove all professional accountability.

What tax and transaction costs should you plan for?

Tax depends on the seller, assets, transaction structure and payment terms. Potential issues may include income tax, capital gains tax, VAT, employee taxes, transfer duty or property related tax, and the treatment of deferred or contingent consideration.

South African VAT rules may permit zero rating where an enterprise is sold as a going concern and all statutory requirements are met. This should never be assumed. The agreement, VAT registration status and facts must support the treatment.

Budget for legal, accounting, tax, valuation, regulatory, finance and possibly brokerage costs. Ask advisers to model the expected net amount after tax, debt repayment and transaction expenses, not only the gross price.

Do you want to continue working after the sale?

Decide early whether you want to retire immediately, support a short handover or continue clinically. Buyers often value continuity, but the arrangement must fit your life.

If you continue, agree:

1. Working days, hours and locations.
2. Remuneration, deductions and payment timing.
3. Clinical autonomy and governance.
4. Targets and any link to deferred purchase payments.
5. Leave, illness and professional development.
6. Restraint, non solicitation and termination.
7. The planned date or mechanism for final exit.

Mia describes sell and stay clinically as its preferred structure, but each arrangement must be negotiated for the practice and owner.

Should you sell fully or partially?

A full sale provides a clearer financial and control exit. A partial sale can release some capital while preserving ownership and future upside. It can also create a staged succession.

Partial ownership introduces governance complexity. The parties must agree voting rights, reserved decisions, distributions, future funding, dilution, deadlock, valuation of later transfers and the route to eventual full exit.

Choose partial ownership because it fits the desired outcome, not simply because the headline valuation appears higher.

How should you assess a buyer?

Assess the buyer’s:

1. Funding and completion certainty.
2. Professional and legal structure.
3. Clinical governance.
4. Track record and references.
5. Staff and patient transition plan.
6. Integration capability.
7. Culture and communication.
8. Treatment of the seller after completion.
9. Approach to branding and premises.
10. Willingness to document promises.

Do your own due diligence. A buyer will investigate your practice, and you should investigate the buyer with equal care.

What should be in the heads of terms?

Heads of terms or a letter of intent should record enough commercial detail to show whether the parties have a real basis for agreement. Common items include:

1. Proposed buyer and seller.
2. Assets or interests included.
3. Indicative price and adjustments.
4. Payment timing and earnout.
5. Conditions, funding and due diligence.
6. Exclusivity and confidentiality.
7. Staff, premises and transition.
8. Seller’s future clinical role.
9. Regulatory and tax conditions.
10. Target completion date.

Clarify which provisions are binding. Do not treat a non binding indicative offer as guaranteed money.

What should you do next?

Create a confidential sale readiness file and a personal outcome statement. Review both with advisers before inviting offers. If the practice needs stronger reporting, systems or owner independence, address those areas before or alongside buyer discussions.

For a confidential conversation about practice services, preparation or acquisition, visit www.mia-healthcare.com or WhatsApp Dr Zane Stenning on +27 65 536 1760.

Important note: This article provides general information, not legal, tax, accounting, valuation, labour or financial advice. Obtain advice appropriate to your practice before making or accepting an offer.