In order to effectively negotiate any deal, you need to be able to understand the person on the other side of the negotiation. You need to know what their fears and motivators are. Somehow though, buyers often misjudge the emotional journey that a seller is going through towards the end of their career.
Most buyers on the journey into ownership see a business solely as a source of increased wealth creation. A means to a financial goal. They think that when an owner decides to sell their practice at the end of their career, they must also be looking at the transaction as primarily financial in nature. They assume that the owner must have come to the decision to sell having achieved their financial goals, arriving at this juncture excited about the impending release of capital, responsibility and obligations.
In my experience, when a dentist is coming to the end of their career and decides to sell their practice, the emotional journey that they are going through is usually much more complex – it is very rarely primarily a financial assessment that makes them proceed with the sale. While a business owner will naturally always want a good price for the practice, the actual decision to sell at the end of a career usually has more to do with reallocation of time than financial capital.
Their age or health or an event (health of a friend or family member) “wakes them up” to the opportunity cost of time. There is a desire to reduce stress, get rid of the admin and compliance involved with ownership, have more holidays and spend more time with family (spouses, children, grandkids), on hobbies (golf, sailing, fishing, etc.) or travelling.
Even though they realise that it is the right time to start making the transition out of ownership, and even though they want to reallocate their time, it isn’t usually a decision that sits 100% comfortably with them.
- When a business owner calls their business “their baby”, it is because they have an emotional attachment to it. They have cultivated and nurtured the team and patient base over decades and generations, celebrated its successes, mourned its failures, seen it mature and grow. As with any longstanding emotional attachment, saying goodbye is not an easy time.
- Selling is usually a big step into the unknown for the owner. As with any major change to the status quo, there is usually a sense of fear of what they will be trading the predictability of their current lives for. They often don’t know themselves anymore without the practice, and there is a very real concern of losing their sense of identity and relevance with the sale of their business. Retirement is something that is easier to phase into, rather than jump into all at once.
As a buyer sitting across the negotiating table from a seller, you would be wise to be sensitive to the emotional journey that the seller is going through.
- Be gentle with any critique of the practice while you negotiate. To the vendor, it is not just a P&L and asset list; it is the inner workings of their lives. The number of active patients isn’t just a number to the seller; it represents relationships that span decades and generations.
- Recognise that just because a seller wants to sell, get rid of the burdens of ownership, and cut down their time at work…this doesn’t mean that they want to retire…at least, not straight away.
- Assure the seller that they will be able to work in the practice post sale, if they so desire, and can phase out of the practice at a rate that they feel comfortable with (from 4, to 3, to 2 days a week, taking long holidays each year). This should be in the buyer’s interests too, as it will minimise patient attrition.
- Assure the seller that you appreciate their experience, won’t treat them like a new grad, won’t micromanage them, and will give them the clinical independence and respect that they deserve.
- If you can tell the seller that you want to keep the staff in their current roles and conditions, it will help put their mind at ease that their staff will be taken care of. Assure the vendor that you appreciate the special place that the practice is, and that you will do right by their legacy.
As a buyer, your challenge in negotiations is to emotionally put yourself in the vendor’s shoes. If you are able to show a vendor that you aren’t just the right fit financially, but that you are also the right choice of buyer from a compatibility viewpoint, you will find that you have a much greater chance of placing the winning bid.
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