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120 NO B.S. Guide to Selling Your Company for Top DollarCHAPTER 14 / INTERVIEW WITH STAN KINDERSTAN: Who the buyer is matters greatly. There are profound GL%u037fHUHQFHV%u0003 LQ%u0003 KRZ%u0003 WZR%u0003 W\\SHV%u0003 RI%u0003 EX\\HUV%u0003 YDOXH%u0003 SUDFWLFHV%u0011%u0003 7KHVH%u0003GL%u037fHUHQFHV%u0003 FDQ%u0003 UHVXOW%u0003 LQ%u0003 KXQGUHGV%u0003 RI%u0003 WKRXVDQGV%u0003 DQG%u000f%u0003 LQ%u0003 VRPH%u0003cases, millions of dollars more being paid to the practice seller. Let me explain.When you sell your practice to a dentist, unless you are willing WR%u0003KROG%u0003WKH%u0003SDSHU%u000f%u0003DQG%u0003%u00c0QDQFH%u0003WKH%u0003VDOH%u0003\\RXUVHOI%u000f%u0003WKH%u0003GHQWLVW%u0003EX\\HU%u0003is relying on a bank loan for the purchase. In this situation, the big variable is how much a bank is willing to lend. Historically, EDQNV%u0003KDYH%u0003FDSSHG%u0003WKHLU%u0003ORDQ%u0003OLPLWV%u0003DW%u0003%u0019%u0013%u00b2fl%u0013%u0003SHUFHQW%u0003RI%u0003WRS%u0010OLQH%u0003revenue, independent of all other considerations. In some rare cases, they would loan 100 percent, but this rarely happens in today%u2019s higher interest rate environment. The dentist buyer%u2019s primary concerns at the time of purchase are: How much can I pay myself? And how will I be able to repay the loan? The latter LV%u0003DOVR%u0003WKH%u0003EDQN%u00b7V%u0003SULPDU\\%u0003FRQFHUQ%u00b3LV%u0003WKHUH%u0003VX%u0380FLHQW%u0003FDVK%u0003%u00c1RZ%u0003to enable predictable loan repayment?On the other hand, the DSO buyer is making an allocation of capital investment decision and is focused on ROI%u2014return on investment. There are three drivers that often enable the DSO to pay much higher values.1. They do not have the same dependency on bank debt to %u00c0QDQFH%u0003WKH%u0003SXUFKDVH%u0011%u00030RVW%u0003'62V%u0003DUH%u0003SULYDWH%u0003HTXLW\\%u0003IXQGHG%u0003and have ready access to capital.2. 7KH\\%u0003 EHQH%u00c0W%u0003 IURP%u0003 WKH%u0003 DUELWUDJH%u0003 RSSRUWXQLW\\%u0003 LQ%u0003 WKH%u0003GL%u037fHUHQFH%u0003LQ%u0003YDOXH%u0003IRU%u0003D%u0003VLQJOH%u0003VWDQG%u0010DORQH%u0003SUDFWLFH%u0003DQG%u0003WKH%u0003much higher value of a practice as a constituent member in a large integrated network.%u0016%u0011%u0003 7KHLU%u0003 FRQ%u00c0GHQFH%u0003 LQ%u0003 WKHLU%u0003 DELOLW\\%u0003 WR%u0003 EULQJ%u0003 HFRQRPLHV%u0003 RI%u0003scale to reduce expenses and their operating and capital FDSDELOLWLHV%u0003WR%u0003JURZ%u0003UHYHQXH%u0003DQG%u0003SUR%u00c0WV%u0011Preview Copy | 42