Deciding Whether to Relocate Your Dental Practice: Key Considerations

As dental practitioners approach the later stages of their careers, the decision of whether to move their practice can become increasingly relevant, especially if they plan to sell within the next few years. For those with more time before a potential sale, different factors might guide the decision-making process. However, for those contemplating a sale within five years, the choice to relocate—or stay put—can significantly impact the value of their practice.

The Importance of Location and Lease Terms

One of the most critical factors influencing the Dental Practice Appraisal is its location. A prime location can enhance the practicei s marketability and attract higher offers, while a less favorable location can detract from its overall value. Equally important is the lease agreement associated with the premises. A lease that restricts long-term access, whether through unfavorable clauses or limited renewal options, can be a significant drawback for both current owners and potential buyers.

A bad lease typically includes clauses such as demolition or relocation clauses, restrictive renewal terms, or assignment limitations. These clauses can severely limit the appeal of your practice to future buyers, who may be wary of investing in a location where their tenure is uncertain. If your lease includes any of these elements, it is crucial to assess your options carefully.

Addressing Lease Issues

The first step in addressing unfavorable lease terms is to consult with a lawyer or lease negotiation specialist. Attempting to renegotiate the lease, especially at renewal time, can sometimes result in more favorable terms. While landlords are often reluctant to give up clauses that provide them with flexibility, it is worth exploring whether certain conditions can be adjusted to benefit both parties.

If renegotiation efforts are unsuccessful, you will need to weigh the pros and cons of staying in your current location versus relocating to a new one. Moving a dental practice is a significant financial investment, often costing between $250,000 and $300,000 for a typical four-operatory office, not including the expense of new equipment. Therefore, the decision to move should be based on a thorough analysis of the potential return on investment.

Evaluating the Cost of Moving

Deciding whether to stay or move hinges on the potential impact on your practice value. If relocating, consider whether the increased value from a better location and improved lease terms will outweigh the costs involved. For smaller practices, the cost of moving might not be justifiable. In such cases, staying in the current location and preparing for a potential merger with another practice could be a more viable option.

On the other hand, for larger practices, the decision to move can often be more straightforward. For example, in a case where a practice was located in a high-end mall, the landlord refusal to renew the lease on favorable terms led to the decision to move. The new location, just a short distance away, offered significantly lower rent and a more modern, appealing space. The analysis showed that the practice loyal patient base would likely follow to the new location, ensuring that the investment in the move would be recouped in the event of a sale.

In another scenario, a practice with strong financial performance faced a similar dilemma. The existing lease included a demolition clause, which had previously lowered the practice value.

By relocating to a nearby office with better lease terms and modern amenities, the practice owner could increase the practice value, making it more attractive to potential buyers.

Seeking Professional Guidance

Every practice is unique, and the decision to move should be based on an individualized analysis of your specific circumstances. Consulting with experienced professionals, such as your lawyer, accountant, and broker, is essential in making an informed decision. These experts can provide valuable insights and help you navigate the complexities of lease negotiations and relocations, ensuring that you make the best possible choice for your practice future.

Conclusion: Making the Right Move for Your Practice

Deciding whether to move your dental practice is a significant decision that can have lasting effects on its value and your long-term financial goals. Whether you choose to renegotiate your lease, stay put, or relocate to a new space, the key is to approach the decision with careful consideration and professional advice. By doing so, you can position your practice for continued success and ensure that it remains an attractive option for potential buyers when the time comes to sell.

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Alan Rustom