Selling a Dental Practice

How To List Your Dental Practice For Sale Post-COVID

There is no doubt that recent events have left us all unsure what the future will bring. In a matter of days, normal life was turned upside down and most of our plans were put on hold, if not cancelled altogether. While we are still unable to say when life will return to normal, or even what the new normal will entail, we can begin to prepare for the future in the best way possible. Knowing this, our ddsmatch Southwest team, along with our colleagues in the nationwide ddsmatch network, have been hard at work talking to industry experts including doctors, CPAs, industry lawyers, and other key players in the dental practice transition industry. We hope that the work we have put in will give you a clearer picture of what dental practice transitions will look like in a post-COVID world. 

If you are considering listing your dental practice for sale in 2020, signs point to this being an attainable goal.

We understand that most of our clients are curious how dental practice transitions will work in a post-COVID world. While we cannot give definitive answers as to how the industry will look after the pandemic, we do have insights into the new process of practice valuation, tips for doctors looking to sell in the near future, and information about post-COVID transition deal structures. Below we will lay out these insights to help you prepare your practice for sale. 

Dental Practice Valuation During and Post-COVID

An accurate and reliable valuation is essential to the process of transitioning a dental practice. At its essence, a valuation tells buyers and lenders what the fair market price for your practice is. After pouring years of work into your practice you deserve to get what it is actually worth when you decide to list your dental practice for sale. Typically, valuation is heavily influenced by the income your practice has brought in over the past three years, leading to the question, how do you value a dental practice in the current climate?

How Valuations Will Likely Be Done in 2020

According to industry experts, the income valuation model, which is widely used in dental practice transitions, will still be used for the foreseeable future although with a few tweaks. This model closely examines your practice’s production, overhead, collections, and more for the previous three years. Right now your practice’s valuation will look at this information, with a special focus on 2019 as that data is most relevant. As we move forward into July 2020 and beyond, experts expect valuators will utilize a post-COVID “snapshot.” What does this mean? Valuators will take your pre-COVID numbers and compare them to your post-COVID numbers, with the goal of reaching 80% of your pre-COVID numbers within a few months of reopening. This goal is indicative of your practice heading toward recovery, which is what potential buyers and lenders want to see. 

What Will Change When You Put Your Dental Practice For Sale in 2020

While it is comforting to know some key aspects of selling your dental practice will stay the same, there are still some things that will change. Most, if not all, dental practices around the country were closed for several weeks. Reopening has come with some important restrictions that require creativity and trust.

Fortunately, your patients and staff are all used to seeing you in a mask and trusting that your instruments are properly sterilized. Still, there are several new cleaning and sterilization procedures you will need to implement in order to keep patients and staff safe. In addition, you will likely see production and collections slow as a result of social distancing. Increased costs related to cleaning procedures combined with the anticipated decrease in collections will result in a very different financial picture if you are not carefully monitoring it.

Remember that the goal of the next few months is not necessarily to return to the way things were in 2019, but to keep your numbers proportional. It is now more critical than ever to be aware of your financials, particularly how all your costs are shifting. If you are planning on putting your dental practice for sale in the near future you need to be highly aware of the way your practice is changing financially. Moving forward, remember to adapt where necessary and do not make assumptions. 

Static Competitive Pressure

One helpful thing to keep in mind as you prepare to make changes to your dental practice is that competitive pressure is mostly static. Around the country dental offices have been shut down for weeks or months, and reopening will require the same type of restrictions across the board. Other dental offices are not stealing your patients while you are closed because they are also closed. In addition, your patients are highly likely to return for their regular treatments as soon as you reopen. Treatment schedules may have been paused momentarily, but not stopped altogether. 

Of course, you should not expect to be back to 100% production within the first few weeks of reopening. Some patients will be wary to return, particularly if they have certain health related risk factors. Many patients have lost their jobs and insurance coverage which may cause them to put their treatments on hold. However, as we stated above, every dentist in your area are in the same position.

Lenders See Dental Practices as a Good Risk

Historically, lenders have seen dental practices as a good risk due to extremely low default rates. According to the lenders we have spoken to, there is no reason to believe this trend would change. Buyers should have the same access to lending as they did pre-COVID. However, the application process will probably be slightly different than it was before. Some lenders will prioritize certain buyers, such as those with a strong record of production or those with a large amount of cash. Lenders may also take more time and pick only the strongest applications resulting in a longer wait time for application processing and a reduced pool of buyers.

On the valuation side, lenders are expected to use the same approach as the business valuation experts outlined above. In order to properly estimate the value of a dental practice for sale, lenders will take a “snapshot” of your post-COVID numbers and compare them to your 2019 pre-COVID numbers. Lenders will primarily examine your production and costs, making sure that your practice is on track and proportional to your 2019 financials. As long as your costs remain proportional and your practice is on track to its 2019 levels of production lenders will likely deem it worth the same now as it was worth in 2019. 

Steps You Can Take Now to Prepare Your Practice

While it may sound counterintuitive, we have seen an increase in potential buyers recently. Rather than shying away from purchasing a dental practice in 2020 many dental associates have decided now is the time to take control of their careers. After the upheaval of the past few months, these associates are realizing the benefits of owning their own business rather than simply being an employee.

Taking the current landscape into consideration, if you are ready to put your dental practice for sale, here are some steps you can take to prepare.

  1. Maintain Flexibility. Keep in mind there are still a lot of uncertainties when it comes to post-COVID dental transitions. Experts can make their best guesses, taking into consideration current and historical data, but the truth is we don’t know exactly how the process will change. We have certainly seen buyers and sellers put their transitions on hold as the pandemic ramped up and now must reassess their deals. The process may take longer than it did in the past, so try not to set expectations in this regard. Deals may need to be restructured to account for increased risk and uncertainty the buyer is taking on. The best thing you can do for your peace of mind is to remain open to every possible scenario.
  2. Gather a Trusted Team. Even pre-COVID, dental transitions were complex, however now more than ever, it is crucial to have a team of dental-specific experts on your side. Before you list your dental practice for sale you must gather a group of trusted advisors. At minimum your team should consist of a dental-specific attorney, CPA and tax professional, and a practice transition specialist. Your team will help you make the most of your time and money, and create a plan that will guide you through the process.
  3. Move Toward Normal. Things may never return to exactly the way they were pre-COVID, but we should still strive to be as close to “normal” as possible. As we have stated repeatedly, getting your production back to 2019 levels with proportional costs is one of the most important things you can do to prepare your practice for sale. Make sure your staff is back, patients know they will be safe in your office, and your community still trusts the care you provide.
  4. Maintain Office Staff. The news is full of reports about unemployment, with nearly every sector affected in some way. Hopefully your office and staff are still operating as usual, but we realize that may not be the case. If you are forced to reduce your staff or their compensation while trying to prepare your dental practice for sale you must consider how this will impact your practice as a whole. Your staff plays a major role in your bottom line and you must have reliable people in place to ensure your office runs smoothly. 
  5. Protect Your Patient Base. As important as reliable staff is, your dental practice could not run without a solid patient base. In fact, your patient base is the core asset of your practice. As stated above, your patients are highly likely to return to their regular treatments as soon as you reopen. However, patient loyalty is not a guarantee and requires a bit of work on your part. As you make changes to your processes, such as extra cleaning and social distancing measures, make sure you communicate them clearly with your patients. Utilize your online presence to announce important changes around the office. Through your website, social media, and additional marketing efforts, educate your patients on the efforts you are making to keep them safe. Consider making a short, friendly video highlighting your new safety protocols, sterilization procedures, and PPE equipment. Share the video to social media, through an email newsletter, and on your website. In addition, your staff should begin calling patients to inform them the office has reopened, what the new safety processes are, and answer any questions your patients may have.
  6. Tap Into Your Creativity. Preparing your dental practice for sale in the post-COVID world will take creativity. Right now most dental practices are seeing limitations on the number of patients they can see a day. In order to accommodate these new rules, and help patients who are worried about missing too much work, we have seen some doctors extend weekday treatment hours or open their offices on the weekend. In addition, doctors are getting creative to help patients who have lost jobs and insurance coverage recently. One option to consider is an in-office dental membership or subscription plan. For a monthly fee patients gain access to certain treatments, such as exams and x-rays. Finally, some doctors are considering how they can make their offices run more efficiently. These doctors are hiring basic wage employees to handle sterilization protocols so higher-cost employees can attend to collections and production.

How  Post-COVID Deal Structures Will Work

Doctors who put their dental practice for sale in a pre-COVID world could reasonably expect a successful transition, as long as they put a little bit of work into it. Whether they wrote a letter to patients explaining the transition, or continued working alongside the new owner for a period of time, there were steps the doctor could take to keep production levels steady. At this point in time it is too early to tell what steps a doctor can take to ease practice transitions, and this uncertainty adds risk to the buyer. Deal structures will have to change to reflect this added risk.

One new deal structure we are already seeing is what is called a “holdback.” A holdback adds extra cushion that protects the buyer in case the practice does not climb back up to its expected production. According to the typical terms of a holdback deal a percentage of the selling price is held back in escrow until the practice reaches certain performance levels. After reaching these benchmarks the money is released to the seller. If you are putting your dental practice for sale in 2020 or beyond be prepared to encounter this type of deal structure and discuss it carefully with your team of advisors.

We’re Here to Help Your Dental Practice Transition

It is never too early to start planning your practice transition. In fact, the earlier you start, the better off your practice will be when it comes time to move on. If you are considering transitioning your dental practice, even if you are four or five years away, talk to one of our dental practice transition specialists. The experts at ddsmatch Southwest offer unmatched experience and professionalism in the industry, meaning your dental practice transition will be as simple as possible.

The past few months have proven to be difficult and stressful for everyone. We understand that you likely have questions and we are working hard to gather all the information you need to feel comfortable with your dental practice transition. Remember that we are here to answer your questions any time, with no obligation. Contact us today to learn more.

Is Your Practice Underperforming? Fix it Before Putting Your Dental Practice for Sale

No one sets out to fail. But life does not always conform to our expectations and things often don’t go our way. If your dental practice isn’t performing the way that you’d hoped, you might be concerned about your future and retirement. If this sounds familiar, take heart, all is not lost! You probably still have time to turn things around and build more—and more consistent—value into your business before you put your dental practice for sale.

A dental practice is, in many ways, no different from any other small business. Some experience steady growth, some experience consistent performance, some experience ups and downs in production, and some crash and burn. If you find yourself in a slump—or worse, a downward spiral—there are things you can do. Below, we’ll address some steps to take to help you get back on course.

Do Not Lose Hope

Before we get into what you can do, we’ll address the one thing you absolutely cannot do. You must not lose hope. When things don’t go our way, it’s easy to get upset, angry, or depressed. These emotional responses, however, will distort your perspective and cloud your judgment. Hopelessness is anathema to making positive change because you think, “Why bother? What difference will it make?” By setting emotions aside and taking a clear-eyed approach, you’ll be able to see solutions where you didn’t see them before.

This is most certainly easier said than done, especially when it comes to your dental practice. You’ve put a lot of time, effort, money, and care into starting and building your business. It’s tough to see it underperform. But your emotional attachment to the business will only get in the way of you being able to most accurately assess the problems and make critical decisions. When you act from a place of negative emotions, you are more likely to avoid making the hard decisions that could save your business, your career, and your future. 

Here at ddsmatch Southwest, we’ve helped many doctors prepare their dental practice for sale. Having worked closely with them as they review their business and consider their dental practice transition, we know how much the practice means to them, what they’ve invested in their work, their employees, and their patients. Because of this, we want to see dentists succeed in their careers—we know how meaningful it is. But, sometimes, that means making hard choices. And you must be up to that task if you want to turn waning practice into a strong one. You must put every option on the table. And you cannot let any of it be personal.

Essential Steps

With that out of the way, let’s move on to what you can do. These suggestions are ways to quickly increase production and profit. If your practice is really struggling, you must take these steps.

  1. Cut your unnecessary expenses. This might seem obvious. And maybe you think you have cut all unnecessary expenses. But, trust us, you probably haven’t. You may need to reevaluate your definition of “unnecessary.” Review all of your costs, being as objective as possible, and carefully consider what you really need at the most basic level. Cut anywhere you can and do it now.
  2. Cut necessary expenses. This might seem counterintuitive. How do you operate a business without paying for required elements? Well, if you’ve really cut all unnecessary expenses and that wasn’t enough, you’ve got to start making the cuts that will really hurt. This may include labor, technology, equipment, laboratory fees, and supplies. Don’t be swayed by a sense of obligation to vendors or employees. It might be hard for someone to lose an account or a job but your goal isn’t to guarantee anyone else’s income at this point. These cuts will, emotionally and psychologically, be the hardest to make, but you must change your mindset if you are fighting for survival.
  3. Increase Your Hygiene Production. In most practices, dental hygiene constitutes about 25% of the practice’s production. But, in most practices, there is room for growth in this area. Consider what hygiene work has been left undone. Work with your staff to identify which patients have incomplete work or who might be amenable to elective work. Reach out to your patients, have your hygienists help you with this, and start scheduling them for treatment. Also, if you don’t already have a periodontal program, start one immediately. These two together can add tens of thousands of dollars a year to your practice.
  4. Increase Your Active Patients. Again, this might seem obvious, but if you were already doing this effectively, you might not be in the situation you are in. Review your patient files for overdue patients and create a program to contact every one of them that is not currently scheduled and get them into your office as soon as possible. Your goal here is to get 96% of them scheduled. As soon as these overdue patients start coming in for treatment, if you keep your costs down, you’ll start seeing your production increasing. Once you have this going, keep it going. It’ll be a great selling point when you want to put your dental practice for sale.
  5. Schedule New Patients Within a Week of Their Call. While it’s great to get your overdue patients in, it’s the new patients that really boost your practice’s income. These patients must be the top priority for your office. Make sure anyone who answers your phone knows to schedule new patients as soon as possible, within seven days of that first call. The faster you get them into the office, the faster they get diagnosed, and the faster you can present them with treatment plans they will start paying for.
  6. Start All Large Cases Within a Week of Being Accepted. Relatedly, you want to close the lag between a case being accepted and treatment starting. Many patients will lag at scheduling their first appointment and a lot can happen during that gap in time, including the patient changing their mind. Instead of leaving the ball in their court, once the patient has accepted, get them immediately scheduled. Again, make sure everyone in your office is clear about this.
  7. Collect Anything Owed to You Immediately. Often, practices that are struggling have a large accounts receivable. This is money that belongs to you and should be paid. If you don’t have a collection system in place, start one now and keep it tight. Start a collections campaign (along with your overdue patient campaign) and get what you are owed. Also, start requiring payment at the time of service.
  8. Improve Your Case Acceptance Production. If you follow the usual method of having a large amount of single-tooth dentistry, you need to start being more expansive in your diagnoses. Give your patients a comprehensive diagnosis that addresses both necessary and elective options. Give them the option to get something they might want but don’t necessarily need, paying you for the service.

A lot of this advice might be hard to implement, but it will certainly be easier than having to close your doors. Remember to set your emotions aside and be rigorous in evaluating your costs and needs. Your dental practice needs a strong and dispassionate leader who is equipped to make the necessary, tough decisions. In the end, you will be glad you did.

We Can Help You Prepare Your Dental Practice for Sale

We are dental practice transition specialists that bring the experience of hundreds of successful dental practice transitions and put it to work for you. If you are considering putting your dental practice for sale and it’s not performing where you want it to be, we have options that can help. If you are considering transitioning your practice in the next five years, we offer a Practice Optimizer program to help doctors plan and prioritize for their future and retirement. We also offer a free, no-obligation Practice Transition Assessment during which we will provide valuable tools and advice to plan and prepare your practice for a smooth transition. Contact us today to set up a consultation—it starts with a conversation. 

Adopt the Best Social Media Practices Before Putting Your Dental Practice for Sale in Texas or New Mexico

We recently posted an article about how to build a solid marketing plan before selling a dental practice and, as part of it, discussed the low-cost, low-effort benefits of social media. In this article, we’ll expand on that a bit and address more specifically why and how social media can benefit your practice. If you are currently using social media and finding it effective, that’s great! We may not have anything to add to what you are doing. However, if  you aren’t using social media or are questioning it’s value, that may be because you may not understand exactly how to utilize it for a small, local business (no shade here, social media platforms are often geared towards tweens and young adults rather than middle-aged or older professionals). Regardless of your situation, it’s wise to adopt the best social media practices, especially before putting your dental practice for sale in Texas or New Mexico.

Avoid Generic Content

For social media channels to be effective, you need to engage your audience. This means you need to provide content that is interesting and compelling. If you want them to pay attention to your posts (as opposed to scrolling past with only a glance, at best), you must provide them something that they want to pay attention to. This can be a problem especially if you’ve outsourced your social media accounts or are getting free content as part of a bundle with other services.

Much of the generic, free content is stuff that might sound interesting at first glance, but, because it lacks personality, it can easily grow stale. Accounts that simply repost content from other sources will quickly become looked over in a feed that is full of more compelling content. (This is not to say you can’t ever repost anything, just be judicious about whether it is really something compelling you think your patients would be interested in.)

Remember that social media is meant to be social. This requires interaction between two real people—the poster and the reader. If your content is outsourced or generic, the reader will feel like they are being marketed to instead of being interacted with. 

But also remember that your goal is to parlay that interaction into paying patients accepting treatment. So, as you plan your content, be sure to include information about dental products and procedures that will be of interest to them. These things don’t have to appeal to all, or even most of your patient base. But those who are interested will be glad to see what you are promoting, if they feel like your dental office’s social media channels are ones they can trust (that is, that it’s a real extension of your office).

Include Clinically Relevant Topics

In addition to keeping your current patient base engaged, social media offers opportunities to bring in new patients. First, consider the goals you have for your practice. If you are considering putting a dental practice for sale in Texas or New Mexico in the next five or so years, this might be goals about expanding your patient base or increasing the amount of production you are generating from specific areas (e.g., implants, whitening, aligners, etc.). 

If you are looking to add patients, consider who you want to add, what they are looking for, and post content related to them and their dental interests. If you are looking to grow in more specific areas, such as dental implants, then post about dental implants. 

However you approach it, be sure that you are coming at it in a patient-friendly way. Your followers aren’t necessarily going to understand the technical aspects of treatment. Instead focus on results, the ease or cost-effectiveness of treatment, promotions, and so on. Remember that your content has to be interesting to your audience.

Make it Personal

As stated above, social media is meant to be social and people want to feel that they are interacting with real people. This is something that can be hard to accomplish if you are outsourcing management of your social media channels. 

As we wrote about in our previous article, it’s probably not as difficult or time consuming as you might think. This is because you don’t necessarily have to do it yourself. First, if you have a marketing agency that manages your online presence, work with them to personalize the content. Review it before it gets posted. Provide them with pictures, events, or content ideas that they can use. You know what’s happening in your office and in your community better than they do.

Second, if you don’t have a marketing agency, you probably have someone in your office that is active on social media, meaning they already have an innate understanding of how the platforms can be leveraged. Once you identify that person, have them set aside some little time a couple of days a week to take pictures and schedule posts to your accounts, and some time each day to respond to any questions or comments.

Finally, what do you post about? Anything good that happens related to your practice: new staff members, patient success stories, doctor profiles, doctor or staff achievements (whether related to dentistry or not), holiday costume contents, sponsored contests, community outreach. Literally anything that reflects well on you, your staff, your patients, or your community.

Small Changes Can Make a Big Difference

You may be surprised what a difference these changes can make. The algorithms that govern social media platforms reward the popular and penalize accounts that don’t get interaction. The more clicks or likes or reposts you get, the more your accounts will be recognized by Facebook, Instagram, and Twitter. This means they’ll appear higher up in your followers’ feeds, making your posts more visible. The fewer clicks and likes you get, the more you’ll slide to the bottom.

Also, be sure that all of your social media accounts are linked to each other and to your website. You want potential patients (and existing ones!) to be able to easily find your accounts and website, to click through to your other channels. This also builds credibility in the eyes of the algorithms. 

If you are considering putting your dental practice for sale in Texas or New Mexico, a strong social media presence can be a good selling point. It bolsters your claims about the value of the goodwill of your practice—that it really is worth what you are asking for it. It shows how you are a integrated part of your local community with a strong relationship to the patients your treat.

Finally, people are drawn to dental offices whose online presence is full of smiling patients and friendly staff. Show them they can find that in your office. It can be done with only the cost of a few hours each week but can be surprisingly effective.

ddsmatch Southwest Can Help Prepare Your Dental Practice for Sale in Texas or New Mexico

We are dental practice transition specialists that can put the experience of hundreds of successful dental practice transitions from across the country to work for you. If you are considering putting your New Mexico or Texas dental practice for sale in the next five years, we offer a free, no-obligation Practice Transition Assessment during which we will provide valuable tools and advice to plan and prepare your practice for a smooth transition. Contact us today to set up a consultation—it starts with a conversation.

Build a Solid Marketing Plan Before Selling a Dental Practice

What makes a successful dental practice? Is it the best trained doctors? The friendliest front desk staff? Is it the latest equipment? All of these may help but a practice can live without any of them. The only thing a dental office cannot survive without is a steady stream of patients. Though that may seem like a simple observation, many dental practices find it easier said than done. Here we discuss a few key factors that may help you strengthen your marketing—a major piece in the puzzle of bringing in new patients. If  you have struggled with your marketing, these are low cost things you can do to build up your patient base, which is especially important if you are considering selling a dental practice.

How Old is Your Website (You Have One, Right?)

What is the first thing you do when you are looking for any kind of service provider? If you are like most people, you Google it. Sure, word of mouth matters, but if a friend refers you to a lawyer or accountant, you’re still going to Google them. What pops up there is your first impression, so you’d better make it a good one.

The good news is that, in 2020, a good website doesn’t mean an expensive website. Sure, 20 year ago, businesses might have spent tens of thousands of dollars on a custom site. But, in those days, coders were less common than they are now and the programming languages were more difficult. Now, many websites are built off of templates and the learning curve is much faster.

The template model is good for dentists because that means you won’t be paying anyone to re-invent the wheel. Chances are you can find someone with a speciality in medical office websites who already knows what you need and how to organize it. Since the early days of the internet, there has been a lot of work done to understand how consumers find and respond to online information, what they are looking for, and what is most effective for communicating that information. The templates are designed to deliver to consumers what they want in the simplest way.

What if you already have a website? What if you spent $15,000 on it ten years ago? Well, we’re sorry to say that your website is out-of-date and that is the impression you’re giving to new patients—one of being out-of-date. They may wonder what else about your practice is not being kept up to date. Equipment? Techniques? Will a dentist that appears stuck in the past give them the best care? If prospective patients don’t like what they see, they’ll quickly move on to someone else.

If you are considering selling a dental practice in the next five years or so, you also don’t want to be marketing something that may look like a dinosaur to a young doctor. You’ll be well-served to make the online “face” of your practice one that is with the current state of the art. 

Your Social Media Presence Should Be Social (You Have One, Right?)

This one is a little tricker because it requires more ongoing work (not a lot, though) from your office. The good news, however, is it doesn’t have to be you. Chances are you already have someone in your office that is active on social media, meaning they already have an innate understanding of how the platforms can be leveraged. Once you identify that person, have them set aside a little time a couple of days a week to take pictures and post to your accounts, and some time each day to respond to any questions or comments.

Why is this important? Do you know how much Facebook, the biggest social media platform, earns from advertising? $17.4 billion in the third quarter of 2019. They made that in three months! And it was a 28% increase from the same quarter of 2018. Why are they making so much money from advertising? Because this is where the eyeballs are. 

Note, however, that we’re not telling you to spend on Facebook ads. We’re saying your prospective patients are on Facebook so if you don’t have a Facebook page for your practice, set one up today. And if you have a Facebook page, keep it updated. Have someone actively posting to it and interacting with anyone who follows you or posts questions or comments. You should also do the same with Instagram and Twitter, the other two big platforms.

The next question you may have is what to post about. The answer is anything good that happens related to your practice: new staff members, patient success stories, doctor profiles, doctor or staff achievements (whether related to dentistry or not), holiday costume contents, sponsored contests, community outreach. Literally anything that reflects well on you, your staff, your patients, or your community.

Be sure to link your social media accounts to each other and your website. Make it easy for patients to find you and information about you. Patients might go to your website first to find out about the practice, but many will also look at your social media to get a better sense of the personality of the practice (you can be a lot looser on social media than you may want to be on your website).

Again, if you are looking at selling a dental practice, having an active social media relationship with your community can be a big selling point in why the goodwill of your practice is worth what you are asking for it. It shows you are built in to your community and have fostered a strong relationship with the people you serve.

Many people are drawn to dental offices whose online presence is full of smiling patients and friendly staff. This can be done with only the cost of a few hours each month but can be surprisingly effective.

Don’t Write Off Traditional Media Just Yet

Much ink has been spilled over the death of traditional media (TV, radio, print, outdoor advertising). To paraphrase Mark Twain, the reports of its death have been greatly exaggerated. 

The key to effective advertising is maximizing impact. You’ve got to cast your net wide enough to capture your intended market but not so wide as to be wasting dollars on people who will never consider your business. For instance, a poorly placed billboard might not get you any patients while a nationwide television ad would never be justified in terms of cost per new patient. 

Local marketing experts in your area will know what kinds of ads the patients you are looking to advertise to will respond to. It may be that you have a newspaper in town that many people still read for local news. Or maybe there is a busy thoroughfare where thousands of commuters see billboards as they creep through daily traffic. If these kinds of means are still effective for small business in your area, don’t write them off.

Also, consider what your competition is doing. If they’re sinking all of their resources into online advertising, you can take advantage of the gap in traditional media, if it’s effective in your area.

Keep it Simple

Marketing doesn’t have to be hard. Marketing doesn’t have to be complicated. And marketing doesn’t have to be expensive. These suggestions are all easy, low cost ways that you can see a significant impact without any major investments of time or money. 

Considering Selling a Dental Practice? We Can Help!

Here at ddsmatch Southwest, we are dental practice transition specialists that focus on finding the right doctor for your practice, one who will honor and build on the legacy you have established. If you are considering selling a dental practice in the next five years, we will, with no obligation, provide you with valuable tools and advice to plan and prepare your practice for a smooth transition. Even if you aren’t considering putting your dental practice for sale, we can refer you to marketing experts if you’d like more information or help in that area. Contact us today and find out what we can do for you—it starts with a conversation!

Dentistry Named a Top Job; That’s Good News for Texas Dental Practices for Sale

In a recent ranking of professions by US News & World Reports, dentistry came in as the second best option, just behind software developers in its 2020 rankings. This is a step up from fourth place in the 2019 rankings. For dentists with Texas dental practices for sale, this is good news, as what is being offered is not just a profitable business, but a solid and rewarding career as well.

While that ranking is for general dentistry, professions throughout the oral healthcare industry fared very well. Orthodontists and oral and maxillofacial surgeons were both in the top ten of overall jobs (at four and nine, respectively) and in the top five of best paying jobs (with oral and maxillofacial surgeons at number three and orthodontists at number five). Dental hygienists came in overall at 24th, prosthodonists at 56th, and dental assistants at 66th. In the more specific category of health care jobs, dentistry came in at number one, orthodontists at number three, and oral and maxillofacial surgeons at number nine.

The criteria US News & World Reports relied on for their rankings started with which jobs would have the largest number and percentage of projected openings between 2018 and 2028, as determined by the US Bureau of Labor Statistics (BLS). Then, the publication ranked the jobs based on other criteria such as median salary, employment rate, ten-year growth, future job prospects, stress level, and work-life balance.

The Tangibles and the Intangibles

According to the BLS, dentistry has an expected 10,4000 job openings with a 7.6% employment growth. It also reported that dentists have a median salary of $151,850, up slightly from 2019 when the median salary was $151,440 (although this is down from 2016 when the median salary was $153,900)

Here in Texas, we have two cities where dentists’ median salary is the highest. Topping the list is Amarillo, where the median salary for a dentist is $279,920. This is followed by Longview, where the median salary is $275,530. This indicates it may be a good time to put Texas dental practices for sale as potential buyers may be looking to build their careers where the fields are fertile.

The top five is rounded out by Fond du Lac, WI ($268,920,  Reno, NV ($267,410), and Sebring, FL ($259,660). If you look at the mean salary, the highest amounts are in Delaware ($264,440), Alaska ($259,350), Rhode Island ($254,190), Minnesota ($227,280), and New Hampshire ($226,300). 

And, of course, the specialists can earn even more. Orthodontists and oral and maxillofacial surgeons earn a median salary of $208,000, while prosthodontists have a median of $176,540.

It’s not all about the money, though. Measurements of dentists’ flexibility in schedules and work-life balance were both found to be above average from all of the professions reviewed. Also, the upward mobility and stress levels were found to be in the average range. Meaning, you can have an average to above-average experience in the profession while earning a well above average salary.

How Well Does This Reflect the Reality of Being a Dentist

The answer to this question, of course, is that it depends. The US News & World Report ranking is encouraging for the future of the profession of dentistry. It is, however, based largely on statistics and does not really give a full picture of what it means to be a dentist. 

As your experience has probably shown, while you can earn a high salary, what isn’t always apparent is the cost of getting that salary. After all, in 2018 the average dental student graduated with a student loan debt load of $285,184. When coupled with a dental practice loan to start or buy a practice, debt payments can take a big chunk of your potential earnings. However, when viewed as an investment and properly organized, a smart doctor can service their debt and still enjoy a high income.

There are also many aspects to practicing dentistry that can provide satisfaction beyond just meeting career milestone goals or earning potential. A successful practice keeps the doctor busy all day, every day, providing a sense of satisfaction in the work accomplished. Also, the work being done is a kind that genuinely has a positive impact on your patients. It’s possible to look back at the end of each day, week, month, year, or career, and see how you’ve made peoples’ lives better. 

At the end of the day, the real value of Texas dental practices for sale is the goodwill that the practices have built in the community. This goodwill doesn’t come from how efficiently you’ve organized your practice in order to maximize production out of each of your chairs. It comes from the care you provide to patients and the relationships you form with your community through that quality of care.

ddsmatch Southwest Has Texas Dental Practices for Sale

ddsmatch Southwest are dental practice transition specialists with an expertise in finding the right match for New Mexico and Texas dental practices for sale. We help visualize your future, set achievable goals, and devise strategies to start you in the direction of your post-transition dreams, well in advance of your intended transition time frame. If you are considering transitioning your dental practice in the next five years, we offer a free, no-obligation Practice Transition Assessment. Contact us today and find out how we can help you achieve your practice transition goals.

Tap Your Hygienist’s Production Potential Before Putting Your Dental Practice for Sale

We recently posted an piece suggesting you set production goals to help maximize your earnings per day and hour as a way to boost your income both as a way to increase your profitability and to build value before placing your dental practice for sale. Relatedly, you can make the same adjustments with your practice’s dental hygiene production. 

In most practices, aside from what you produce, the only other major source of production are your dental hygienists. Some consultants recommend that you have a goal of having hygiene make up about 25% of your practice’s overall production. That’s a significant amount, but it is something that is achievable if it is well planned as part of overall scheme to create efficiency. Below are five suggestions for how to get more out of your dental hygienists.

1 – Patients Past Due for Hygiene Treatment

Who do you think will have a greater impact on patients overdue for hygiene treatment: your administrative staff members or your dental hygienist? We mean no disrespect to your staff members. They may be highly professional and capable people who excel in their capacity. However, they are not providers of clinical treatment. That is, they are not seen as having knowledge and expertise in hands-on dental care. The difference this makes to patients might surprise you.

You can leverage this in two ways. First, if your hygienist has time in their schedule (due to a gap or a no-show), they should have a list of patients ready to contact to encourage them to make an appointment. Second, they can also create a script for the administrative staff members to use, relaying a message from the hygienist about the overdue treatment, encouraging them to set an appointment. This script might focus on the importance of regular, ongoing hygiene treatment that will enable them to keep their teeth for their lifetime, one that educates about dental care and periodontal health in a positive and helpful way.

2 – Elective Procedures

As you know, your dental hygienists have more time with your patients than you or any other member on your team. Over the last several years, there is more of a focus in our society on whitening and, among adults, straightening of teeth. While these procedures may not be clinically necessary for ongoing oral health, many of your patients may find an appeal in these procedures. Many practices are underperforming when it comes to cosmetic procedures, implants, and adult orthodontics. You can leverage the time your dental hygienists have with your patients to offer and discuss these options. 

Additionally, as you grow closer each day to the time when you will place your dental practice for sale, building this into your practice will be a selling point—having employees who are invested in and critical to increasing the practices overall productivity.

3 – Ongoing Treatment Reminders

You probably have a number of patients to whom treatment plans have been suggestion but that haven’t accepted your recommendations or haven’t completed the treatment. Too often, dental practices will provide a treatment plan recommendation and then simply leave it to the patient to decide. Consider, however, how many of those patients would be more likely to accept or complete the treatment plan with follow-up conversations?

Presenting a treatment plan is often not just a two-step process where you present the plan and the patient opts to accept it or not. There may be myriad factors as to why a patient chooses to accept or complete a treatment plan. The best way to boost your case acceptance rate is to have, in essence, an ongoing conversation about the treatment plan.

Your hygienists should make it regular practice for each appointment to review the patient’s file, see what treatment has been recommended but not completed, and to discuss that with the patient. Even if the patient’s reason is related to the annual renewal of dental benefits, it’s important to remind them of what is needed and why it is to their benefit. This way, you can leverage the time your hygienists spend with patients.

4 – Periodontal Diagnostics

Whether you know it or not, periodontal disease is a widespread problem, affecting about 65% of all patients, yours included. Most people don’t understand what it is, really, even though they may be experiencing its symptoms (such as red, swollen, or tender gums; bleeding when brushing; bad breath). This lack of awareness is an opening for your hygienists to be recommending care through a periodontal diagnostic program. If you create the program and train your hygienists on how to educate patients, you’ll be providing them with additional level of care and using your hygienist’s time to get closer to that 25% production goal. And, again, if you have a program like this being boosted by hygienists, that will only help you when you decide it’s time to place your dental practice for sale. 

5 – Dental Hygienist Assistants

You have employees for a reason: you simply don’t have time to do everything and, because your time is valuable, you need to delegate the simpler tasks to someone with less training, skill, and experience. The same can be true for dental hygienists. 

Not everything your hygienists are doing needs to be done by a hygienist, such as preparing rooms for treatment, developing x-rays, and performing other administrative duties. If you run your hygiene program like you run your work— having hygiene appointments in multiple chairs with an assistant doing prep work while the hygienist moves between chairs performing their work—you might be surprised at how much more productive it can be. If you have a high volume practice and available chairs, you might be able to increase your hygiene productivity by as much as 33%. Again, imagine how this will look to prospective buyers when you are ready to put your dental practice for sale

Selling a Dental Practice? We Can Help

ddsmatch Southwest are dental practice transition specialists committed to helping doctors meet their practice transition goals. If you are considering transitioning your practice in the next five years, we offer a free, no-obligation Practice Transition Assessment during which we will review with you the current, local dental practice transition market, best transition options for your practice, physical and image improvements to increase value, potential practice investments, and present and future staff integration. Contact us today and find out what we can do for you!

Four Steps to Increase Production Before Putting Your Dental Office for Sale

It’s 2020. A new year, a new decade, and a great time to get your dental practice on track for its most successful period yet. To make that happen, however, you’ve got to have a plan and the sooner you get that plan in place, the better. Ultimately, the day will come when it’s time to put your dental office for sale and the time to start building value for that transition is now. In the meantime, you can enjoy the rewards that your increased success will bring.

There are different ways to measure success. It can be in increased overall production revenue (a good measure for a young or mid-career doctor). It can be in increased production per hour, leading to having to work fewer hours (this might be better for an older doctor who is looking to work less but maintain a steady income). Whichever measure you use, the following steps will work for any doctor who wants to increase earnings for their practice.

Step One: Make a Production Plan

First things first, you’ve got to have a specific plan that includes your ultimate goal and the steps along the path to reach it. For instance, if you want to reach $1.5 million in production, that will require you to bring in $31,250 each week (based on 48 work weeks in the year—you can, of course, adjust that for more or less time off). Breaking it down even further, if you work 40 hours each of those 48 weeks, this will mean you need to be producing around $721.25 each hour you work.

Next, how do you do this? First, you should set daily production goals and work with your scheduling coordinator to arrange appointments that will enable you to meet those goals. Their job is not just to keep the chairs filled but to do so in a way that maximizes your production per hour. This means that they need to be trained on each procedure you perform, how long it takes, and what it’s value is in production. It’s like a jigsaw puzzle, figuring out which piece goes where to create the overall picture. If all your scheduling coordinator is doing is fitting patients into open spots on the calendar, you don’t end up with the picture you want, just a jumble of pieces. But when they know how to look for the right spot to schedule the right procedure, the vision of your production goals will come into view.

Second, you should have a designated treatment coordinator who is effective at presenting the treatment plans for all of the producers in your practice, and they should be able to meet, at a minimum, an 85% acceptance rate. Determining and providing clinical treatment is your skill. This is differentfrom being able to help patients understand the importance of accepting the treatment plan. You want the best person for each job. This team member should be able to spend as much time as necessary sitting face to face with your patients, to answer questions, resolve concerns, and address any perceived barriers to acceptance of the plan. Your treatment coordinator should also follow up with patients after the initial presentation as part of their regular responsibilities. This is how you get more patients accepting treatment, scheduling the next appointment, and boosting your production.

Related to increased reliance on your staff is raising your overall customer service standards. When your patients feel seen, heard, and well cared for in every aspect of their experience with your office, that boosts your reputation and increases your word of mouth referrals (and, remember, when you put your dental office for sale, most of the value falls into the nebulous category of “goodwill,” and you will be well served by being able to demonstrate the goodwill you have built through superior customer service). You can become known as the best doctor in town when your patients feel that they are cared for. This leads us to the next step.

Step Two: Remember the Patient’s Needs

Too often when patients are presented with treatment options, the plans are presented on an assumption of what the doctor or office believes the patient can afford. This is the wrong approach. It assumes the best option to present to the patient is the one the doctor is betting the patient is most likely to accept. This puts the doctor’s interest (in getting the patient to accept further treatment) above the patient’s (in getting the best treatment for them). Your office should be presenting all available options to the patient and letting them choose for themselves.

This approach, however, involves a little more time and patient education (which is why it’s best to have a designated treatment coordinator, who can put in that time). Your treatment coordinator should present all available treatment options and address the patient’s immediate needs, their long-term needs, and any other treatment options that the patient may have asked about. When patient’s understand what is available and how the options do or do not address their needs and desires, they are more likely to accept further treatment. Its empowering them to make a choice in their best interest, rather than have only one option dictated to them.

As stated, however, this requires time and education. Patients have to be informed about what the treatment options are, what they entail, and what clinical issues they will address (and what they won’t). When patients are shown what is happening in their mouths (with x-rays or other images), and when they learn about the conditions you’ve diagnosed (perhaps through videos), they have a much better understanding of why you are recommending a course of treatment. When they know what you know and they understand its importance, leading to a higher acceptance rate.

Step Three: Review Your Production Reports for Indicators of Problem Areas

Do you know how much money is owed to your practice right now? If not, you should be reviewing your practice reports carefully, looking at things such as your accounts receivables and outstanding insurance claims. You should know how much is owed, and from who, in order to better be able to collect and perhaps make changes to resolve any consistent problems in these areas. You also need to review your production, new patient flow, and patient retention for any recurring issues that need to be addressed.

If you have associates or other doctors working in your office, you should review these reports for their production, as well as your hygienists. If your software allows for production forecast results, use that tool to identify slow periods in production that may lead to shortfalls. As noted above, a key to increasing production is maintaining a consistent level across all providers each hour of each day of every week throughout the year.

Reviewing these reports with your team members will also help them to understand how each part of the practice impacts the others. That is, the success of each person in your office helps the other team members do their job better. Think of rowers on a crew team: maximum efficiency comes from precise, coordinated effort. One person out of sync will slow everyone down and require them to work harder to make up the shortfall.

Additionally, having this kind of detailed sense of your office’s production, and having all of your team members working together, will be a great aid when you put your dental office for sale. Prospective buyers will pay more for a fine-tuned machine than they will for something that needs work. 

Step Four: Reduce Your Overhead

If your practice is doing well in an overall sense, you may not have felt the need to look too closely at your overhead costs. If it isn’t broken, don’t fix it, right? Sometimes, however, we don’t know something is broken until we examine it. 

What is reasonable overhead for your practice is going to be determined by a number of factors that are specific to your practice. That said, a good rule of thumb are the industry standards. Use these as guides and review your costs and see how close you are. If you are too far off these benchmarks, look at those expenses to see what’s happening and how they can be reigned in.

For the dental industry, the standard is about 55% of your collections. That means you keep 55 cents in profit for every dollar you make. To break it down further, here is about where you should be with specific overhead categories:

  • Payroll: 20%
  • Laboratory: 10%
  • Rent: 5%
  • Dental supplies: 5%
  • Payroll taxes and benefits: 3%
  • Office supplies: 2%
  • Miscellaneous: 10%

If your overhead is out of bounds with these standards, make the necessary changes to reign it in. You can then take the money you’ve saved on overhead expenses and reinvest it in things that you may have thought you couldn’t afford, such as technology that will increase your productivity and attract patients.

If You are Thinking of Putting Your Dental Office for Sale, We Can Help!

Here at ddsmatch Southwest, we are dental practice transition specialists with an expertise in counseling doctors on how best to position their dental office for sale. We’ve developed a Practice Optimizer to help doctors plan and prepare for their future. If you are considering transitioning your dental practice in the next five years, contact us today and find out what we can do for you.

The Advantages of Dental Associateships and Buy-Ins

It’s a great time to be a dentist that owns their own practice. Whether you are currently in a dental associateship looking to expand your interest in a practice, or an owner looking to sell or expand, a buy-in—also known as a minority interest transaction—can work to the advantage of both the buyer and the seller. 

From the point of view of the owner-dentist, a dental associate buy-in can be a good plan for a dental practice transition. Rather than just bringing on an employee, a dental associate becomes a partial owner. The benefit here is that the junior dentist has a greater investment (both literally and figuratively) in the practice. They are more likely to stay with the practice and work harder for its growth and success. By having more at stake, they will have more of a long term view. Also, when it comes time for the senior dentist to retire, there is already someone settled in the practice, who knows the staff, the patients, and the community. It makes for a smoother, simpler transition. By going through the process of hiring an associate and allowing them to buy-in, you are essentially hand-picking your successor.

Additionally, by creating a partnership agreement between the senior and junior dentist, the senior dentist is assured of the continuity of the practice in the event of their death or disability. Partnership agreements typically require the surviving partner to buy-out the other, meaning that the practice will continue. Without such an arrangement, it’s possible that the practice—something a doctor has worked to build over many years—may end up closing its doors without any of its value being transferred to the dentist’s family.

For the associate, a buy-in can be a tremendous opportunity. They get to share in the benefits of practice ownership, not just be a worker that clocks in and out and collects a paycheck. They get to learn how to manage and grow a practice, but do so under the tutelage of an experienced practitioner and business owner. It provides the opportunity to learn real world skills and business acumen that isn’t taught in dental school. Essentially, the associate gets to learn how to own a practice without having to take on the full risk of ownership.

How it Works

The dental associateship buy-in timeline usually takes place in two parts. First, the associate would buy a minority interest in the practice. 10-20% is a good starting point and is typical for these arrangements. A smaller percentage is beneficial for these types of partnerships because this will be a trial period for both parties. If it turns out to not work for whatever reason, it will be a lot easier to end a partnership that only involves 10-20% rather than half, most, or all of the practice.

The second part, then, is the complete buyout of the senior dentist’s remaining interest. This would probably occur when the senior dentist decides it’s time to retire, but, as referred to above, could be accelerated by the death or disability of the senior dentist. Although such instances are not common, its best for both parties to carefully consider what they would want to happen in such circumstances before finalizing a buy-in agreement, just to be sure this is a path they want to go down together.

After the junior dentist has purchased an initial stake in the practice, generally staff and patients take that doctor’s role more seriously than if they were simply an employee for hire. Although the junior partner is not on par with the senior partner, there is a clear difference when they have bought into the practice (literally and figuratively). Staff will view them differently, especially knowing that the junior will become senior one day. And when that day comes, it can be a more seamless transition than if a stranger is brought in one day and introduced as the new boss. The associate will have had ample time to earn the confidence of the staff and patients.

The Best Partnerships are True Partnerships

There is no doubt that a dental associateship and buy-in is a serious commitment by both parties. It requires mutual respect, open communication, and a solid legal agreement. The most heavily negotiated part of buy-in is not the purchase agreement, but, rather, the partnership agreement. Both parties must be clear on their expectations and those expectations must be aligned for it to work. 

These documents can be very detailed and technical. Whichever side you are on, you will need an experienced attorney to negotiate on your behalf and provide expert counsel on such things as voting rights, management responsibilities, CEO compensation, withdrawal provisions, personal guaranty requirements, matters requiring unanimous consent, deadlock provisions, drag-along rights, required chairside responsibilities, and several other issues.

You should be carefully considering each of these issues, along with the others raised by your attorney. And don’t just considering them in abstract, but within the context of a very real long-term working relationship that you are taking on. Unfortunately, not all of these partnerships work out. Most do, however, you will be well served by not going in blindly or with rose-colored glasses. As with any relationship, business or personal, If you proceed with good faith and your eyes open, you greatly increase your chances for success.

ddsmatch Southwest Can Help You with Right Dental Associateships

ddsmatch has been successfully connecting the dentist’s present with their future for ten years. Recently, we’ve partnered with ZipRecruiter to leverage their proven employment solutions to expand your options, along with the continued support of our team of professionals, and the thousands of dental associateship candidates on our website.

At ddsmatch Southwest, we focus on dental practices in Texas and New Mexico. If you are interested in adding a dental associate, or are considering transitioning your practice, contact us today for a free consultation.

Start Planning for Retirement Before Selling a Dental Practice

It’s never too early to start planning for retirement. As dental practice transition specialists, we here at ddsmatch Southwest know that selling a dental practice is often not enough, on its own, to support a dentist and their family through the period of retirement. Proceeds from the sale are significant, indeed. But consider, if you are accustomed to earning $200,000 or more a year from your practice, selling it for $1m will only support your lifestyle for five years or less.

If your practice consistently reports high earnings, it’s a good time for you to start an employer-sponsored, qualified retirement plan. In addition to good planning for your future, you can do it in a way that will also save you money on your yearly tax bill through deferred compensation.

The Devil is in the Details

First, you will need a dental accountant. The ability to maximize your retirement savings and minimize your tax liability is going to require an accounting professional with an expertise in your business. Using a general CPA might seem like it will be cheaper, as they may have lower fees. However, in the long run, what you save—both in your retirement accounts and from lower tax bills—will make a dental CPA specialists worth the extra costs.

The reason for this is twofold. First, you need a CPA who understands your business in the most detailed way. If you are the only dentist in your accountant’s portfolio, then you are paying for their learning curve. And you can’t be confident that they are picking up on and correctly incorporating all of the details that are specific to dental practices.

Second, you need a CPA who has a functional understanding of the full panoply of retirement plans, not just the most common ones (such as the ones you, as a non-accountant, can think of off the top of your head). Do you know the difference between a defined contribution plan and a deferred benefit plan? That difference could mean savings in the amount of hundreds of thousands of dollars. The specialist is worth the extra expense.

Is Your Practice Right for a Defined Benefit Plan?

Do any of the following apply to you?

  • Are you nearly 50 years old or older?
  • Are your earnings consistently on the higher side?
  • Do you have a relatively young staff?
  • Do you employ a high number of specialty employees (i.e. hygienists)?

If any of these apply to you, a defined benefit plan might be a good fit. Consistent high earnings are important because these types of plans are based on formulas. With a deferred contribution plan, you have a maximum contribution, set by law, for your allowable deductible contribution. If you can save more, with higher tax savings, through a defined benefit plan, you should be making use of one. However, you need to review your financials with a dental CPA to be certain.

Also, if you are nearing 50 or older, you should be considering what position you want to be in when it comes to selling a dental practice. The better prepared you are now, the better prepared you are when that day comes (especially if it comes sooner than you think because of an unexpected life change).

Here’s How it Works

If you paid yourself $300,000 dollars in salary and paid your taxes on those wages, this can be essentially the same as claiming $150,000 in salary and your business organization contributing $150,000 to the defined benefit plan as a deductible contribution made on your behalf as an employee of your business. This would save you money on your state, federal, and Medicare taxes for the first year you claim it (even if you wait until the very end of the fiscal year) and every subsequent year, as you would only be taxed for the $150,000 claimed as salary.

If you are paying close to 50% in taxes, considering the double Medicare tax as the owner of the business, and the extra Medicare tax on earnings above $250,000 for a married couple filing jointly, this can translate into at least $75,000 each year that you will save in taxes. Instead of paying that to the government, you are paying it into your defined benefit plan for your retirement. This means that half of your $150,000 retirement plan contribution is being made of tax savings.

How this will play out for your specifically is dependant upon a number of factors, a major one being how you have organized your dental practice (as an S-corp, LLP, LLC, etc.). That factor, after consultation with your dental CPA, can be combined with other methods of savings to fund the balance of your retirement account. 

Finally, a defined benefit plan, like most qualified employer-sponsored retirement plans, are immune from creditors. Regardless of what happens after you set it up, the contributions will appreciate without being taxed until the funds are disbursed, which will likely be after selling a dental practice.

What’s the Downside?

Of course there is a downside. An employer-sponsored defined benefit plan is different from other retirement funds because the employer knows the formula calculating the benefits ahead of time. This means that if there is a funding shortfall (due to either faulty assumptions or poor investment returns), the employer is legally obligated to make it up with a cash contribution. As the owner of your business, this would mean you would owe yourself the difference out of your business’s earnings.

Because of this potential liability, it is essential that your carefully consider your options after a thorough consultation with an experienced and reliable dental CPA.

Selling a Dental Practice? We Can Help

Ddsmatch Southwest are dental practice transition specialists committed to helping doctors meet their practice transition goals. If you are considering transitioning your practice in the next five years, we offer a free, no-obligation Practice Transition Assessment during which we will review with you the current, local dental practice transition market, best transition options for your practice, physical and image improvements to increase value, potential practice investments, and present and future staff integration. Contact us today and find out what we can do for you!

How Asset Allocation Helps When Buying a Dental Practice for Sale

It’s easy to think of buying a dental practice for sale in a monolithic way. For instance, you might think, “What am I buying? I am buying a dental practice and it costs $500,000.” But, in reality, you are buying several different components that, together, constitute the dental practice. These things include: 

  • Equipment
  • Supplies (dental and office)
  • Improvements to the office or property
  • A covenant not to compete by the seller
  • Patient records
  • Goodwill

Each of these can be valued separately. When negotiating the price of each separately, you can get away from just talking about one number—the overall value. By breaking each item out by individual value—known as asset allocation—you can do a couple of things.  First, you can actually make negotiations go smoother by not just dealing with one big number that a seller (or buyer) can get hung up on. Second, your dental accountant or tax professional (and the IRS) will not categorize all of these items in the same way. By using asset allocation, you can save yourself from overpaying taxes. These two factors, together, result in a better conclusion to the deal for both you and the seller.

The Depreciation Rule

The rule the IRS will use when looking at the assets in the sale is depreciation. Depreciation is the allocation of value to an asset over its useful life. The goal with depreciation is to try and match an asset’s expense to the revenue it helps generate. For instance, if you spend $1,000 on a computer, you will likely use that computer for several years. Because of that, the cost of the computer will be viewed, for tax purposes, as spread over the period of its useful life, not just in the year it is purchased. This rule applies to any asset with a value over $600 and a useful life of more than one year.

Using the assets identified above, the IRS will typically view them as follows with regard to the buyer of a dental practice for sale:

  • Supplies (dental and office) – expensed in the year purchased
  • Equipment – depreciated over five to seven years
  • Improvements to the office or property – depreciated over 15 years
  • A covenant not to compete by the seller – depreciated over 15 years
  • Patient records – depreciated over 15 years
  • Goodwill – depreciated over 15 years

For the selling doctor, the IRS will typically tax the sale of these items like this:

  • Supplies (dental and office) – ordinary income
  • Equipment – ordinary income
  • Improvements to the office or property – long-term capital gain
  • A covenant not to compete by the seller – ordinary income
  • Patient records – long-term capital gain
  • Goodwill – long-term capital gain

Because long-term capital gains are taxed at a much lower rate than ordinary income, the seller will want as much of the value as they can get assigned to goodwill.

The Fair Market Value of an Asset is the Negotiated Price for Each Asset

After a transaction to buy a dental practice for sale, when it comes to tax time, both parties are required to independently report the values of the assets included in the sale. Both parties must be in agreement in what the value for each is. However, what values they assign to those assets is negotiable. 

The rule applied by the IRS to the valuation of assets is their fair market value. But fair market value is simply the price that an independent buyer and seller can agree upon. So, basically, you reach an agreement on overall price for the practice, then negotiate the value of the supplies, equipment, improvements, covenant not to compete, and patient records, and the rest of the value is assigned to goodwill. As long as both parties agree on the value assigned to each asset, then that is the asset’s fair market value.

Why Negotiating Asset Allocation Matters

Negotiation asset allocation is important because it allows you, when buying a dental practice for sale, to negotiate points beyond overall price. It allows you to find areas where your interests and the interests of the seller are aligned—or, at least, aren’t in opposition—and work toward a mutually beneficial final arrangement.

Here at ddsmatch Southwest, we believe a good deal is one where both parties walk away from the table satisfied with the terms of the deal. Asset allocation allows you and the person on the other side of the table to move pieces around to find the combination that works best for all involved. For instance, if a seller feels strongly about getting the full asking price, they may be willing to move some value out of the goodwill category and into equipment, which would benefit the buyer. Or, if the seller is concerned about their tax bill, they may be willing to come down on the overall price and keep more of the value in goodwill.

Everything is Negotiable

Saying everything is negotiable might be an overstatement, but, remember, there may be a lot more that is negotiable than you might first think. What we’ve discussed here has focused on the money involved in the sale of a dental practice for sale. There are a lot of things that don’t impact the valuation of the practice that can be negotiated to facilitate a successful transition. These include the buyer’s starting date, the seller’s letter to patients, ways to protect current staff, other restrictive covenants beyond the non-compete, or a right of first refusal on purchasing real estate (if the seller owns the building).

The key takeaway is that the more knowledge you have about your options, the higher the probability that you will close a successful deal. After all, both parties want essentially the same thing: the sale of a dental practice in which they have confidence. The seller wants confidence that the buyer will take care of the practice, patients, and employees—that their legacy will be protected. The buyer wants to own a dental practice with a steady income stream that they can feel good about.

We Have Dental Practices for Sale in Texas and New Mexico?

If you are ready to make this next step in your career, we have available dental practices throughout Texas and New Mexico. You can view our listings here. If you see any your are interested in, or have any questions, please contact us— it starts with a conversation.