Selling a Dental Practice

“The Personal Touch”: Why One Doctor Used ddsmatch When He Put His Dental Practice for Sale

We sat down with Dr. Bill Dean, of Floydada. Texas, to discuss his dental practice transition, facilitated by ddsmatch Southwest. He had recently seen his last patients, who were, coincidentally, among his very first patients—they are part of a family, four generations of which, have been his patients. Dr. Dean makes the case for practicing dentistry in rural areas and for using the ddsmatch dental practice transition specialists. 

“ . . . they did everything that I needed help done. They supplied all the paperwork, all the forms. They did all of the listing and advertising, and all I had to do was be there to open the door when they brought someone out.”

When you first put your dental practice for sale, what did you have in mind for the type of person you were hoping for in a buyer?

Someone that would be a part of the community, that was more than just drilling and filling and seeing patients. And, [Dr. Shively, the buyer, has] been with a corporate firm in Lubbock for the last six months and it wasn’t a matter of getting to know the patients, it was a matter of production, and Dr. Shively didn’t like that, didn’t want that. He wanted to be a part of the community.

He said when he came out there was little league baseball playing, and he said that’s what he’s looking for, and, you know, that’s what I’ve had for the last 27 years. We’ve known for two months . . . that Dr. Shively was taking over, and that I would be leaving. And, the last two months with patients have the most humbling and rewarding of my entire career. The patients just saying, “we appreciate you and love you,” and that’s what dentistry’s all about. It’s getting to know people.

When he came out with Andy it was an instant bond with both of us, and we knew that this is what we were going to do.

It seems like it’s the kind of community that allows people to get to know each other as people, not just as part of commercial transactions.

Exactly. We’re a town of about 3,500 people, but we’re about 50 miles from Lubbock. It’s the nearest town, large town. And, I have a drawing area of probably 20,000 patients and coming from three or four different counties that don’t have dentists, and it’s hard for young dentists coming up to realize that they can come to a real community and have an instant practice when they start out.

Do you feel that younger dentists coming out might not recognize the benefits of a rural community?

Particularly if they’re buying a practice. There’s a ready-made client base that they can go to work from day one and be busy. They don’t have to try to develop a clientele, and they get to know their patients and the patients . . . Once they’ve won a patient over they will tell all their friends, and it just is an ongoing process of good people.

You mentioned that the local newspaper ran a story about you putting your dental practice for sale?

The local newspaper came out probably three months ago now, and interviewed Dr. Shively and me, and ran an article in the paper, front page, half a page story about him coming in and wanting to be a part of the community. And, he’s been out a couple of times, shadowing me and then he came out one day when I wasn’t there and saw patients and then Wednesday will be his first day to see patients, and he’s got a full schedule for the rest of the week.

What is happening with your staff?

My staff will stay. My hygienist has been with me 16 or 17 years, Gracie, who’s the office manager’s been with me 13 and then [Kiera] is a new one, but they are all staying. And, they’re the ones that are going to make the transition for him. They’ve been building him up since the very beginning.

Was your staff involved in considering buyers or were they not really involved in that process?

They weren’t really involved, but some of the first ones that came out, they came out after hours, and it was obvious that they weren’t going to work, and so we didn’t do that. When I met with Dr. Shively, we brought him back out to shadow me, and I told them that he was coming and was probably going to be the one. And, there was a little apprehension until they met him, and then they were quite satisfied.

Let’s talk a little bit about the process with ddsmatch. If somebody came up and just said, “hey, you used a broker, why would you do that?” What would your thoughts be?

I’ve got a colleague in Plainview, that’s about 30 miles from Floydada, that’s tried to sell his practice, I think three times, and it’s all fallen through because he didn’t have the right, I don’t know, idea of how he needed to do it, what he needed to do, and with the ddsmatch they did everything that I needed help done. They supplied all the paperwork, all the forms. They did all of the listing and advertising, and all I had to do was be there to open the door when they brought someone out.

Did they help you out with getting your practice appraised?

They did . . . I supplied, I think it was bank statements and production figures for, I believe, three years. I don’t know now, but they went through and evaluated everything, and they came up with the figure of what they thought the practice was worth, and it was pretty much what I had estimated in my mind that it was going to be and took over from there.

How did that process work?

I supplied three years of bank statements and three years of production figures, and then they took production and expenses and came up with a percentage of office overhead, and lab fees and everything, and based their projected income off of that. They had one problem that they were concerned that my accounts receivable was very, very low. And, for 25 years or since I’ve been in Floydada, we’re a fee for service, we do file insurance but everything is paid by the patient and really the only accounts receivable we have is outstanding insurance.

At the time that Andy looked it was less than $5000, and they used that, and once they decided that that was legit, that we weren’t trying to pull something over, and then my office overhead is quite low for an average dental office. I had to justify the reason that we were doing that but we have a very low rent, or lease payment, and it includes everything, janitorial. They were able to take that and run with it. It’s almost a no-brainer to come.

Did you have a lawyer already in place or did you use one that they had referred you?

I’ve got a friend for the last 40 years and he looked over my part. They supplied or recommended a lawyer to Dr. Shively and he used a financial consultant that ddsmatch recommended, and they did most of the paperwork, and my lawyer looked over it. There were a couple of items that I wanted changed, took a week to do that, and everything was signed and ready to go.

If somebody were to say, “hey, I know of another guy who’s a broker, why shouldn’t I use him instead of ddsmatch?” Why would you recommend that they would use ddsmatch?

For the personal touch. Maybe it’s because I’ve known Andy for 25 years, but I’ve met some of the other consultants with the ddsmatch and I think they go above and beyond what has to be done to list a practice. I can’t say enough good about ddsmatch.

Did they help you with the transition with your staff? Do you feel like they saved you from anything?

They saved me from a disaster of trying to do it myself. Because if I had done that, there’s several things I would not have thought of that had to be done, and they helped with easing the staff into the transition, to assure them that they would be taken care of and supplying all of the necessary forms for state board, radiation board. There’s a multitude of things you have to do to quit practicing dentistry.

Did you send a letter out to your patients informing them about the new doctor?

We did. Right after we had the interview with the newspaper, Dr. Shively and I together wrote a letter and we took the active patients from the last two years and did a mail out to them. We actually used patient families rather than individual patients because some of those would have four and five patients in a family. But, we sent that out about a month ago.

Have any of the patients mentioned the letter or say anything about their impression of Dr. Shively since learning about you putting you dental practice for sale?

They were, most of the patients, when they came in, they were more interested in talking about me leaving than Dr. Shively coming. But, the fact that he has devoted the last five years to serving our country in the military with nine months deployment in Iraq, speaks volumes for his character and what he’s going to mean to the community. I have no doubt that Dr. Shively will be an instant success in Floydada.

If somebody doesn’t know Andy or ddsmatch, could you reassure them about his character?

Andy’s the most honest person I know. I have no . . . I’d trust him with my wife and kids to go somewhere, and I don’t do that with most people.

Having practiced for so long in a smaller community, you’re watching kids grow up, then you’re treating their kids. What that is like from your perspective?

Probably half of my patients call me Dr. D., the other half call me Bill, because I go to church with them, or I’m on the school board. I’m just one of them. Particularly for these that, like the Davidsons, where I see their kids and grandkids and great grandkids, they’re really more family than they are patients. And that’s the beauty of working in a small town. When you leave the office you may see them at the grocery store, you’re going to see them at the football game, or the basketball game. The only problem I have is that we have patients coming from all the little towns around and at the basketball game, I forget and holler for the wrong team sometimes.

Dr. Dean and the Davidsons

It must be really nice to be able to regard your patients as neighbors and friends.

Exactly. I treat them like I would want to be treated because they’re coming back. Even though I’ve got a drawing area of 20,000 people, that’s a finite amount of people and if you don’t treat every one of them properly you’ll eventually run out and that’s what little towns are all about.

What is your case to make for doctors choosing smaller towns or rural areas over the city?

If you go to a small town, we are . . . Lubbock is a town of about 200-and-something-thousand people, Texas Tech University is there, and they’ve got everything you could want. It’s 45 minutes away. If you’re living in Houston you may drive an hour to go eat somewhere and if you’re living in Floydada, you could be anywhere in Lubbock within an hour, and you’ve got anything you want. You got a major airport that’ll get you where you want to go, and, as I said, you’ve got an instant practice the day you open up your doors and in a large city you have to work to get people to come in. Or, go in as an associate and work for five years before you can actually become a partner. 

The nice thing about being in Floydada is, I am my own boss. If I want to take Thursday and Friday off, I take damn Thursday and Friday off.

What you’re looking forward to next?

Got my four grandkids here. I’ll have them for the rest of the week, and two are from Virginia, and two are from about two hours away. I’ll play with them. I’m going to do some part-time dentistry in Lubbock, doing dental sleep medicine with oral surgeons that I’ve worked with, but just slowing down, enjoying life. 

Ddsmatch Southwest can also help you with your dental practice for sale 

At ddsmatch Southwest, our team members are dental practice transition specialists. Our aim is to help you get what you want out of your dental practice transition. We meet with you to find out or help establish your transition goals and work diligently toward them. With our experience, we know to cover all the details. You can be as involved—or not involved—as you’d like. If you are considering transitioning your practice in the next five years, we offer a free, no-obligation Practice Transition Assessment. Contact us today and find out what we can do for you.

Ten Years of Success in Assisting Doctors with Dental Offices for Sale

2019 marks ten years of ddsmatch providing expert dental transition services. Over that time, we have helped hundreds of doctors all across the country achieve their dental practice transition goals. With each successful dental practice transition, we only get better at providing the kind of care and service ddsmatch has come to be known for as we bring that experience to bear for each new client. Your transition goals are our transition goals and we are never satisfied unless our clients are also. If you are thinking of putting your dental office for sale, you can’t do better than with a ddsmatch dental practice transition specialist.

About ddsmatch

In 2009, our founder, Thad Miller, had a vision of a better way for doctors to transition their dental practices by combining technological advances with the human touch to find the right match for your practice, both on a professional and personal level, to better serve your patients, your staff, and give you the peace of mind that they were being provided for. Each of our dental practice transition specialists, and the outside professionals we refer (such as attorneys and accountants), serve our clients at the highest level.

Our specialty is in connecting those putting a dental office for sale with the right buyer by using a process we call “The Trusted Transition Process,” which focuses on integrating relationship capabilities, supported by our technical platforms, and advise based on our extensive professional expertise.

We can assist you with: 

  • Practice sales
  • Practice mergers
  • Dental partnership agreements
  • Associate placements
  • Dental office appraisals
  • Dental Real Estate sales

We are able to achieve a high level of results with our specialized tools, including:

  • The Trusted Transition Process
  • An in-depth clinical practice analysis created by Dr. Charles Blair & Associates PracticeBooster®
  • Fair, dependable third-party business valuations and practice appraisals supported by accredited professionals
  • An interactive website that allows you to search for a practice buyer or partner for your practice
  • Kolbe testing to better assess the nuances of potential matches between dentists and their associates

About the Trusted Transition Process

The key to our Trusted Transition Process is what we refer to as the Conceptual Transition Experience. This begins with a comprehensive interview with, you, the doctor wanting to put a dental office for sale, in order to determine your financial goals and personal requirements about what kind of match you are seeking to take over your practice, attend to your patients, and work with your staff. We understand that these personal relationships have developed over time and are important considerations—a dental practice transition is not just a financial transaction, it’s also about protecting your legacy.

We work directly with you to set your objectives, identify your transition (based on your individual circumstances), and create a plan to meet your objectives. At every point, you are always in control of the process.

About the Trusted Valuation Analysis

Our appraisal process is designed to determine the most accurate fair market value of your dental office for sale. The analysis is based on the financial and other information you provide about your dental practice, along with the economic conditions of your local market and how those relate to your practice and the dental industry overall. One aspect unique to ddsmatch is that we only rely on Certified Valuation Analysts at Blue & Company to provide the most comprehensive appraisal of your practice. These analysts are all CPAs, specifically trained to evaluate business with a specialization in medical and dental practices. This means you are getting the most industry-specific appraisal possible.

Blue & Company has over 40 years experience in providing business valuations. Their staff are recognized for their skill and are regularly retained as valuation experts in both business transactions and litigation, and are certified as valuation analysts (CVA) and accredited senior appraisers (ASA). They are also business valuation members of the American Society of Appraisers and have specialty designations for business valuators (ABV).

This means the appraisal of your dental practice for sale will be fair, based in fact, and detailed with information on the scope of work performed, how the calculations were completed, and the calculated value. Additionally, our team will provide on-site inventory and valuation of your equipment, and, if necessary, we can arrange for a real estate appraisal though our professional partnerships.

Our aim is to provide you with a fair market evaluation of your dental practice that is both realistic and as thorough as can be, based on the experience and knowledge of trusted and qualified professionals.

About our Clinical Opportunity Blueprint

The more information you have, the better positioned you are to make good decisions that further your dental practice transition goals. As stated above, your goals are our goals. To assist you, we will provide you with a forecast for your practice in the form of a 70-page, customized report detailing your practice opportunities, based on Dr. Charles Blair’s Clinical Treatment Analyzer. The Clinical Treatment Analysis can reveal:

  • Over 50 clinical procedure tendencies of the practice’s procedure mix
  • 15 areas of potential within a hygiene department
  • 12 doctor procedure ratios
  • At least 16 monitors that reflect the dentist’s service mix intensity level

Potential matches for your practice will benefit from this information by:

  • Understanding your practice mix from the beginning
  • Assessing their practice philosophy in relation to yours
  • Identifying areas for potential growth
  • Making a fully educated decision based on the facts of your practice

When you are ready, your practice will be posted on our website. By that time, you will have a thorough understanding of your practice transition options, better enabling you to choose your direction on the best way to proceed for your to meet your transition goals.

ddsmatch Southwest Can Help You Put Your Dental Practice for Sale

ddsmatch Southwest focuses on matching available dental practices in Texas and New Mexico with potential buyers. Our success speaks for itself. One satisfied client said 

“It was a pleasure doing business with [ddsmatch Southwest]. You were able to sell my practice when three other brokers failed . . . Selling one’s dental practice and retiring from 48 years dentistry is not an easy, painless decision, but through your guidance (and a bit of counseling too), you made it happen with a buyer to whom I feel very comfortable turning over my practice . . . Your professionalism was absolutely critical to the successful sale and transition of my dental practice, and I am deeply grateful.”

Bill Wolfe, DDS

Contact ddsmatch Southwest today and find out how we can help you meet your dental practice transition goals.

“They were very good”: Why You Should Let ddsmatch Southwest Handle Your Dental Practice for Sale

Dr. Gwen Eaker went through two dental practice brokers, each of whom left a bad taste in her mouth, before finding ddsmatch Southwest. Our team members are dental practice transition specialists who aren’t happy with a transition if you aren’t happy with your transition. Read more and learn why after letting our team handle her dental practice for sale, she considers Randy and Andy to be her “very good friends.”

How is it that you decided it was time to move on from owning your own practice?

I’m just tired of being an owner and having all that responsibility. I wanted to just take a job that had less responsibility but still good money. So, I found that.

How long ago did you make the decision that you wanted to make a change? Has it been quite a while?

I think it was about a year ago . . . Maybe about a year ago I decided. I signed on with [ddsmatch] maybe eight months ago. It took a little while to sell it, but it takes some time. It was less than a year for sure.

Had you worked with anyone else before you worked with Andy and Randy?

Yes. I’ve been with two other brokers. They were horrible. They were crooks. Really they were. It was really bad. One was way worse than the other, but they both were bad, very bad. Not trustworthy. Just in the end you felt like you were taken advantage of.

The second one, I felt he was working for the buyer in the end. You know? And he kind of is working for both, so it’s a tough line to toe, you know? In the end, I felt like he was more in favor of the buyer. I had bad feelings.

I didn’t feel that with Andy and Randy. They were very good. Very good. They helped me come to grips with even just making the decision. They helped me work it through and decide what was  . . . no pressure to sell it because you know that’s how they make money, is to sell my office. But they did not pressure me to do that. They would have helped me jumpstart it, and make it more of a success if that was the road I chose to take. They helped me decide. They were very good friends.

How did you even find out about them and ddsmatch Southwest?

Oh my gosh. I found out from a little dental equipment repair man, an independent guy who came to my office. He’s the one that told me about Andy.

By that time, I’m sure you had some trust issues there about using a broker to put your dental practice for sale.

Yeah. I let them know that. And, so, they were very good about my little roadblocks that I had from my previous experience. They were very helpful to help me overcome those hurdles because they knew I really did want to get out of this, and I needed to get out of this. But I was scared because of everything that had happened before, and the change is scary. So, they did, they helped me to make a good decision without pressure. That was important to me.

Where was your practice?

I was in Spring Branch, Texas. It’s north of San Antonio, about a half hour.

Did you have an idea of the kind of person you were looking to sell to?

Well, I love my staff. I still love my staff, so I cared about who bought it. I’m really pleased with who did end up buying it. So, yeah, I cared about that. I don’t know what would have happened if I’d come down to it, and it was somebody I didn’t really approve of. 

But they brought me some good candidates. They all were pretty good. And then, I really loved who ended up buying it. It’s harder if you don’t like whose buying it, or you’re questioning how they’re going to change the office, and how they’re going to treat your staff. That makes it more difficult, but I didn’t have that. I was lucky.

Did you have a part of your agreement where you had to work in the practice for a little while? How long was the transition period?

Well, we worked that out with the buyers. They wanted me to stay until the new doc out of dental school could get his license. So, you know, yeah, they were helpful with that. That just all depends who the buyer is. Some want you out right away.

You’re almost finished. What are your plans? What are you hoping to do now that you’re going to move on?

I took a job in Ohio, to just work for a company. A friend of mine . . . So, I know who I’m going to be working for. But I’ll be an employee, associate dentist.

You are basically saving yourself the stress of having to run a business, and do all the things on top of actually just doing the work in the chair, right?

Yes. Oh, it’s a huge headache. It’s a huge headache. It’s very difficult here in this area. It’s very hard for me. I’m very relieved.

If somebody was in your shoes in a similar situation, would you recommend ddsmatch Southwest to help put their dental office for sale?

Oh, I would definitely recommended ddsmatch, Andy and Randy particularly. I guess it’s regional, so it would depend where the office was. I have faith in the company and I really enjoyed the experience I had with them.

I mean, I would not recommend anybody else. And I’d never do it alone. I know some people do it alone, but I was like, ‘No way. I’m not doing it alone.’ So, for sure. I really, really enjoyed working with them.

What is it about doing it alone that you think you would never want to do that? Why you would really want a dental practice transition specialist?

Oh, I just think legally, something could come back and bite you. I just don’t know enough about business. I don’t think anybody knows all that, unless you’re an attorney and a dentist. You know, know all the things you have to think about to wrap things up.

Yeah. Too risky. I would never do it.

Was there anything specifically about the way ddsmatch Southwest handled it that you appreciated in particular?

Yes. I really appreciated, they had referred me to an excellent attorney out of Dallas, who I was very happy with. I had worked with an accountant that they told me about, who was excellent. So, they have a good referral base. They help you and have special people that they refer to that can really help you, and they’re the best at it.

So, that was really important to me because I don’t know people here. So, that was really great.

In terms of the transition over to your staff, did they help you with that transition or did they work with your team?

Oh, they did. Yes. He came to the office and talked with my girls. It was very smooth.

Any other advice that you would give to a dentist in your shoes?

Just let them handle it. Because I didn’t know how to do it, so he guided me the whole way. He was really good. He was very accessible. You know, text, phone, email, very responsive. I just don’t have any complaints.

Let ddsmatch Southwest Handle Your Dental Practice for Sale and You Won’t Have Any Complaints

Our team here at ddsmatch Southwest are dental practice transition specialists and your goals for your dental practice transition are our goals. For more about how our clients feel about us and how we’ve served them, check out our Client Testimonials page. To find out what we can do for you and your dental practice transition in Texas and New Mexico, contact us today.

Preparing Your Dental Practice for Sale: Efficiency Increases Value

If you’re at the point in your career when the time for putting your dental practice for sale is getting near but you’re not sure if you’re really where you need to be in terms of your collections, you’re not alone. Fortunately, there are some pretty simple things you can do to help boost those numbers. And, you don’t have to figure it alone. Below we’ll share some tips on how to create more efficiency in your practice, which can help lower overhead and increase productivity, both of which impact your profitability and will make your practice  more attractive to buyers.

Many doctors think about the profitability of their practice in isolated categories. What are my overhead costs? What are my collections? What is my production rate? No doubt, these are significant factors. But the key to understanding how to boost profitability is in understanding all of the moving parts that contribute to these factors and how they relate to one another. That understanding leads you being able to make necessary changes that allow you to work smarter, not harder, to reach your goals.

Rethink Your Scheduling to Maximize Efficiency

One approach to scheduling is to break the day into time segments and try to fill them all up. If you’ve got a full schedule each day, that’s great. But how can you increase collections if you’re already at capacity? Remember that not every task you do during the day requires the same effort and skill. By considering how your energy and attentiveness ebbs and flows throughout the workday, you can maximize your productivity by scheduling to those patterns.

For instance, if you feel the most fresh and alert in the mornings, use those times to do your more intensive procedures and prepare crowns. Save the fillings and simpler procedures for later in the day. You’ll get those more intensive tasks done quicker than you would if you’ve scheduled them for when you feel the drag of the workday later on. Saving that time can allow you to fit just a little more in your day than you would have otherwise, which adds up day after day, week after week.

This will require some training and supervision of staff as they learn to steer patients to an appropriate time slot based on the procedure. However, your staff should understand that this is not only good for the practice, it’s good for the patient as well. You’ll be better able to perform those intensive procedures, with fewer hiccups, and get the patient on their way a little faster. This is good for patient retention, your reputation, and your band, all of which will reflect in a more value when you put your dental practice for sale.

Relatedly, consider scheduling new patient appointments immediately after the lunch break. This way, you will never be late for that appointment, creating a good first impression: one of reliability and organization.

How Well Does Your Team Work Together?

You may have a great staff that you’ve carefully selected and trained over the years. You may even have no complaints about any of their performance. But this doesn’t mean that there isn’t room for improvement. Not just change for the sake of change, but honing the skills that already exist.

This is all about saving time. A perfectly efficient office is one where there is no wasted time or forgotten tasks. All of the departments are both running smoothly and well-integrated so that as patients, records, information, and materials flow from one to another there are no points at which the system stalls or breaks down. Since, however, we do not live in a perfect world, it’s unlikely your office runs this well.

Consider each staff member in their individual role. Do they know their job well? Do they understand their role in the organization—how they are supporting you in providing the highest quality care to your patients? Do they forget tasks or overlook details? If so, is there a pattern? Your answers to these questions will show you where additional training or supervision may be needed.

Also consider your employees as a unit. How well do they work together? Are there conflicts? Do they communicate well? How integrated is each department? Again, your answers to these questions will show you where organizational refinement may be needed.

The importance of saving time is in reducing overhead costs. Every instance in which you have to take time to address an error, to track something down, to intercede between employees takes time away from your schedule and from theirs. The smoother your office runs, the more everyone can get done within a day. And, as with scheduling, the savings may be incremental, but they will add up, especially when combined with the other changes.

When it does come time for you put your dental practice for sale, your buyer will be impressed with how well your office functions. The efficiency will boost patient satisfaction (benefiting retention), employee satisfaction (happy employees make a positive impression on patients, and can protect your staff during the practice transition (increasing their value to the practice will encourage the buying doctor to keep them on and take care of them).

Look at Your Patients and How they Pay

Even if you are at full capacity, you might be losing out on collections depending on how you are paid for your work. If you accept reduced fee-insurance, are those patients edging out other patients in your schedule who would pay full-fee? Are your fees up to date? When did you last raise them? What is the market value for your services and are you charging appropriately (that is, how do your fees compare to other dentists in the area)? Even if your fees are, in some instances, capped by PPO insurance plans, you don’t have to charge your non-PPO patients at that same rate (and if the PPO fees are below market value, you can use that if you renegotiate with those insurance providers).

Some of these areas can be tricky. Retaining outside experts such as a dental transition specialist, a dental CPA, or a dental practice valuator. You’ll need this kind of professional expertise when you put your dental practice for sale, so building those relationships now will only get you closer to where you want to be before your practice transition.

Update Your Technology

Regarding technology, there can be a limit to how much value you will get out of it. Whether the updates will really boost value will vary from instance to instance. Here are some general guidelines of what is, typically, always worth doing.

Digital radiography and practice management software are the norms. If you don’t have these, you should. First, they both will boost office efficiency and, especially the digital radiography, can translate into higher patient satisfaction. For more on this, read our post about how tech upgrades can add value. Second, whoever buys your practice is likely a much younger doctor who is going to have trained on these systems and may be turned off by the idea of buying a dental office with outdated systems.

Technological upgrades can be expensive, meaning they’ll take time to translate into profitability. However, just because they may not reach that point in your practice before you sell, that doesn’t mean that you won’t see the value reflected in what you are able to get for your practice. Figuring this out can be tricky, though, and consulting with practice transition specialists and dental practice valuators will help you make the best choice for your practice.

Are You Considering Putting Your Dental Practice for Sale in the Next Five Years?

At ddsmatch Southwest, we work with you to determine your goals for your dental practice transition and help you find ways to work toward meeting those goals. If you are considering putting your Texas or New Mexico dental practice for sale in the next five years, we offer a free, no-obligation Practice Transition Assessment. As part of this assessment we’ll discuss the current local market for dental practices, advise on potential practice investments to increase value, suggest other physical and image improvements, and more. Contact us today for your free consultation.

How DSOs Have Changed the Market for Selling a Dental Practice

Love them or hate them, dental service organizations (DSOs) take up a lot of the conversation when it comes to selling a dental practice. In fact, there is so much ink being spilled over DSOs, you might be surprised that they are not quite as prevalent as you think. Regardless, they are having a significant impact on dental associate employment and dental practice transitions across the country. If you are considering a dental practice transition, you may need to consider a DSO as an option, but, if you don’t think that’s right for you, there are still plenty of private buyers out there. Here we discuss some of the things that you’ll need to think about if you are considering selling your dental practice to a DSO.

How Common are DSOs?

Not as common as you might think. According to DSO News, only about 16-20% of practices in the U.S. are “consolidated practices.” However, if you compare the dental industry to the larger medical industry, where consolidation of physician practices has been going on for quite a bit longer than DSOs have been consolidating dental practices, you can see where this might be headed. According to the American Medical Association, in 2016 the medical industry in the U.S. hit a new benchmark in which less than half of physicians owned their own practice.  

This increasing trend is also shown in dentist employment statistics. As of 2017, the ADA reported that, overall, only 7.4% of all doctors were affiliated with a DSO. However, when you look at younger dentists, the number more than doubles to 16.3% among doctors aged 21-34. This disproportion between the number of new doctors joining DSOs and the number of doctors overall indicate a trend toward DSOs having an increasing presence in the field.

Anecdotally, however, there is evidence that young doctors associate with a DSO but don’t necessarily stay and work long-term in that employment model. After all, a young doctor is looking to get experience quickly and the compensation package offered by a DSO is likely be greater than what they can earn working for a doctor-owned practice. Those higher salaries are going to be attractive to recent grads who have, on average, $261,150 in student loans.

While this is making it harder for doctor-owned practices to attract young dental associates, this doesn’t mean that the younger doctors are necessarily forgoing ownership of their own practices. After all, there are significant financial incentives for owning your own practice. So while DSOs are certainly changing the landscape, they haven’t totally remade it.

Selling a Dental Practice to a DSO May Not Be as Easy as You Think

As with any dental practice transition, the best deal for your practice is going to depend on what you are looking to get out of the practice—whether you want to hand over the keys and walk away with pockets full of cash, whether you want to be rid of the business side of the practice but keep providing patient care for another 20 years, or are somewhere in between.

Because DSOs are have deeper pockets and easier access to financing than most individual buyers, they can often outbid the individual buyers. However, those big offers may not be all cash and can come with a lot of strings attached. No doubt you’ve received numerous emails and postcards urging you to consider joining your practice to a DSO. Note that they often do not say that you will sell your practice and work form the. They say things such as “affiliating you practice” and “partnering” with the DSO. While this indicates something like a legal partnership, it most certainly is not the case. The DSO will own your practice and you will be an employee (although possibly one with stock or stock options).

Also, rumors of high payouts by DSOs can be overstated. First, DSOs are looking for particular kinds of practices. If yours meets their criteria, they may be willing to pay a premium. If not, they may still make an offer, but it might not be as attractive as you would expect. Under those circumstances, you may be better off with an individual buyer.

Second, if you are selling a dental practice with the intention of getting cash at the close and walking away, a DSO is less likely to agree to those terms. A DSO may make an offer that is a combination of cash and stock and will likely want you to stay on for a minimum amount of time (as an employee) to facilitate the transition. They may make a part of what’s being offered dependant upon you being able to meet their production goals. How hands-on or hands-off they will be during the transition will vary. However, to be certain, you will be an employee helping the DSO to remake your practice into what they want it to be. Also, there have been reports of DSOs not being quite as doctor-friendly or flexible as they present themselves (in addition to reports of some questionable patient care practices).

What to Consider when Selling a Dental Practice to a DSO

As stated above, a DSO is unlikely to offer you a premium for your practice in an all cash deal where you collect your payment and go on your merry way. So, if you are considering selling your dental practice to a DSO, here are some things you may have to grapple with.

The sale price that you will be offered can be comprised of a few different parts:

  • Cash at close: this is pretty straightforward— it’s the actual dollar amount put into your hand when the papers and signed and the sale is closed.
  • Earn out: this is money that you might get at the end of a multi-year employment commitment and is based on financial goals set for the practice. If you meet certain goals, you get a certain amount. If you don’t, then you mostly likely won’t get most, or possibly any, of the earn out amount. This allows the DSO to make a higher offer but end up saving some of that cost if your practice fails to perform with sufficient profitability from the DSOs perspective.
  • Equity roll: this is where you have the option to take some of your cash at close and invest it in the DSO’s parent company. This is not always an option. However, when it is, the idea is that the buyer is a successful company that’s good at getting a return on its investments and you may be able to take the proceeds of the sale of a dental practice and turn it into even more money down the road.

The other major aspect to think about is becoming an employee of the DSO. This is definitely something to look at closely and carefully consider if an earn out is part of the deal. Some DSOs will negotiate some terms of employment, some will not. Regardless, you need to look at:

  • Clinical compensation rate: is it based on collections or production? What about lab costs?
  • Overall benefits package: does it include health insurance, malpractice insurance, a retirement savings plan, does the employer match any contributions for retirement, do they pay for continuing education?
  • Non-compete agreement: how big of a geographical area and for how many years? Be sure to have a qualified attorney review the terms.
  • Ownership: are you being bought by a public or private corporation? If you are being offered stock, what are you getting stock in?

Whether selling a dental practice to a DSO is the right choice for you is ultimately dependant upon the goals you have for your practice’s transition. At ddsmatch Southwest, our dental practice transition specialists work with you to help you define those goals and then use those goals to help identify a buyer with the right skill set and personality match to carry on your practice and the legacy you have worked so hard to build, whether it be a DSO or an individual buyer. If you are considering transitioning your practice in the next five years, contact us today for your free, no-obligation Practice Transition Assessment.

Should You Stay On After You Put Your Dental Office for Sale?

A common occurrence in dental practice transitions is where the seller puts a dental office for sale but, for whatever reason, will stay on with the practice after the sale closes. This can happen for a variety of reasons, however, when it’s driven by the selling doctor, it’s often a case where the doctor wants to “sell my dental practice” but isn’t actually ready to retire. These situations can be problematic. Here at ddsmatch Southwest, we believe a good dental practice transition is one where everyone is happy with the outcome. Here are some tips we have about when selling doctors should stay one and what expectations both the buyer and seller should have.

Why Do You Want to Stay in the Practice After the Sale?

The first thing you need to consider is why you want to stay on. If you want to facilitate a smooth and successful transition, that’s great. Having the selling doctor stay in the practice can help with many potentially problematic aspects of the transition.

  1. Staunching the loss of patients. Experience has shown there will be a certain amount of patient attrition in a transition. Having the doctor patients are familiar with can ameliorate patient loss. Additionally, the selling doctor can work on finishing up treatment plans with certain patients where it makes sense to not try and hand the case off to an unfamiliar doctor. However, depending on the patient experience, this may not always work out. A patient may not appreciate that the familiar doctor is still practicing in the office if they are being seen by the unfamiliar doctor.
  2. Easing the transition for the staff. One of the trickiest parts of putting a dental office for sale is quelling fears of the staff. They are concerned about their job security and how their work environment—which is heavily influenced by the personality and management style of the doctor—will change. By having the buying and selling doctors working together during a fixed transition period can alleviate these concerns. The changes will occur gradually and with the cooperation of the selling doctor who can provide insight as to why things are done the way they are. Changes that are implemented are done over time, perhaps with more consideration given to established practices.
  3. Guidance and training for the new doctor. While every transition is different, it is likely that your practice is being bought by a younger, less-seasoned doctor, one who may only have a few years experience out of dental school that has never managed a practice before. Being able to leverage the knowledge of the selling doctor as the buyer finds their footing can be invaluable.

It is important to note, however, that for these goals to be achieved, both doctors must fully accept that, as of the close of the sale, there is a new owner.  That means there is a new boss, and it’s not the selling doctor, who is now an employee. The selling doctor is there to be a resource and support to the buying doctor, not to try and enforce their own way of doing things. Change is coming to the practice. The selling doctor can help to facilitate it, but should not work against it. That’s a battle the selling doctor will lose while alienating the buying doctor, and possibly the staff and patients as well.

Do Not Expect to Have Your Cake and Eat it Too

To be sure, when you put your dental office for sale, the end of that process is that it’s no longer your dental office. Along with control over staff, policies, practices, and other aspects of the practice, you are also losing your claim on the practice earnings.

Ask any dental transition specialist and they can tell you stories about excessive demands that sellers put on buyers to keep drawing on the earnings of the practice for years after the close of the sale. In one instance, a third-generation doctor with a lucrative practice was demanding an eight-year employment contract with a minimum guaranteed salary and a long-term position for her dentist father. Needless to say, that deal did not go through. In another instance, an orthodontist was requesting to stay on with a minimum of 120 days per year at $1,750 per day (working out to at least $210,000 per year). These doctors are not really ready to sell, much less retire. Such requests are unreasonable and you will be hard pressed to find a willing buyer.

Part of the issue with these kinds of onerous demands are that they will unfairly (if not impossibly) tax the resources of the practice. If you put your dental office for sale but demand to stay on with ongoing compensation equal or greater to that of a full-time associate, you are, in effect, adding the financial burden of an employee where there wasn’t one before (unless you are selling to your associate). It’s unlikely that your practice can support that. If it could, you would have already had to add an associate to keep up with they practice’s workload. If you haven’t reached that point, it will be very difficult for the buyer to pay you.

You might look at your books and think there is plenty of money coming in to support your salary at an associate level. While that may very well be true, you may be overlooking the fact that you probably don’t have a dental practice loan or student debt that you have to service. Your buyer most certainly will and they will need those excess earnings to pay for the education and practice they just bought.

Finally, with regard to compensation if you do stay on for a period, a fair amount would be what you would have offered an associate, whether that be base salary, commission, or a combination of the two. It’s unlikely that your practice will be able to afford to pay you at the level that you’re accustomed to. But that is reasonable because you will no longer be the owner, will full rights to all excess profits.

Are You Really Ready to Put Your Dental Office for Sale?

If this discussion is giving you pause, the question you may need to ask is whether you are really ready to put your dental office for sale. Some doctors may be at a stage of life where they feel like retirement should come next but aren’t psychologically prepared for the change—they have something to retire from but nothing to retire to. If this is the case, as you begin the dental transition process, you should consider what you will do once you no longer have an office to come to each day.

Other doctors may be ready to stop seeing patients and start hitting the links every day but perhaps are concerned about whether the proceeds for the sale will really be able to provide for the level of comfort that they’d like. In that case, you should consider staying in your practice as the owner for an additional period of time as you earn and save a little more. Regardless of the circumstances, selling before you are ready, either psychologically or financially, can cause regret that may be easily avoided.

If you aren’t really ready to retire but aren’t necessarily interested in being a manager or sole proprietor anymore, you have a couple of options that can work to your benefit:

  • Buy-in to buy-out: under this model, you would add a partner to your practice with a plan for the new partner to eventually purchase full ownership of the practice. This is a good option if your practice can support another doctor, or if you have a good candidate in another sole proprietor that can bring their own patients with them. Under this model, you can work towards your transition in a way that is comfortable and meets your dental practice goals.
  • Become an associate: if you are not ready to stop treating patients but would be happy to relinquish the responsibilities for managing the practice, this could be a good option. Recognizing that it would likely involve a pay cut, you would have several options. You could sell your practice to another doctor and be an associate in the practice. You could sell to a DSO and remain as an employee in your practice. Or you could sell outright and find an associate position in another practice (you’d have to consider, however, the impact of the non-compete agreement that you’d have to sign as a part of the sale of your dental practice).

ddsmatch Southwest Can Help You Meet Your Dental Transition Goals

If you are considering a dental practice transition in the next five years but are not sure what option is best for you, ddsmatch Southwest can help. We will discuss with you what you think you need to get for your practice to retire the way that you want, how soon you want to retire, and what kind of buyer you are looking for, be it an outright sale, an associate, a partner, or a DSO. Also, we offer a free, no-obligation Practice Transition Assessment to help you determine what will best help you get to where you want to be before you put your dental office for sale. Contact us today to find out what we can do for you.

What About Your Staff? How to Protect Them When Your Dental Practice is for Sale

Most dentists who are putting their dental practice for sale are concerned about what will happen to their staff after the transition. You’ve put your staff together carefully, worked with them closely for years, and developed personal relationships with them. Its right to worry about their well-being. However, you don’t want to let that worry cause you to make a decision that can jeopardize either the practice transition or their jobs. For these reasons, you need to be careful about how they are informed and provided for before, during, and after the transition.

Why the Buyer Wants to Retain Your Staff

Don’t assume the dental practice buyer will want to fire your staff. A prospective buyer most likely has a strong interest in retaining them. After all, your staff have been working in your office, meaning that they know the files, the systems, policies, and procedures, and, most importantly, the patients. A prospective buyer isn’t going to want to disrupt the flow of a smoothly running practice— an important component in what makes your practice successful, and, therefore, a desirable dental practice for sale. A change in doctor is enough change to foist on your patient base. Most buyers correctly realize that a change in staff may be too much for patients and can have a negative impact on patient retention through the transition.

When Putting a Dental Practice for Sale, Confidentiality is Important

A breach in confidentiality regarding the sale of your dental practice has the potential to sink the deal. This is the last thing you want and you need to protect against it. And although you may not relish the idea of keeping news like this from your staff, it is in their best interest that you do until the time is right.

While a prospective buyer will probably want to retain your staff, you have to consider the situation from the perspective of your staff and your patients. It’s a major change and change can be frightening, especially in an employment context. As the doctor at the end of a long career, you have a perspective that is very different from that of your staff. You once either bought or started a practice and know what it means to have a competent, experienced, and professional staff to support you. Your staff members have probably not had the same experience and may (not unreasonably) be concerned about their job security.

Because of this, you need to be concerned about the news of your dental practice for sale being public. If staff members become skittish, you run the risk of a couple of different negative outcomes. First, you need the news of your dental practice transition to not be public before you choose to make it public. If your staff doesn’t fully comprehend how a little idle chatter can impact the transition, and, by extension, their employment, you run the risk of a staff member mentioning the potential sale to a patient. Once that patient hears about the transition, will they want to stay with a new, unknown doctor? Or will they want to find someone else in the community that is trusted? If that patient knows other patients, will they tell those patients? How will they react? If you start losing patients before the sale is final, how will that impact the financing? Or the willingness of the buyer to go through with the sale?

Second, if a staff member is concerned about job security, they may immediately begin seeking other employment. Having a turnover of staff during your transition is problematic for a couple of reasons. It means you are going to have to be hiring new staff while trying to sell the practice. Those new staff members are going to need training and time to get up to speed on your office practices and procedures, which will impact efficiency. This is not something you need to deal with at that time, nor is it something you want the prospective buyer to see you grappling with. Also, changes in staff can impact patient retention. Your patients interact with your office staff more than with you, and their experience with staff will inform their opinion of the services being offered. So even if the news of the sale of your dental practice is not public, the turnover in staff can have the same negative impact on patient retention.

When Putting a Dental Practice for Sale, Timing is Everything

It’s impossible to overestimate the importance of timing in every aspect of your dental office transition, from when to put your dental office for sale, to when to hand over the keys and walk away for the last time. When to inform your staff is an essential part of this process and needs to be carefully considered. On a personal level, you may feel a loyalty to your staff that compels a desire to let them know as soon as possible. You must, however, do what will be in their best interest, which is to not inform staff until certain aspects of the transition process are locked down.

You need to be the one that is making the transition decisions. As discussed above, you may be the only one in the office that has previous experience with a dental office transition. In addition to risking staff defections or gossip about the sale, you also run the risk of staff talking to the prospective buyer outside of your presence. This would give them influence over the sale and the buyer that they should not have.

In addition to telling staff too early, there is a risk of telling them too late. If you wait until after the sale is final, your staff may feel betrayed, like they have been sold along with the practice to a stranger. You need to have a period of time before the sale is final to be able to inform staff, introduce the new doctor, and allay their fears. This way, your staff has time to address their concerns with you, get to know the new doctor, and prepare for the change.

How do you find the sweet spot? You should consult with your practice transition specialist about how to pick the right way and time to inform the staff. A rule of thumb, however, is that you inform staff after the buyer’s financing is in place and a purchase agreement is signed. This gives you, as the seller, a reasonable degree of confidence that the sale will close, while having time to work through your staff’s issues before closing the sale.

A common practice for doctors who have put their dental practice for sale is to call a staff meeting and inform everyone all at once. Your dental practice transition specialist can help you prepare for this meeting. In fact, it’s not uncommon for the dental practice transition specialist to run this meeting, given their experience with transitions and the common concerns that arise.

Although you may have a desire to speak to each staff member individually, the likelihood is that after you tell the first staff member, the rest will be informed while you are speaking with the second staff member. This robs you of the ability to present it equally to all staff members, to answer questions, and address concerns uniformly. You need to be able to control this message. After the staff meeting, if individual staff members have particular concerns, you can address those one on one.

Don’t Worry!

If you follow the pattern laid out here, you may be pleasantly surprised at how well your staff responds to the news about the dental practice for sale. You can introduce the buyer to your staff as a properly-vetted candidate who is well-suited for your particular practice. You can present to the new doctor with confidence, as a positive change for the practice, the staff, and your patients. This can go along way to calming concerns and making the transition easier for everyone. For more on this topic, read our post about How Staff Should Be Informed about the Sale of a Dental Practice.

ddsmatch Southwest: Dental Transition Specialists who Can Help You With Staff Concerns

At ddsmatch Southwest, we bring the experience of hundreds of successful dental transitions to work for you. We’ll do whatever we can to make your transition a successful one, including advising on, attending, or even running the meeting when you inform your staff about your dental practice for sale, whichever will be the most helpful to you, to your staff, and your buyer. Contact us today to find out how we can help you meet your dental practice transition goals.

Asset Allocation and “How to Sell My Dental Practice?”

If you’ve ever gotten into the weeds of the question of “how to sell my dental practice?” you’ve probably heard talk about allocation. There are different ideas about how to handle allocation and sometimes people disagree. This might make it seem complicated. But it’s not, really. There is a fairly simple rule to follow and, if you work with your dental practice transition specialist and your dental accountant, you should be able to negotiate an allocation that will work for both the seller and the buyer. But first, what is allocation?

Allocation of Assets

Simply put, the allocation of assets is the process of assigning a dollar value to each asset being transferred in the sale of a dental practice (excluding the building, if that is part of the sale). These assets include all of the tangible items of personal property included in the sale and the big intangible that usually accounts for the bulk of the value of a dental practice: the goodwill. We’ll get to why this distinction is important below.

Generally when you put a dental practice for sale, you aren’t selling the business entity (e.g., your LLC or S-Corp), you are selling what the business owns.  That is, you don’t sell your shares of the corporation, you sell off all of the corporation’s assets, including your furniture, equipment, patient records, supplies, your trademark and logos, etc. All of these items are specifically identifiable and can be quantified in value. That is, your equipment is worth what you paid for it, less depreciation over time. How much could you sell your used equipment for? That would be the value its allocated. As far as the intangible of goodwill, the value there is harder to determine and is more fluid.

The Simple Rule for Allocation

The simple rule for allocation of assets is that you determine the value of the practice (for more information on this topic, see our recent post on methods of valuation for dental practices, “How Much is My Dental Practice for Sale Worth?”), negotiate an agreement between the buyer and seller on the value of each category of tangible assets (e.g., the furniture and equipment is worth $150,000, the supplies are worth $10,000, etc.), and whatever remains after that is allocated for goodwill. It’s a fairly simple arithmetic problem, once all parties are on the same page.

For instance, if you are buying a practice for $1,000,000, and the tangible assets are valued at $200,000, the goodwill is then allocated $800,000, or 80% of the purchase price. Some will say that good will should always equal a certain percentage, or fall within a certain range, such as 75-80%. That’s really the tail wagging the dog. There is no rule for how much should be allocated to goodwill. Rather, goodwill tends to fall within that range as dental practices are valuated.

Why Allocation Matters

As you are wondering “how to sell my dental practice?” you might think this sounds like a lot of trouble to go through. Why not just negotiate the overall value of the practice with the buyer and leave it at that? In a word: taxes.

For the seller, tangible assets are taxed at the ordinary rate, whereas the intangibles are taxed at the more favorable capital gains rate. This is why it’s so advantageous to have a high percentage of the purchase price allocated as intangible goodwill. The tangibles have to be allocated at a fair market value. Fair market value is essentially what the buyer and seller agree upon, but has to be within a reasonable range. The rest can then reasonably be called intangible.

If you are a buyer, you want to be able to gain back the maximum amount of the purchase price over as short of a period as you can, by expensing, depreciating, and amortizing the assets. Some of the tangible assets, certain pieces of furniture and equipment, for instance, can be depreciated over five to seven years. The goodwill, however, will take longer to depreciate, 15 years.

How to Sell My Dental Practice and Get the Most Out of It

To maximize the value of the sale of your dental practice, you need to be careful with your allocations to reduce the amount that the IRS will take of your proceeds. This is why it’s so important to have a qualified team of professionals, with knowledge and experience specific to dental practice transitions, to advise you throughout the process. At ddsmatch Southwest, as expert dental transition specialists, we recommend that in addition to a transition specialist, you have dental attorney and a dental accountant who will understand the legal and taxation pitfalls and how to avoid them. We also recommend that you use a Certified Business Valuator to evaluate every aspect of your practice to get it ready to put on the market. At ddsmatch, we partner with Blue & Co., for dental valuation consulting and dental accounting.

If you are considering a Texas dental transition or New Mexico dental transition in the next five years, contact us for a free, no-obligation Practice Transition Assessment. We will discuss the current local dental practice transition marketplace, establish best transition options for your practice, and advise on potential practice investments to increase value. Contact us today and find out how we can help you meet your dental transition goals.

Why Do I have to Sign a Non-Compete When I Sell My Dental Practice?

If you are transitioning your dental practice with the intent to retire from dentistry, you might ask yourself, “if I don’t intend to work as a dentist, why would I sign non-compete agreement when I sell my dental practice?” It may seem unnecessary to you. To the buyer doctor, however, this document is extremely important. In this post, we’ll discuss a little about what these agreements are and why they matter.

Before we get started, however, please understand that the issues surrounding these agreements are legal matters and you need a qualified attorney to counsel you regarding the reasonableness and enforceability of non-competes in your state. This post is for general informational purposes only and should not be relied on for legal advice.

What is a Non-Compete Agreement?

A non-compete agreement is a contract in which one party agrees to not compete with another party in their area of business within a defined geographical area and for a certain length of time. A non-compete agreement may include non-solicitation provisions which prohibits one party from soliciting customers away from another party.

In dentistry, these agreements come up in three basic scenarios:

  1. When Hiring an Dental Associate: the dental associate will likely be asked to sign a non-compete agreement that covers the period after the associate leaves the practice. It would protect the practice by prohibiting the former dental associate from competing directly with the practice or using information from patient files to lure patients away.
  2. When Entering into a Dental Partnership: similar to the dental associate scenario, the agreement covers the period after a partner leaves, to protect the practice.
  3. When Selling a Dental Practice: Again, the agreement is to protect the practice. But, here, the doctor being protected is the buyer—the new doctor. The agreement prohibits the seller from practicing within a certain area for a certain length of time, thereby increasing the chance that the practice’s existing patient base remains with the practice, even after the departure of the long-time owner.

In most states, these agreements are enforceable (California is one notable exception). This means that, especially with regard to dental associates or when you decide “it’s time to sell my dental practice,” a non-compete agreement will likely be a non-negotiable part of the deal. And, in fairness, they are a good idea for whichever doctor is left in the dental practice.

For the buyer of a dental practice, it’s important to be assured that the selling doctor is not going to pocket the money, open a practice across the street, and take all of the patients with them. Also, if the selling doctor is going into retirement, that’s uncharted territory for the seller. What if after a few months or a year or so the seller decides they don’t really like being retired? The buyer wants a guarantee that they will have time to establish themselves in the practice and earn the trust of the patients and staff before having to compete with the seller.

Reasonableness of the Terms

A key to the enforceability of the agreements is whether the terms are reasonable. What does that mean? Well, it depends. It depends on the state law governing the agreement and it depends on the location of the practice. Again, you will need a qualified local attorney to advise you on these issues.

There are two main points on which the agreement must be reasonable: the scope of the geographical area being restricted and how long the restriction will be in place. For the length of time, two to three years is a common duration, although it may be up to five. For the geographical area, it will largely depend on where your practice is located. For instance, in a dense metropolitan area, such as New York City, the area may be small, defined in city blocks. However, in rural Texas, a dental practice for sale might be the only one in a 50-mile radius.

One guide to determining a reasonable geographic area is, before you think “it’s time to sell my dental practice,” consider where your patients live. The area that you draw patients from can be quantified as the area in which about 80% of your patients live. That way you capture the bulk of your patients without chasing the outliers that might make the area too broad and, therefore, unenforceable.

A word on the enforceability of unreasonable restrictions. Some employers or buyers of dental practices might purposefully try and see what they can get away with in terms of overly broad restrictions. This is a bad practice for both parties as it relates to the agreement. Overly broad terms may have the effect of invalidating other parts of the contract which are related—so if you are the one asking for the non-compete, don’t push your luck by asking for too much. If you are the party being restricted, sometimes courts will take the approach that you knew what you were getting into when you signed. Don’t take the risk. Plus, do you really want to be contractually obligated to a party that is trying to get something from you unfairly? In that situation, it’s probably better to walk away.

Other Considerations for the Terms of the Non-Compete Agreement

  • What circumstances will negate the agreement? If the practice ceases operations, is sold to another dentist, or moves location, you should consider how these factors will impact the agreement. For instance, if the practice closes, maybe the agreement should no longer be enforceable. If the practice moves, it should probably depend on where it moves, and how far that is from the original location (e.g., whether it changes the geographical area from which the practice draws the majority of its patients). If the practice is sold, there will likely be a non-compete between the parties to that sale. That would be a situation you’d want to discuss with your attorney.
  • Does it cover going to work for an existing competing dentist? This is mostly applicable to former dental associates or partners, although it could arise in the sale of a dental practice. Even if the change in employment is not advertised and no one is stealing patients, it’s still possible, especially in a small town, that people will learn of the change and that could draw patients away. This is something you should consider and discuss with your attorney and dental practice transition specialist. If you are dealing with a partner or employee leaving the practice, they may be leaving because they are unhappy in the practice, a factor to be carefully considered.
  • Are staff covered by the non-compete agreement? Do you want to prohibit the other party’s ability to hire your staff away from you? Will you state laws allow you to do anything about it proactively?
  • If partners are splitting a practice, how do you divide the resources? Who keeps the patients? Who gets the referral sources? These factors must be decided before you can move forward with any further restrictive agreements.

You Need a Trustworthy Specialist when it’s Time to “Sell My Dental Practice

At ddsmatch Southwest, we are expert dental transition specialists who draw on the experience of hundreds of dental practice transitions from across the country to assist and advise our clients with their dental practice transitions in Texas and New Mexico. One of our satisfied clients said one thing he especially appreciated about the dental transition specialist that handled the sale of his dental practice was that  

“Your issues were his issues . . . the thing that was amazing with me was that I absolutely knew nothing, but absolutely had an amazing experience, and that’s because Andy took good care of me. . . . He’s a good guy. He looks out for his clientele.”

You can read more about that client’s experience on our Dental Transitions Blog.

Whether you think “it’s time to sell my Texas dental practice” or whether you think that time is still a few years down the road, it’s not too early to find out what ddsmatch can do to help you meet your dental transition goals. Contact us today for a free, no-obligation consultation.

What Will Dentist Practice Appraisals Show about Your Overhead Costs?

One of the major factors that affects value in dental practice appraisals is overhead. Overhead is a term that represents the ongoing costs of operating a business. These are expenses you incur regardless of how many patients you see or how much you charge in fees. These include rent, employee wages and benefits, lab costs, materials, and so on. Simply stated, overhead is everything that isn’t money in your pocket.

Overhead is important for three related reasons. First, it tells you how much it costs to run your practice. Second, it shows the profitability of your business. For instance, if your overhead costs are 65%, which according to some researchers is about average for general dental practices, this means that for every dollar you collect, $.65 pays your overhead and you get to keep $.35. And, third, when you start to look at overhead by category, it shows you where you might trim some fat to make your practice more profitable.

Some overhead expenses are fixed, such as rent, meaning they don’t change from month to month. Some are variable, such as costs for certain materials or lab costs, which will vary depending on your patient treatments. And some are semi-variable, like utilities, where you may have a fixed base charge with additional costs that depend on usage.

While it’s important to look at your overhead costs as a whole, the real work is done by looking at each category, line by line. There are national averages which can be a rule of thumb on where you should be with each category, but these are just general guidelines. If you are over the average on rent but under on employee costs, it may balance out, as an example. But national averages can also be problematic. For instance, as noted above, the national average for total overhead may be as high as 75%, but 60% is really where most practices should be. Below, we’ll discuss a few categories where you can start to examine overhead, especially if you are considering putting your dental practice in Texas for sale or are considering dental practice appraisals.

Employee Costs

Number of Staff Members

If you are like most doctors, this is your biggest expense. The target here is for employee costs to be about 25% of your intake, and that should include not only wages and salaries, but also any benefits, bonuses, and any other compensation. If you are above that range it likely means one of two things: you either have too many employees, or you are paying them too much.

Over-hiring is a common problem. If your staff is busy and balls are being dropped, the easy solution is to hire another person. But you have to carefully consider whether you really need another employee, or if your present staff just needs more direction or training. Hiring additional staff doesn’t typically solve the problem, and in most cases, it just creates a new one in the form of higher overhead. If you’ve already made this mistake, you are faced with a tough decision. Eliminating staff is one of the most difficult aspects of running a business, but, at the end of the day, you need to have a dental practice that is running as efficiently as possible.

Managing Staff Members

If your office isn’t running smoothly, it may be because you haven’t been as effective in your role as CEO of your dental practice as you need to be. Being a good doctor doesn’t necessarily mean you are also a good manager. But that doesn’t mean you can’t learn how to better support your employees.

If employees are not clear on their job descriptions and responsibilities, if they lack the vision to see where they fit into the whole of the operation, or if they are not as efficient or productive as they could be, more often than not, it’s a matter of training, supervision, and support. Having specifically delineated job descriptions, written policies, and clear instructions on office procedures can go a long way toward making sure everything is being done properly and on time. Employees benefit from performance measurements and frequent feedback, and your business will benefit in turn from the increased efficiency, which will be reflected in dental practice appraisals.

So, before you hire another person, look at, for instance, how patients are moving through your office. How long do they spend at the front desk? It shouldn’t take more than 10 minutes to check a patient in and out. If your offices sees 20 patients a day, that’s 200 minutes of time at the front desk. If there are 480 minutes in a work day, you shouldn’t need more than one person at the desk. If your front desk person can’t keep that time in line with where it should be, even with additional training and support, then what you need is a replacement, not additional labor.

Employee Compensation

There is a notion that employees should get some kind of pay increase each year. This is wonderful  if your practice is increasing collections each year. However, if your practice is stagnant or declining, you simply cannot afford yearly raises. Remember that every dollar of increased overhead is a dollar by which you decrease profits. If you can give raises and maintain 60% overhead, then it is fair to compensate your employees for the efficiency they bring to your practice.

If giving raises will take your employee overhead costs above the 25% target, then you should consider making raises dependent upon the practice’s performance. While stagnation or declining profits is not likely the fault of one employee, it’s unlikely, under these circumstances, that your employees are operating at peak efficiency. And if they know that they’ll get a raise each year regardless of performance, they will lack incentive to improve. Here is where performance standards can carry real weight— instituting a policy where raises must be earned on the basis of what an employee brings to the business.

Patient Recall

One of the many factors potential buyers of dental practices want assessed in dental practice appraisals is patient recall. Returning patients indicate that your monthly and annual collections are something that can be replicated in the future. When a young doctor buys a dental practice, they want future success, not past ones.

Unfortunately, many doctors don’t prioritize a patient recall system. If you haven’t already, you should set up procedures for your patient coordinator to contact past-due patients and schedule appointments, with a goal for making a certain number of calls and appointments each day. Recall patients bring in revenue you would not have otherwise collected, increasing profitability and reducing overall overhead.

Raising Fees

Many dentists resist raising fees because they think that higher costs for patients might drive those patients to other practices. The fact is, consumers expect prices to rise over time. If you regularly review your fees and make incremental increases, keeping in line with the market value of your services, it won’t surprise or upset most patients. The problem is waiting too long. Then you have to make bigger increases, which are harder for patients to accept.  Also, if you have an eye toward selling your dental practice in Texas, a potential buyer may be wary of a practice that has too low of fees. If the buyer wants to bring fees in line with market value, they don’t want to be the one to do it, as a change in ownership coupled with higher prices may increase patient attrition.

Other Important Overhead Categories for Dental Practice Appraisals

The other overhead costs you can count on for any dental practice will be rent, utilities, lab costs, materials, equipment, marketing, and accounting. There are industry standards for how much of your overhead should be allocated to these categories. For instance, rent should be about 6-7%, materials and lab costs should be about 6% each, marketing should be about 2-3% of your overall overhead costs, and account should be about 1-2%. Before you put your dental practice for sale, you may want to consider having a business valuator look at your practice and review where your costs can be reduced. When a potential buyer reviews a dental practice appraisal, they’ll be most interested in a dental practice that falls within these industry standard ranges.

But, remember, these are averages. If you are high in one category, making that reduction can bring you within the overall ideal range, then discrepancies in other categories will appear less problematic. Once you know where your costs are and make the necessary adjustments, keep an eye on each overhead category every month to watch for waste, inefficiency, or other ways your costs may be unnecessarily high.

At ddsmatch Southwest, we are uniquely experienced in helping clients who are selling a dental practice to achieve their profitability and lifestyle goals. We are expert dental practice transition specialists, and will help you identify a buyer with a strong skill set and personality match that will carry on the practice and legacy you have worked so hard to build. We ensure that every detail is covered, help you avoid common mistakes, and ensure no step is overlooked.  Plus, your confidentiality is always guaranteed. Contact us today for a free, no-obligation Practice Transition Assessment and find out how we can help you get the most for your practice.