Selling a Dental Practice

In His Own Words: “Call DDSMatch Southwest”

Dr. Mitch Conditt, a dentist from Fort Worth, Texas, found himself in an unexpected and unfortunate position: he was having increasing difficulty holding a handpiece, and he knew it wasn’t going to get better. Retirement wasn’t yet on his radar, yet it was clear he needed help with something he’d never done in his 30-plus-year career: selling a dental practice. He didn’t know where to start, but he knew that ddsmatch Southwest did. Here, in his own words, was his experience.

“My Hands Just Were in Real Bad Shape”: How Dr. Conditt Came to Need Guidance in Selling a Dental Practice

“I’m a general dentist in Fort Worth, Texas. I’ve been practicing since 1985, mostly a restorative and cosmetic practice. Been in the same location, everything, since day one. Noticed probably about three or four years ago that I was starting to get some ailments with my body. Had some neck surgery, shoulder surgery, hand surgery, different things like that. I could see the writing on the wall that this wasn’t going to go on for a long, long time before I couldn’t really work much more.

“I started getting into a different field of dentistry, which was sleep and TMJ [temporomandibular joints], where I didn’t really have to hold handpieces, use my hands so much, do things like that. I started getting into that, knowing that this was going to happen, that one day I would need to sell. Actually, it happened a lot faster than I thought. It almost happened overnight. All of a sudden, I couldn’t hardly hold a handpiece. My hands just were in real bad shape.

“Interestingly, I had talked with Andy [Edmister] with ddsmatch [Southwest] probably about a year and a half earlier. Ran into him at Chicago Midwinter Meeting. He just showed me what he was doing. He just took me over to his booth, because I’ve known Andy for a long, long time. He just showed me what was going on, how things were doing, and what he was doing now. He said, ‘If you ever want to have your practice evaluated,’ he goes, ‘We’ll come in and evaluate it to see what’s going on.’ I kept that in mind. Then literally it must have been about the summer, maybe even the early fall of the following year, it hit me and I thought, ‘Oh, this is going to happen really, really quick.’

“I called Andy and I said, ‘I’m ready,’ and he said, ‘Well, thinking, what, another six months?’ I said, ‘No, I’m ready, like, tomorrow.’

“He got out here, he did the evaluation on the practice and all this stuff. I said, ‘Look, if you can just do this for me and let me keep doing what I’m doing, that would be great.’ He said, ‘Don’t even hardly need you,’ and he just did everything he needed to do. It took very little effort from me or my time.

“It’s not maybe two months later, he calls me up and he says, ‘We’ve got someone that I think you might want to talk to.’ I said, ‘Great.’ He said, ‘Let me get everything really kind of figured out before we even pull you in on it, but we think we may have a possibility.’ Weeks later he said, ‘This thing is, I think, going to work.’ Apparently he was working with Dr. Blair, who bought my practice. He was working with her and they were getting their ducks in a row and all that. I didn’t even know if I knew who it was back then, but I know that I didn’t do anything. Basically at one point, not much longer, he said, ‘Well, I think we’ve got a done deal.’

“Then we got a couple of attorneys to wrap it up, and in no time at all it was done. It could not have been easier. I’ve had several of my friends that I’ve talked to that have gone through prospective buyer after buyer after buyer after buyer, and nothing ever panned out, things fell through. It just didn’t work out for some reason, whether it was funding or whatever it was. This thing just went smooth as silk. Literally by March 2, we closed.

“Literally, there was no way it could’ve gone any better.”

Putting Your Dental Practice for Sale Doesn’t Mean You Have to Stop Practicing

Although Dr. Conditt was selling a dental practice, he still wanted to practice, and he “still wanted to do sleep and TMJ.”

“It wasn’t even really in the contract that I had to do that, but  . . . [w]hy would I really want to leave here? This is where I’ve been coming for 30-something years, every day. We had a spot where I had been doing sleep and TMJ out of this office. I kept the same little place I was at. It’s worked out great for me. . . . I wouldn’t say I’m looking at full retirement for a good while, but I only practice about eight days a month. . . . That’s not a lot of work really. I would practice more if I wanted, if my body’s fine, and I’m doing something that I could do for ten more years if I wanted to do it.”

Why Having Trusted Advisors is Critically Necessary

When selling your dental practice, you need a professional team with experience in things like dental accounting and valuation, real estate, legal transactions, and more. Because your speciality is dentistry, not in dental brokerage, ddsmatch Southwest can help you find the right team to get you what your practice is worth. ddsmatch Southwest has a strategic partnership with Blue & Co., an accounting and consulting firm with dental CPAs and certified business valuators.

Dr. Conditt explains his experience with Blue & Co. and the other professionals ddsmatch Southwest matched him with and why its essential to follow the advice of experienced professionals:

“The terms of the deal were exactly what we asked for. [Blue & Co.] came in and did all the work. . . . As far as I can remember, and I’m almost positive, we didn’t change one single thing in the contract. It went just exactly as Andy and them put it out there. That’s how it went.”

Dr. Conditt’s Tips to Dentists Looking to Retire in a Few Years

Get an Evaluation

“Obviously I’d ask Andy to make sure on something like this, but I’m thinking if you’re even close to a year, maybe even two years out, why not go ahead and get your practice evaluated, have Blue [& Co.] come in and take a look at it and see what’s going on for one, there may be things that they find that they say, ‘You know, if you change this or if you did this a little better, we could get more money for your practice down the line.’ Andy told me that. He said, ‘Probably with your practice it’s not,’ because mine was basically a cosmetic practice, so it’s a little bit different, but he said a lot of times there are things that they can tell you to do that will increase the value of your practice. That would be one.”

Start Early

“I don’t know if they would suggest that to be two years out or three years out. [NOTE: ddsmatch Southwest recommends dentists begin the planning process 3-5 years ahead of retirement.] The fee to have that done was not very much. I don’t know if they still do it, but that fee was refunded back to me once the practice sold. That was a no-brainer.”

Hope for the Best, Plan for the Worst

“The second reason is you don’t know when anything’s going to happen. You don’t know when you’re going to need to sell. From everything I’ve heard, it takes a long time to get everything in order. Particularly if something happens, it’s a little bit of an emergency to go in and try to get everything you need to get done in a short period of time. Then you go through a lot of different people to see who’s going to work best, what’s going to happen and what have you. When you’re going through all of that, that can become a little bit of a hassle. If you get that done and get completely prepared, I think everybody’s going to feel a whole lot better about everything.”

Keep the Sale Under Your Hat

“The other thing, I don’t think everybody does this, at least the friends I’ve talked to didn’t do that. One of the things that they do, or at least Andy did, maybe this is the philosophy of ddsmatch [Southwest], and I never heard of this before, was don’t tell anybody you’re going to sell. Don’t tell anybody you’re thinking about it. It was all one of those things where if everybody knows and your practice has been on the market for a year, I guess it’s like if your house has been on sale for a year: ‘Nobody’s bought it? Something’s wrong. It’s either priced too high, there’s something wrong with the house.’ Everybody gets to thinking, ‘Well, how come nobody’s bought it in a year?’ If no one even knows your practice is for sale, and all of a sudden they bring someone to the table, they have no idea what’s going on.

“I found out with a good friend of mine in Tennessee, that’s exactly what happened to him. He had just whoever come out and evaluate it. The evaluation was fine. It’s almost like he put it up in the paper that the practice was for sale. He didn’t do that, but it was certainly not kept a secret. He didn’t sell for probably two years, and that’s exactly why, because everybody thought, ‘Now, wait a minute. This guy hasn’t sold his practice in a year. Something must be wrong.’ There wasn’t anything wrong with it. It was a great practice. I don’t know if that’s [ddsmatch Southwest]’s philosophy or if that’s Andy’s philosophy, but that was tremendous to do that right there. Just keep it silent, let Andy do all the work, and it worked out beautifully.”

Dr. Conditt’s Advice to Anyone Considering Selling a Dental Practice: ”Call ddsmatch”

“Without a doubt, I would have them call and talk to ddsmatch [Southwest]  and just ask them, ‘What do I need to do? Should we get evaluated now?’ I’m sure they’ll ask you, ‘How long out do you think you are?’ I would literally tell anyone, call those guys up. Follow exactly what they say to do, and just let them do it. There was zero effort on my part to do this.

ddsmatch [Southwest] . . . were very honest. They were very forthright in everything they said. There was no hiding anything. They let you know exactly how the process is going to work, what’s going on. Blue [& Co.] . . . has a great reputation. They did everything very well. What I noticed afterwards is that once some of the banks and the lenders saw who was evaluating the practice, there was no discussion on what the evaluation. Was it really worth that? Was it not worth that? I guess they had the reputation that you just take their word for what it’s worth. That was great.

“Andy actually hooked me and Dr. Blair, who bought my practice, hooked us both up with attorneys. Even I asked her about her attorney. Both our attorneys were fantastic. They didn’t drag anything on. They were not expensive. They said everything exactly like it ought to be. They actually knew each other. They had done this before, so they knew how to get this handled. That was incredibly smooth. Andy was a dream to work with because literally, like I said, I did nothing. When he had to get some numbers, he just basically said, ‘If you don’t mind letting me go into your computer, I’ll do it while you’re working. I’ll just get the numbers, and you can go on.’ They’re asking us to pull numbers off of our software system, and it’s like, ‘We don’t know how to do that. We have no idea how to get these numbers you’re asking.’ They just go in it and do it themselves. Those things right there are really, really invaluable for us when, particularly, we don’t know how to get that stuff, and we don’t want to jack with that. We don’t know, are the attorneys good? Are the evaluations going to be good? Are the people behind the evaluations honest and everything?

“Everything was completely on the up and up and even above that.”

“Call ddsmatch [Southwest] and just say, ‘Look, hold my hand. Walk me through this thing. Tell me what to do.’  It’s the easiest thing you can do.”

If you are considering putting up your dental practice for sale, ddsmatch Southwest will give you a free, no obligation Practice Transition Assessment. Contact us today to learn more about their Trusted Transition Process and what ddsmatch Southwest can do for you!

Should You Consider Selling to a DSO?

No matter what you think of corporate dental service organizations (DSOs), they are now a major factor in the dentistry marketplace. DSOs continue to grow and, depending on the market, many dental practices will likely be impacted. Can your dental practice adapt? Some professionals worry that DSOs may change how dentistry is managed as a business. While you may not like the idea of your practice being acquired by a corporate interest, selling to a DSO may be your best financial move.

While DSOs seem to be everywhere, especially in urban markets, the actual numbers belie that belief. According to a recent study by the ADA’s Health Policy Institute, only about 7.4% of practicing dentists are in DSOs. Here at ddsmatch Southwest, we see the potential for growth in that number. However, for various factors beyond the scope of this article, we don’t see DSOs becoming a majority of dental practices. That said, there are certain advantages to selling a dental practice to a corporate dental service organization. Ultimately, it comes down to your goals for transitioning your practice. Whatever those goals our, our team at ddsmatch Southwest is committed to helping you meet them. It’s important to us that the dentists we serve are making an informed choice. To that end, its worth discussing DSOs and how they are changing the landscape.

How DSOs are Changing Small Dentist Offices

DSOs work on the economic principle of scale. The more offices they have, the more name recognition they have with consumers. This translates into more customers through the door. Also, by purchasing equipment and supplies in higher bulk quantities, they can get discounts for volume, reducing their overall costs (although they do have added costs related to a larger corporate structure).

As a corporation with investment capital, DSOs may be able to expand more easily than a solo office. This would include everything from marketing, to opening additional offices, to offering more services, to hiring staff and associate dentists. In fact, in our experience, while DSOs will acquire single practices, they seem to prefer to buy larger group practices that allow them to grow as quickly as possible.

For a small office competing with a DSO, this may mean that the small office will have to make changes to stay competitive. This might mean increasing your marketing budget, investing in the latest technology, and increasing your office hours and services. Without an increase in revenue, however, these changes can be hard. If this seems burdensome, there may be a way for you to adapt without running your business into the ground.

How a Small Office Can Function More Like a DSO

For a lot of solo dentists, DSOs may be anathema. After all, you’ve worked hard to build a practice and reputation for quality, individualized care for your patients. Can a corporate organization ever replicate that? Well, whether a DSO can or cannot do that doesn’t matter as much as whether you can compete against the larger entity. The good news is you can. Here are some ways how:

  1. Bring on one or more associates. Expanding the number of dentists practicing under your roof will both increase your revenue overall and allow you to offer more services. Bring on associates with diverse specializations and you don’t have to refer work to other offices–keep it in house. Also, these associates may have new ideas that can make your practice better overall.
  2. Open a second (or third or fourth) office. If DSOs can benefit economically from scale, so can you. Maybe not to the same degree, but it could be enough to make the difference. If you can get similar discounts on volume purchases, you can funnel the savings into increased marketing. If consumers see your billboards or online ads and are as aware of your offices as they are the DSO’s, you benefit from the same kind of name recognition. And remember, you’re local. You were there serving the community before the DSO came to town. Leverage that.
  3. Combine practices with other small offices. If several dentists own their own individual practices, but operate within a shared space with shared staff, you can greatly reduce your costs. Those savings can be put into other growth-oriented business practices, like marketing or the hiring of associates. Also, you can consider splitting the costs of high price investments like new equipment. If the group sharing the space has a diversification of specialties, you can also have reciprocal referral arrangements, keeping it in house.

Most people get into dentistry to be dentists, not business managers. But a little entrepreneurial spirit can help you grow your practice in ways you might not have thought before. Remember, Goliath wasn’t brought down by the status quo, it was by David’s creative thinking.

Why You Should Think About Selling to a DSO

As mentioned above, at ddsmatch Southwest we want to help dentists get what they want out of transitioning their practice. That is our number one goal. But, the fact is, sometimes that means selling to a DSO.

When we talk to dentists thinking about retirement, we’ve found that every doctor has different expectations for transitioning their practice. That’s why our Trusted Transition Process includes so much more than just the dollar valuation of your practice. While a corporate organization may be solely focused on the bottom line, this has been your life’s work. You have a reputation, relationships with your employees and patients, and a role in your community. Concerned about what will happen to those things after your retirement? At ddsmatch Southwest, we care about your concerns and will put the time into finding you the right buyer to protect your legacy.

On the other hand, because you’ve worked so hard to build something of lasting value, it’s also reasonable that you want the best price you can get for your practice. You deserve to get all that you can out of a sale so you can enjoy the fruits of your labor during retirement.

So while selling to a DSO may not be right for everyone, it may be the right move for you. With capital to invest (rather than relying on financing), a DSO may be likely to offer more than an individual dentist.

Several dentists we’ve worked with are eager to give up the business management hassles, but not ready to be done practicing dentistry, especially with longtime co-workers and patients. DSOs often want the selling dentist to stay on for 1-3 years as an employee. This option allows you to end your career purely practicing your craft, not dealing with administrative headaches.

As ddsmatch Southwest, we’ve helped dentists transition in all kinds of different ways. Your goals are our goals. If you’re thinking of transitioning your practice in the next five years, call us to arrange a free Practice Transition Assessment and find out what we can do for you.

Why Now is the Time to Put Your Pediatric Dental Practice for Sale

When a medical need arises, most parents are quick to take their child to a pediatrician. The idea that the same principle should apply to dentistry–that the needs of children’s teeth are unique and require a specialized approach–is newer, but taking hold. Which means pediatric dentistry is on the rise. If you own a pediatric dentistry practice, now is a great time to consider selling. The market is primed to get you a good price for your practice. If you delay putting your pediatric dental practice for sale, its value may reduce as newer practices start up and become more common throughout the country.

Pediatric Dentistry: Promotion From Professional Organizations and Dental Hygiene Brands

The U.S. Bureau of Labor Statistics has dentistry on pace for a 19% increase for the period of 2016-26, higher than the average of other U.S. industries. Pediatric dentistry is projected to rise at the same pace. This is significant because pediatric dentistry specialization is a relatively new trend. In today’s world, more parents are choosing a pediatric dental specialist for their children over a general practitioner than ever before. The American Dental Association is supportive of parents making that choice, as there are unique aspects of tooth care for baby teeth and juveniles with new permanent teeth, and because they want children to develop lifelong healthy habits early on.

But it’s not just the ADA. A variety of dental and medical organizations are pushing for parents to take their children to pediatric dental specialists rather than general practitioners for those same reasons. And they are encouraging parents to get set up with a pediatric dentist as soon as their children get their baby teeth. “The American Academy of Pediatric Dentistry, the American Academy of Pediatrics, and the American Dental Association all recommend that parents establish a Dental Home – a home base for all of their children’s dental needs – by their first birthday” because “[while all parents know baby teeth eventually fall out, it’s important to keep them healthy. After all, they’re the blueprint for your child’s permanent teeth!”

In addition to the dental and medical associations, consumer dental brands are promoting pediatric dentistry. While it might not immediately seem significant how a toothpaste company sells its products, consider that most people first become aware that there is an ADA because of toothpaste advertisements. So when a company like Colgate promotes the reasons to choose a pediatric dentist, this will likely have more sway over parents than an ADA press release (it’s a hard reality that these corporations are more influential over public ideas about dental care than professional dental organizations).

And, the fact is, Colgate is right. Parents like pediatric dentistry because of how it’s specifically designed to meet children’s needs, both with regard to treatment and to the office setting and equipment. Children’s dental needs are not the same as adults, and parents are comforted by knowing their child’s dentist understands their concerns unique to children’s teeth. A pediatric dentist is trained to look for complexities related to a child’s growth and development, and will stress the importance of oral health and diet that will have positive benefits throughout their child’s life. As this way of thinking takes greater hold, it will drive an increase in demand for pediatric dentists.

Additionally, parents are more confident taking their child to a dentist in an office designed to appeal to the child’s sensibilities. This includes decor and furniture specifically selected to make children feel comfortable. More importantly, it means a dentist and staff that understands a child’s apprehension or even fear of going to the dentist trained to manage potentially negative responses. Understanding how children think and behave in these situations also allows dentists to effectively educate children in ways they understand.

Get Ahead of the Curve and Put Your Pediatric Dental Practice for Sale

With the professional organizations and consumer product companies in alignment about the importance of taking kids to a pediatric dentist, the trend toward this specialization will continue. Even without looking at the numbers, consider your own experience. When you drove through your town 10 or 15 years ago, how many pediatric dental practices or billboards did you see? How many do you see now?

Pediatric dentistry is on the rise in the public mind, making it on the rise in the dental industry as well. More young dentists entering the field will choose this specialty, meaning more young dentists are looking to buy or buy into practices. If you’ve been thinking about retirement, this makes now a great time to put your pediatric dental practice for sale. Even if you were thinking that retirement might be years away, the premium that your practice could net you now might make the difference that could justify your early retirement. You’ve worked hard to build the practice, why not enjoy the proceeds of that work sooner rather than later, when you can get the most from it?

At ddsmatch Southwest we have buyers looking for a pediatric dental practice for sale. If you are ready to discuss selling your practice, we can talk you through the process. It’s complex, but with our experience, we can help you with every aspect of the transition including legal matters, real estate issues, and employee concerns, in addition to considering your legacy. One of our specialities at ddsmatch Southwest is matching the right buyer and practice, so you’ll rest easy knowing your practice is in good hands before you begin enjoying your retirement.

If you want to transition your practice in the next five years, we offer a free Transition Assessment to help prepare you. We have buyers ready. Call today and find out what ddsmatch Southwest can do for you.

Buy, Sell, or Start a Dental Practice

RK: Randy Kinnison with ddsmatch Southwest, just wanted to thank you for being with us today and answering a few questions that we’d like to share with our potential clients and customers. If you would just please introduce yourself and kind of describe the relationship that ddsmatch has with Blue & Co. and the business valuations that you guys prepare for us.

MH: Good morning Randy, and thank you for the time. I’m Matt Howard with Blue & Co.  I lead our business valuation team. We do approximately over a hundred dental evaluations a year for ddsmatch and other dental needs. We’ve just really carved out a nice niche in it and have a lot of fun with it.  I am a dental CPA and also an accredited business valuator and a certified valuation analyst. So, I have certain credentials that are specific to valuation. Our relationship with ddsmatch Southwest is, we are the third-party, non-biased valuator that comes in and gives you a true market test for what your practice is worth at the date of our valuation.  We’ll be looking at the practice from an industry perspective trying to help both seller and buyer know what a true fair market value price is for the practice.

RK: Thank You, Matt. Just describe a little bit about the BV [business valuation] and what it entails. I know the first part of the business valuation always has the historical numbers of the practice as well as the performance. So, if you would just tell us a little bit more about the BV and what it entails.

MH: Certainly. With any small business or personal service company, the biggest noise in the practice would be the owner’s noise. What I mean by that is anything that’s inside the practice that is not necessarily operational or is basically something that the owner has decided to do at the practice that doesn’t exactly reflect the operations of the practice. A lot of times a seller will own the building, and in owning the building, they’ll pay themselves a lease rate for that building. Sometimes, that isn’t a market rate. And sometimes, it’s a little bit above; sometimes, it’s a little bit lower. Our job in this process is to really work through the practice to make sure it shows the historical financial statements. Basically, we help sanitize or normalize the numbers as we see them and as the true operations of the practice are reflected. So, our part in the valuation process is we will collect data. We’ll go through the data. We’ll enter it into our models. We’ll ask very specific questions about that data about maybe aberrations and the financial performance over time. Sometimes, a dental supply category jumps ten percent over a year. We want to really understand everything that’s going on inside the practice.  Then as we go through it, we would release a draft document for discussion with the seller. That document would be completely … a conversation piece to talk about the variables that we took into consideration, the market effects that impacted the valuation price to really just helped you understand exactly how we came up with that number. And then after that conversation, with any input from the seller, we’ll move it to a final, and then that will be the piece to share with any potential buyers as they consider the practice.

AE: That’s great, Matt. Hey Matt, Andy Edmister here jumping on the call with you. I have a few more questions. Thanks for joining us today. Matt, when would you recommend a dentist start preparing for a sale? And, why would you recommend him at that time?

MH: Yeah, a great question. I wish it’s a question that a lot more sellers kind of investigated not the year before they’re considering the sale. So, some things to take into consideration is knowing yourself and knowing what your aspirations or your goals are for the practice transition. What I mean by that is, a lot of dentists will wait until they’ve slowed down some, and we have something called a decreasing revenue stream, that’s where the collections slowly over time have started to decrease. That’s just basically reflective of the seller or the owner wanting to start to slow down. There’s nothing wrong with that if that’s an intentional decision you want to make. Unfortunately, when we see that in an evaluation, and even when banks see that in our evaluations as they consider financing this for a buyer, it does have to be taken into consideration. So, a decreasing revenue stream in the valuation world is not exactly ideal. More of what we like to see is if they’re an immature practice that’s either consistently growing by inflation or at least steady in the collection perspective. So, as you understand who you are and what your goals are, I do think it’s an important thing to consider when to sell and maybe selling before we start decreasing your output or decreasing your hours. That’s the first key. I would say anywhere from five, maybe even a little bit over five years, would be a good time to meet with your ddsmatch Southwest broker and start discussing what you want to do in the future and what does that look like in your mind from an ideal perspective taking all the different desires that you have into consideration. They’ll be able to help you walk through when may be a good time to even bring in an associate; or maybe when it’s a good time to think about something; maybe a couple of years before you thought you would; just so that we don’t run into that decreasing revenue stream which would impact the valuation price.

AE: Okay, that’s great advice. Basically, to sum it up, keep your foot on the gas until you get through the evaluation and the transition of the practice to maximize the value of the dentist’s practice.   

MH: Precisely, I couldn’t have said it better myself. Yes, trying not to minimize the fact that yes, you want to slow down; however, you also want a good price for your practice.  Obviously, those two things go hand in hand.

AE: Okay, well, thank you. I’m gonna move on to another question. The question pertains to purchasing in a practice or doing a de novo or startup practice on your own. What do you see is the benefits of each or the cons of each; and what would you recommend to a new dentist client of yours.

MH: A great question. And, a question that comes up quite often. As a person coming out of school, the ideal part of buying a practice is the fact that you’re walking into cash flow day-one.  What I mean by that is, you are paying a fair market value price for the practice; and then, you’re making money. You’re walking into, hopefully, a three hundred, four hundred, five hundred, and up thousand dollar collection practice which helps pay your bills day-one. That’s an obvious benefit of buying a practice. The problem with starting a practice is this: it’s a three to sometimes seven-year journey to maturity or average collections of a de novo. So basically, the first year you’re probably going to feed the business as in bring money to the table to keep it going as you build up that collection stream. The second year, you might break even or maybe pay yourself a little bit but definitely not up to industry standards. The third year, between the second and third years, during these startups is where we see you making some progress towards paying yourself a reasonable wage. Still probably not what you could get out being an associate at another practice. But you’re on your way. And then, that fourth, fifth, six, maybe up to seven years could get you, hopefully, up to average. An average is somewhere around nine hundred thousand dollars of collections, hopefully, dropping somewhere about to two hundred and fifty to three hundred thousand dollars bottom line. These are all guesses. Every marketplace is a little bit different. Every geography is a little bit different, but that’s just in general.

AE: Okay, well, good answer, thank you. I’m sure that will be useful for a lot of people watching. Next question. When would you recommend or what do you think is the best time for a dentist who is where he wants to be, but he’s not sure if he’s ready to bring on a new associate. What would a dentist do to say, “hey am I ready, or am I not ready to bring on the associate.”

MH: Again, a great question enough, and a complicated one sometimes. Every practice has a limited amount of resources, of ops, of time for the staff to not hit over time. So, there’s a lot of variables that play here. Typically, we like to see over a 1.2 million dollar collection practice, in general, that way there’s plenty of room for an associate to come in, inherit some of that revenue stream as the seller wants to back off a bit and transfer some of their patient-base over to the associate. Let’s just look at this from both angles. A seller wants to have an associate for the benefit of growing and continuing to serve the patient-base well. If you’re booked two to three months out, that’s not a very good patient-service quality for your patient. So, you need to come up with a constructive way to service them quicker and have a better overall experience for your patients. A lot of times that’s where an associate will come in. Therefore, you can help address the backlog and give to the associates.  From the other angle, the associate has the ability to make money day one, not build up a new business inside of a practice. They might get some sort of guarantee the first year, but you’re gonna move them to some sort of production or collection-based compensation after the first couple of months or even maybe after a year at the most. It’s important that it’s a formula that doesn’t only work for the seller, but it also makes economic sense to the buyer. Typically, buyers these days have quite a bit of student loans that they need to address, so they need to make a certain amount inside the practice. Associateships work great if there are enough collections and the seller wants to slow down a little bit and maybe back off a day, and open up some collections to the associate. And then obviously, there’s a lot of other variables, but those are just some general thoughts.

AE: Okay, well that’s great. What kind of tools could you offer as part of ddsmatch Southwest? What could you provide to help dentists decide if they are ready for an associate or not on an analytical side just on the numbers besides a gut feeling and wanting to slow down.

MH: Yeah, that’s also something that we’ve seen over and over again coming up is, “am I a good candidate for an associateship? Does it make sense for my practice to do this?” So, what we’ve come up with is an associate IQ or quotient that helps walk you systematically through the practice with about ten different areas that we look at to make sure that it makes sense for the practice to bring this on. Does it make sense from the owner side? Does it make sense from the associate side? Some things we’ll look at is if you only have three ops, and you want to bring in two dentists a day, that does not make a lot of sense. After looking at a bunch of these different variables and intricacies of the practice, we will come up with a quotient of how you rate on a scale of 0-100 for being a good candidate for how many associates. We’ll walk you through the entire process. Does that answer your question, Andy?

AE: Yeah, I think that’s great, in that way, they can make an educated decision on where they’re at currently and if their business can support another dentist. But also, it shows them what they would need to do to grow to get to that point.

MH: Exactly, the last thing that anybody wants, and we run into this occasionally as well because people jump into associateships, is after a year the associate goes away. We’re stuck holding the bag here–of all the attorney fees and the professional fees to get that to happen, and then have that asset, have that partner walk away. That’s really tough for a practice, especially, if you’ve grown it significantly and can’t keep up with all the work coming in the door. It’s very important that an owner of a practice considers all the variables in play as they consider this major decision that can affect the valuation of the practice and can affect your stress levels as well.

RK: Very good Matt, thank You. Randy again. We have another question. We get a lot from dentists that are preparing to sell their practice, and even if they are a few years out, they ask a question, “should I invest in any major equipment purchases? Or, what should I do to make the practice more attractive to a buyer?” What does that do, normally, to evaluation? Does that help evaluation or not?

MH: Yeah, you’re absolutely right. That question comes up quite often. I’ll use a house as an illustration here. There’s a couple of different types of upgrades for remodeling that we can take into consideration. When you’re buying a house, you fully expect the roof to be leak proof. That’s just part of the standard price of the house. It doesn’t add anything if you find out the roof has all sorts of problems that need to be replaced before I pay you the price that you quoted. So, with that kind of consideration inside of a dental practice, certain things like x-ray heads, chairs, and normal standard-of-care type assets at the practice, you absolutely need. If you redo them a year before selling the practice, it’s not really gonna make a significant difference in the value of the practice. Some things that would make a significant difference in the practice, let’s say two months before you sell your practice, is adding a cerec machine or something that’s not been in the practice previously that hasn’t affected the income or the collections of the practice. There’s a couple of different things to consider, to remodel the practice. If you still have shag carpet in the practice, it probably needs to go before you start marketing it. So, those types of considerations and things that will bring it up to a higher standard-of-care could make it more valuable. However, you’re probably not going to get a one-for-one pay back on your investment. I guess my end-all be-all recommendation is five years before the practice sale, unless you’re really making your practice digital or doing something that’s bringing it up to standard-of-care, any other significant remodels at that point would probably not be a complete one-for-one return on your money. Does that make sense?

RK: Yes, that makes great sense. Thank you for that clarification and answer. One other question we’d like to ask you, Matt, once we get down the road matching a buyer and seller together and negotiating the asset purchase agreement, there’s always the question of asset allocation which plays a pretty important part for both sides. Do you mind touching on that a little bit?

MH: Yes, so what we’re talking about here is let’s say we come up with a price, and the price is one million dollars for the practice. The practice price is set, and we’ve negotiated that. At the end of the day though for both parties at play, really even more acutely to the seller is, it’s not just the price, it’s the overall deal that makes it a good or bad deal for you. What I mean by that is this, the million dollar price is great; however, it’s not about what the price is. It’s about what you keep. Obviously, what I’m referring to here is taxation. As you come up with the purchase price, and it’s an asset sale, inside that sale you would have two different buckets to place things in that the IRS expects you to fill out on a certain form. How much of the price is going to be assets? And, how much of the price is going to be goodwill? Those two buckets are very important. For the goodwill side on the seller’s side, amount that is going to be potentially subject to capital gains. Capital gains is a big deal because the difference between that and ordinary income can be significant. We can talk about over ten percent difference here. That’s a big deal for a million dollar price. Ten percent is a hundred thousand dollars. It could be that important. The asset side is anything that’s called an asset in the sale. That would be more advantageous to the buyer. That means they can depreciate those assets quicker than goodwill. Goodwill they can amortize over fifteen years as under current law. To the seller, goodwill is important. To the buyer, assets are important.  It’s a little bit more important to a seller though. To a seller, that difference between capital gains and ordinary income can be quite significant. To the buyer, it’s a difference of when can I depreciate something; when do I get the tax write-off for this asset or goodwill. It’s the difference between five years to 15 years. They still get it. It’s just a question of when. For a seller, it’s a one-time deal. It’s either goodwill or it’s either assets. The more that’s goodwill, the better for the seller. And really, that is just subject to negotiations. It’s not really mandated by the IRS in any way. It’s based on what are the negotiated rates allocated to each bucket.

AE: What would you advise a young dentist in an associate for a couple of years, or two to five years out of school, paying off debt? They came to you saying, “I think I’m ready to look at purchasing my first practice.” What would you review with that dentist and how would you prepare him to be ready to engage with Randy and myself to find him a practice?

MH: Some of the first things here is have you spent the time clinically to get your hand speed up, to make sure, that whatever you’re looking at buying, you can actually do or can you document that you can do that in the that new practice? Something else or the bank will be looking at is have they been able to produce at the levels of the practice that they’re buying. That’s one important element. The second important element is taking a look at what does their world look like. Have they gotten in a couple years out of school. Have they been able to create some sort of emergency fund? Do they have some sort of margin in their life? That sounds very logical but a lot of times a buyer is not a good candidate because they don’t have any kind of safety net in their life. So, the third thing that I would talk about is do you know what you’re looking for? Do you know a geography? Have you really studied what area you want to be in and what that practice might look like? Having a clear direction and intentionality about the practice that you’re buying I think is an important thing for a dentist to address to a broker at ddsmatch Southwest because they really need to know that you’re fully vested in buying in a certain area, for a specific purpose, with a certain clinical skill set. Does that answer your question?

AE: Yeah, Absolutely I think that’s great. There’s a lot of young dentists out there that are just kind of on the edge, “am I ready?” It’s scary to start your own business.

MH: No doubt about it. I walk through maybe twenty buyers a year. and Some of the same elements that you’re just discussing here come up often. It can be a terrifying thing. You just need a really good board of directors to walk you through. I mean a great CPA like myself and a great attorney to help you understand the logistics of the transaction and how to structure it. Beyond that, if you have the right people on your team as advisors, we’ve been through this a hundred plus times just helping you through that is part of what we do.

AE: Well, thank you very much, and again we appreciate you taking the time today. You’ve been a huge partner and a huge help not only for us but especially for our clients, so thank you, very much, Matt.

MH: I think that this has been a great conversation and great questions. I think these are key elements to any transaction as these will come up at some point in the process. It’s nice to have a heads up for your sellers or even the buyers out there to understand the dynamics at play. Again, ddsmatch Southwest is a great brokerage. They really walk their clients through everything. It’s an open process. They invite your advisors in to help you through it. I’m a big fan.

To find out how ddsmatch Southwest can help you with your practice, call today.

Tips to Get the Most Out of Selling a Dental Practice

If you’re planning on retiring and selling your dental practice in the next five-to-seven years, what do you need to know before you head down that road? There are many factors to consider before selling a dental practice, and your transition out of the business and into retirement can either be rocky or smooth. Fortunately, the brokers at ddsmatch Southwest specialize in finding you the perfect buyer and making the transition as easy as possible. To help you ease into retirement check out the tips below from Matt Howard at Blue & Co., and the dental brokers at ddsmatch Southwest. With careful planning, you can ensure a smooth transition.

Business Valuation: What Is It?

As a dental CPA, accredited business valuator, and a certified valuation analyst, Matt Howard knows a thing or two about determining the value of a dental practice. Before selling a dental practice, you need a business valuation to show potential buyers. This document will show buyers how much the practice is worth, taking into consideration the physical practice, operations, and average collections. “The first part of the business valuation always has historical numbers of the practice,” says Matt. (For his full webinar, see the video below on this page.) Has your practice grown, stayed the same, or decreased in revenue in the past five years? After that, your business valuator will look through financial statements and your practice operations. “We’ll go through the data. We’ll enter it into our models. We’ll ask very specific questions about that data… We want to really understand everything that’s going in going on inside the practice,” explains Matt. After taking into consideration market variables, a business valuator will present a draft to the seller and be open for input from the seller’s perspective. Then a final draft is made that the seller can present to potential buyers.

Building Value Before Selling a Dental Practice

When should you start preparing to sell your dental practice? Matt Howard says “anywhere from five, maybe even a little bit over five years would be a good time to meet with your ddsmatch Southwest broker and start discussing what do you want to do in the future.” It is important to start planning your transition early so you don’t make mistakes that could cost you when selling a dental practice. Matt Howard explains that “some things to take into consideration are knowing yourself and knowing what your aspirations or your goals are for the practice transition.” If you desire to slowly ease out of the practice, you may have already started to cut back your hours and started seeing fewer patients. What you may not realize is that decreasing your revenue stream in this way makes your practice less valuable for a future sale. According to Matt Howard, “A decreasing revenue stream in the valuation world is not exactly ideal. What we like to see is [the practice] either consistently growing by inflation or at least steady in the collection perspective.” Decreasing your hours and your revenue stream is not a bad desire but consider how it will affect a future sale before you take that step. It may be time to bring in an associate so you can still build your business while cutting back on your hours.

Office Remodels and New Equipment: Is It Worth the Cost?

Many dentists think adding value in the form of newer equipment or a remodeled office will be helpful when selling a dental practice, but as Matt points out, that is not always true. Matt suggests avoiding significant equipment purchases and remodels five years before you plan on selling, saying “significant remodels at that point would probably not be a complete one-for-one return on your money.” If your practice desperately needs updates to bring it up to an average standard of care then spending money on that makes sense. For example, if your practice has not moved into the digital age, now is the time to update your operating systems. But a newer x-ray machine or more comfortable dental chairs won’t get you a higher price if the ones you currently have are working well. Hold off on large business expenses that aren’t necessary to get your practice up to an average standard of care as you won’t see that money coming back to you when you sell.

Talk to a Dental Broker About Selling a Dental Practice Today

The American Dental Association released statistics stating that in 2015 the average age of dentists in the US is 50 years old. With so many dentists nearing retirement age, an increase in those selling a dental practice can be expected soon. Don’t get stuck trying to sell your practice in a flooded market. Depending on your specific market, you could get more from your sale if you decide to sell in three years instead of five. Talk to a dental broker at ddsmatch Southwest today for advice from local experts. We can help you plan, so you can take the appropriate steps in the coming years that will assure your smooth transition into retirement.  Call today to find out how we can help you.

Retirement: When To Sell Your Practice

What dental trends should you be aware of as a dental practice owner? When you own a small business, planning for retirement involves much more than putting aside money in a retirement account. Knowing the trends in dentist retirement is an important first step before putting your dental practice for sale. New statistics from the ADA serve as an important signpost on the road to retirement.

ADA Statistics and Retirement Trends

The ADA recently released statistics from a Dental Workforce study showing that as of 2015 the average age of dentists in the United States was 50 years old. This statistic reveals that most dentists will reach retirement age in the next 5-10 years. Knowing that the market for dental practices is likely to be flooded soon, it is beneficial to start planning and strategizing today for your retirement, so you don’t put your practice on the market at the wrong time. Your dental practice may be worth more today than in 5 years when more dentists decide to put their dental practice for sale.  

Questions and Concerns About Retirement

Below we address some of the most common questions and concerns dental practice owners have when thinking about retirement. Even if you aren’t planning on retiring soon, it is a good idea to think through these questions and have a game plan for the next 5-10 years.

What is my practice worth?

Finding your practice’s value is a complex process. A general rule of thumb for valuations can be applied, but these estimations can often be inaccurate. Your best method for finding how much your practice is worth is talking to a dental broker. Brokers specialize in these transitions and know what market factors will play into your practice’s value. The experts at ddsmatch Southwest will help you determine your local market rate so you can make the most out of your practice.

Should I add an associate?

Often dentists will choose a slow transition out of their practice by adding an associate who will eventually take over the practice. This is a good idea for dentists who don’t want to put their dental practice for sale right now but want to cut back on hours and maintain a foot in the door. ddsmatch Southwest can help you find the perfect associate, whether you are planning for retirement or just want a little help.

Should I sell to a DSO?

A Dental Service Organization, or DSO, manages the non-clinical side of a dental practice. Deciding if you want to sell to a DSO is a personal decision. A DSO will relieve the headache of managing the business side of a dental practice and could make working in your practice more attractive for potential associates. However, many dentists who have built their business from the ground up, find it difficult to think of their practice changing due to a DSO’s management. To learn more about the recent rise of DSOs and the benefits they may provide read this piece by Dental Money Digest source.

How do I find the right buyer?

If you do not sell your practice to a DSO, how do you find the right buyer? ddsmatch Southwest helps dentists in Texas and New Mexico find the perfect buyer for their dental practice. The brokers at ddsmatch Southwest will use our Trusted Transition Process™ to determining your wants and needs and decide how much your practice is worth. Then they will find a buyer that matches the skill set and personality of your office. Before you put your dental practice for sale, call the experienced brokers at ddsmatch Southwest for a consultation.

What should I do to prepare for retirement?

If you’re planning on retiring in the next 3-5 years, it is time to start planning now. Talk to a financial advisor to determine if you have enough set aside to retire. Dental Economics has an excellent post about planning for retirement to retire on time.  Next, find an experienced broker to help you with the transition into retirement. A broker will guide you seamlessly through the next steps, so the years leading to retirement are a breeze.

What about my real estate?

When you put your dental practice for sale, that does not automatically include the real estate where your office is located. If you own the real estate, you will need to sell that as well. The process is not difficult but may change who ends up as a potential buyer since they need financing for both the practice and the real estate. The good news is both parts of the transaction can often be closed at the same time. Another option is selling the dental practice but keeping the real estate and becoming a landlord. This post goes into more detail what options are available to buyers and sellers in this type of transaction. Talk with your broker about which option fits your lifestyle and your budget.

Do I sell now to get maximum value or wait?

This question can only be answered on a case by case basis since the values and trends of dental practices vary. However, based on the above statistics from the ADA, putting your dental practice for sale before the market floods will help you get the maximum value. Talk to an experienced dental broker with knowledge of the local market and they will be able to advise you whether to sell now or wait.

I have a partner who won’t buy me out, what do I do?

Partnerships in dental practices can be beneficial for many reasons but tend to get mucky when there is a transition, and you don’t see eye to eye. ddsmatch Southwest helps dentists who are selling their ownership, even if it is a part ownership. We find buyers who are specifically looking to buy into a partnership, so everyone ends up with what they want. For more information on how this process works, and to find the answers to more specific legal questions that may apply to you, set up a consultation today.

How do I find someone I can trust to help?

This is by far the most important question you can ask before you put your dental practice for sale. You have spent your career building a thriving practice, and now you need to get the most out of its sale while leaving the kind of legacy you want. A dental broker with local experience, many years in the business, and proven examples of successful transitions is what you want. For dentists in Texas and New Mexico that broker is ddsmatch Southwest. The brokers at ddsmatch Southwest will take care of every detail and guide you through the transition process so you can retire with confidence.

Think Ahead about Putting Your Dental Practice for Sale

If there is a chance you will be retiring in the next 5-10 years, keep the above statistics and questions in mind. If you start planning now, you can ensure a smooth transition when the time comes. For more information contact ddsmatch Southwest and set up a consultation.

Putting Your Dental Office for Sale: Lease or Sell?

Profit By Selling Your Dental Practice

To receive the maximum profit when selling a dental practice, you first need to create a practice that brings in maximum revenue. This can be a difficult task. Dentists have more competition than ever before. Building a successful dental practice does not happen overnight. It takes a strategic and purposeful business model.

Avoid Costly Mistakes

Behind every thriving business is a solid business model. Unfortunately, some dentists have learned this the hard way. But growing a dental practice is like building any other type of business. There are certain tools and methods that are proven in the business world to help entrepreneurs become profitable. At ddsmatch Southwest, we offer a few suggestions to help you get the most out of your dental practice. So whether you are starting up your first practice or trying to recover from a failed attempt, there are several key components you should consider, especially if you anticipate selling a dental practice in the future.

Increase Your Online Presence

If your business does not have an online presence in this digital age, you are in trouble. More and more people are turning to the Internet to find answers to their everyday questions, including the question of what dentist to go to. One major benefit of an online presence is that you can reach people at times that are convenient for them. What you put online is available for all to see 24/7/365. You can grow your dental practice on holidays, weekends, and even in the middle of the night.

According to statistics released by the United States Census Bureau, at the time of their survey:

“Among all households, 78 percent had a desktop or laptop, 75 percent had a handheld computer such as a smartphone or other handheld wireless computer, and 77 percent had a broadband Internet subscription.” To beat out your competition and create a profitable practice, you simply cannot afford not to go online.

Don’t Forget About Social Media

Dentists need to proactively work to reach prospective patients through social media. The world freely communicates and interacts through social media. It is one of the best ways to have potential patients learn about your practice through personal recommendations.

A 2018 report from the Pew Research Center states: “Roughly two-thirds of U.S. adults (68%) now report that they are Facebook users, and roughly three-quarters of those users access Facebook on a daily basis … Americans ages 18 to 24 are substantially more likely to use platforms such as Snapchat, Instagram, and Twitter even when compared with those in their mid- to late-20s.”

Make it About Your Patients, Not You

The average adult does not understand, nor care about, the technical points of certain procedures or the extent of your training as a dentist. Rather, make your marketing easy for any given adult to understand. Patients want a dentist they can trust, that will listen to their concerns, and provide superior care. When you advertise, do not market to impress other dentists. Have the needs of your patients be your priority. Explain how you can provide solutions to their dental problems. Point out the benefits of your procedures and how pursuing dental care is important. Help them understand why your dental practice can improve their quality of life.

Gather a Team

There are many elements to managing a dental practice. Dentists need a team of professionals to help them grow their business or when selling a dental practice. It is wise to hire out additional staff to handle the marketing, clerical work, accounting, and other responsibilities of your practice. A dentist’s time is best spent with patients. Patients bring in revenue. Patients are the ones that will spread recommendations to their friends and family. Invest your time into meeting the needs of your patients’ dental issues.

Selling a Dental Practice

Selling a dental practice takes time and preparation. You will get out of it what you put into it. You need to first create a successful dental practice to be able to have a profitable exit. Dentists need to consider:

  • How can I boost my online presence?
  • Am I utilizing social media?
  • What message does my marketing promote?
  • Do I have a sufficient team to build a solid dental practice?

The Services of ddsmatch Southwest

At ddsmatch Southwest, we help dentists buying or selling a dental practice. We are expert dental practice brokers and know how to make you successful. With our expertise and knowledge of the dental industry, we help you achieve the vision you have for your dental practice. The team at ddsmatch Southwest understands the challenges and needs of dentists. Put our experience to the test. Learn more about our services and get a free Practice Transition Assessment. Call today and let ddsmatch Southwest help you reach your financial goals.

Financing for Buying or Selling a Dental Practice

Whether you’re looking for financing for one or multiple dental practices or looking to transition into retirement and sell your practice, it’s crucial to have your financial package organized and ready for presentation. However, finding lending if you’re interested in opening up more than one practice will require more documents as proof that your business is and will continue to be a profitable one. If you’re buying or selling a dental practice, there are many variables to take into consideration and many questions to ask when shopping for lending.

Questions to Ask Lenders

The first and most important question to ask is “do you finance multiple practices?” Institutions should be able to give you a firm yes or no. Most institutions do finance multiple dental practices, but research shows that lenders providing this type of service may ask for more requirements and collateral if opening multiple practices.

There are different types of loans associated with dental practices, including SBA loans and alternative lenders, so you need to inquire about which type of loan serves you best. SBA loans tend to be more popular among dentists as the interest rate is lower than alternative loans and the term is longer. However, if you need lending quickly, alternative loans may be the right option for you. Consider that alternative loans have a shorter payback period and typically only loan up to $500K. Depending on your credit history, ask if your lender requires collateral. They may use a house, car, assets or equity to help qualify you. Ask whether the interest on your loan is simple or compound. Laid out simply, compound interest compounds on the outstanding balance and any interest accrued. This means your interest can change month to month. Simple interest is interest at a fixed rate, payment, and term. Whether you’re just starting out or thinking about selling a dental practice after 30 years of being in business, simple interest should always stay the same.

What Lenders May Ask if Lending for Multiple Dental Practices

The more practices you have, the more difficult it may be to find funding. When approaching a lender, make sure you have a clear vision of what you plan to accomplish. Take into consideration if you plan to own five practices, ten practices, or a larger number which would require a lot of infrastructures.

Lenders will only agree to give you a loan if you can prove that your business is currently profitable or has all its “ducks in a row” giving it a promising head start. And of course, based on credit history. Lenders can inquire as to the specific locations of the practices, so they can geographically see if it’s possible for a dentist to commute to all of his or her locations regularly. They may also inquire as to the amount of cash on hand. This could become beneficial in planning and emergency situations. Laying out a detailed business and marketing plan helps lenders see where the funds are going.

If you envision a large network, hiring a CEO and CFO will be needed to keep track of all credits, debts, invoices, and cash flow. If you intend on selling a dental practice down the road, having people in these executive positions will help you understand how much your practice is worth. The larger your practice, the more employees and organization you will need. Lenders can and will put a hold on funds to expand if you cannot prove that your practice is under sound fiscal control. Some lenders may put a limit on the number of practices you can open and own under your loan portfolio, while others may specify a dollar amount of the maximum debt you can incur.

Factors to Consider When Starting or Expanding your Dental Practice

When looking to start or expand your dental practice, consider the following costs:

  • Rent of new location
  • Utilities
  • Staff salaries
  • Dental supplies and lab equipment (if acquiring from someone selling a dental practice, equipment may be outdated and in need of replacement)
  • Office supplies
  • Marketing and Advertising Costs
  • Expanding your Insurance Coverage
  • Business License
  • Remodeling costs

In addition to costs, consider the time frame that you need the loan. Alternative loans provide quick funding. SBA Loans are known for taking weeks or months.

Making a Smooth Transition when Selling a Dental Practice

Whether you’re the seller or the buyer, you want to make certain that the sale doesn’t negatively affect your staff and patients. With over 25 years of experience, ddsmatch Southwest has a proven process that uses technology to reach a wide range of vetted buyers and long-standing relationships with 3rd party valuation analysts and dental industry experts to make certain your practice is priced fairly and competitively.

Transitioning or selling a dental practice requires careful planning and preparation. Leave it to the professionals at ddsmatch Southwest to ensure everything is handled safely and that the future is promising for everyone involved. Call us today.