Your dental practice represents years of hard work, a career spent building your patient base, training employees, and forming relationships with the community. When you decide it is time to retire and sell a dental practice in Texas and New Mexico, how can you be sure you are getting the true value of your investment? When retirement is three to five years away, it is time to consider whether you can build additional value in your practice.
Making a Plan for Success
Before you take any steps toward selling your practice you should have an idea of how much the practice is worth, and how much you need to make on the sale in order to retire the way you want. If you don’t know where to start contact one of the ddsmatch Southwest practice transition specialists. Our Practice Optimizer Experience was created especially for dentists planning on transitioning their practices in five to seven years and covers everything you need to help you plan for the future. The first step is simply sitting down with one of our transition specialists to determine your vision for the future. What goals do you want to achieve before and after you sell a dental practice? What is your ideal transition timeline? Once you lay out some of these specifics you can create a roadmap to retirement success.
Why Business Valuation is Crucial to Building Value
You have likely heard of business valuation as something you need in order to determine the value of your practice before a sale. A business valuator will look at everything involved in your sale, from the physical equipment to your monthly cash flow, and determine its economic value and appropriate sales price.
At ddsmatch Southwest we recommend those moving toward retirement should plan to have two valuations performed. The first analysis will be at the beginning of the process, three to five years before you plan to list your practice. This valuation will give you a full understanding of what your practice is currently worth, and provide insight into how you can increase the value before you sell. For dentists moving toward retirement this first analysis is crucial for wealth management purposes.
Any business valuation done before you sell a dental practice in Texas and New Mexico should be performed by third party valuation experts, which is why we partner with Blue & Co. for fair and reliable valuations. The experienced professionals who perform your analysis will take a holistic approach to finding your practice’s value.
Matt Howard, a dental CPA, accredited business valuator, and certified valuation analyst, explains the process saying, “The first part of the business valuation always has historical numbers of the practice.” After looking through these historical numbers, Matt explains, “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 on inside the practice,” Once they have finished their analysis, including gathering and incorporating feedback from the seller, they will provide a detailed report.
Ideally your valuation will show that your practice is worth enough to carry you through retirement. However, this isn’t always the case. What happens if the value of your practice does not match up with your goals for the future? The good news is, most dental practices have significant, untapped opportunities for growth. Value can be added in many ways before you sell a dental practice, but as you inch closer to retirement you must be careful how you spend your time and money, as not every investment will yield a return.
Remodels and New Equipment: Is Now the Time to Invest?
One method some dentists turn to before listing their practice is remodeling the office space or buying new equipment. This method, according to Matt Howard, is not always effective for dentists who are selling their practice within five years. “Significant remodels at that point would probably not be a complete one-for-one return on your money” says Matt.
Of course, there are several exceptions to this rule. For example, if your practice has not made the switch to digital technology now is the time to invest. The reason for this is that many dentists are not trained to use the older equipment, especially if they are newly out of dental school. Not only will new digital equipment increase the value of your practice, it will make your practice more marketable.
One other area that is an exception is a basic tidying and sprucing up of the office. When you sell a dental practice in Texas or New Mexico you want to put your best foot forward. Housekeeping tasks such as a quick coat of paint go a long way in making your office look nice, without spending thousands of dollars on a remodel or brand new equipment.
Before making any large purchases or major renovations talk to your team of experts. Your dental CPA can explain any tax implications, and your transition specialist will be able to advise you on whether your plan will attract more buyers. Remember to keep your end goal in mind: a successful transition into retirement.
Maintaining Your Practice’s Value Through Production
Unfortunately one of the steps many dentists make in preparation for retirement is to slowly decrease their hours. While there is nothing wrong with wanting to make a gradual exit, you have to be aware how it affects your practice’s value. When you sell a dental practice the buyer will want to see evidence of its value through production. 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.”
If one of your transition goals is to slowly decrease your hours to one or two days per week, consider bringing in an associate to pick up the slack. With two doctors in the practice this method can even lead to increased production and collections, bringing your value up even more before you list your practice. However, there are other considerations when bringing in an associate and you need to make sure your practice can support an additional doctor. Visit our blog to learn more about the advantages of bringing in an associate before you sell.
Increasing Value Through Your Patient Base
Whether you choose to maintain your current hours, or bring in an associate so you can decrease them, you need to make sure your practice is still bringing in and retaining new patients. Ideally, in the three to five years before you sell a dental practice in Texas or New Mexico, you should have 25-30 new patients each month, with a 12-14% attrition rate. If your practice isn’t meeting these benchmarks, try to find out why. Some factors to look at include:
- Marketing Efforts: Is your marketing strategy bringing in 25-30 new patients each month? If not, take a look at your current strategy and determine how you could adjust it to bring in more new patients.
- Patient Turnover: A new patient may visit once, but if they do not make a second appointment they cannot truly be considered an active patient. Focus on turning new patients into active patients.
Patient turnover can have several causes. Investigate your current method of appointment scheduling to ensure it is easy and quick for patients to accept their care plan and set up their next appointment. Take a look at the overall patient experience. From the time a patient walks in the door you want to ensure they are greeted warmly and feel comfortable. An increasing patient base is one of the most valuable parts of any dental practice, which is why it is crucial to understand and get control of before you list your practice.
Revisiting Insurance Payments Before You Sell a Dental Practice
When was the last time you examined the insurance makeup of your practice? A significant number of patients choose their dentist based on their insurance benefits, which is why you need to take it into consideration when you are trying to build value before a sale. Look at the plans you currently work with, and consider the profitability of each one. As in any business, you should only offer services that bring a profit.
If the services you are offering under a specific insurance plan are not profitable it is time to rethink your participation in that plan. After looking at the data some dentists decide to go out-of-network with certain insurers, but this isn’t the only option. Depending timing and where your practice is located you may be eligible to renegotiate plan rates. No matter what you choose, keep in mind that your end goal is to build your patient base and increase your practice’s value.
Sell a Dental Practice and Retire with Confidence
One of the best things you can do at the beginning of your retirement journey is to seek out the advice of a dental practice transition specialist, dental CPA, and dental attorney. These professionals have seen numerous dental practice transitions, and know what works when you are trying to build value. With a panel of trusted advisors you can be sure that you are making the right choice every step of the way.
As we mentioned above, the transition specialists at ddsmatch Southwest created a roadmap for dentists heading toward retirement, providing expert advice at every stage. Our Practice Optimizer Experience has helped countless dentists plan, prepare, and prioritize for their future. Here is what you can expect:
- Conceptual Transition Experience: Sit down with our experts to determine your goals for before, during, and after your transition.
- Trusted Valuation Analysis: As we detailed above, a reliable business valuation is crucial to anyone listing their practice. Our business valuation partners will analyze your practice twice, once at the beginning of the process, and once before you sell a dental practice.
- Ideal Retirement Calculation: A financial review of all your investments and projected future income is needed to ensure you can retire comfortably. ddsmatch Southwest partners with HK Financial Services to provide a Retirement Check-up, either as a third-party opinion or alongside your current advisor’s calculation.
- Estate Preparedness Gameplan: Your estate should be prepared and protected in the event of an unforeseen death or disability. Our experts will refer you to a local attorney to create essential legal documents such as a will or trust.
- Dental Insurance Navigator: As we touched on above, you should review the insurance plans in place before listing your practice. We arrange a customized consultation with Shelley DeGroff of Integrative Dental Solutions, a PPO Advisor, who will advise you on your current payer mix.
- Clinical Opportunity Blueprint: In order to pinpoint untapped growth opportunities in your practice we use Dr. Charles Blair’s “Practice Booster Clinical Treatment Analyzer.” This 70-page report will reveal ways you can add value before you sell a dental practice.
- Critical Metrics Analysis: Your practice is constantly changing, especially as you focus on adding value before retirement. We provide periodic, customized reports aimed at keeping your practice producing at a high level.
- Trusted Transition Process: When you are ready to move forward with your transition our experts will start you on our Trusted Transition Process™. This roadmap lends transparency to the process of preparing and listing your dental practice, and will carry you through to the other side of your transition.
While we are able to give general advice that applies to most dental practices in Texas and New Mexico, your specific practice needs a specialized approach. The transition specialists at ddsmatch Southwest have helped hundreds of dentists buy and sell practices across Texas and New Mexico, bringing a wealth of knowledge to the process. It is never too early to start planning, preparing, and prioritizing for your future.
If retirement is three to five years away contact the experts at ddsmatch Southwest. When the time comes to sell a dental practice in Texas or New Mexico you need experts on your side who can advocate for you, protect your legacy, and ensure your transition into retirement is successful. Contact our team today by calling 855-546-0044.