Posts

Prepare to Buy a Dental Practice for Sale: First Steps

At ddsmatch Southwest, we are dental practice transition specialists who focus on matching the right buyer for doctors who have placed a dental practice for sale in Texas or New Mexico. We believe that the right match is important because a successful practice transition is one where the practice continues to thrive, protecting the legacy of the selling doctor and providing the buying doctor with a solid foundation on which to build their own legacy. Because of this, we believe it is important for the buyers in the practice transitions we facilitate to be well prepared and well informed, with everything they need to have confidence in both the practice they are buying and the fairness of the transaction. 

To this end, we will be posting a short series of articles about how to best be prepared to purchase a dental practice for sale in Texas or New Mexico. In this article, we will provide a brief overview of the first steps of the dental practice transition process, from the buyers point of view, and some general principles to keep in mind. 

Assemble a Team of Advisors

After you have decided the time is right for you to buy a dental practice, and have an idea of where you would like that practice to be, you should identify and retain a small group of trusted advisors to counsel you through the process. This should include, at least, a dental CPA, a dental attorney, and a banker with experience lending for dental practice purchases. You may also want your own dental practice broker.

You may wonder why you can’t use your family member who is a respected attorney or a friend who is a CPA. While these types of contacts may be great for general purposes, you need advisors who understand the particulars of dental practices and the accounting and legal issues that are unique to your industry. You don’t want something important overlooked because your CPA didn’t recognize its significance. And you don’t want to pay an attorney’s hourly rate while they get themselves up to speed on an issue. You’ll save money and time by retaining specialists with experience.

Before you get anything but the most cursory information about a dental practice for sale, you will be required to sign a non-disclosure agreement. This agreement will protect your personal and financial information, as well as the selling doctor’s, and will protect the dental practice from staff and patient concerns if knowledge of a transition is leaked too soon. It’s a good idea to have your own dental broker or attorney to help you review and understand the agreement.

Have a Realistic Idea of What You Can Afford (and Need the Practice to Earn)

In 2018, the average dental student graduated with over $285,000 of student loan debt. When you are buying a dental practice, you have to consider both what you can afford to buy and what you are going to need to earn to cover the practice’s expenses, pay off the practice loan, keep paying on your student loans, and still have enough for your personal expenses and savings.

Depending on the practice, you may need some operating capital to keep things going in the early days after the transition. You may also need to compensate the selling dentist if you both agree it will be mutually advantageous to keep the doctor on for a period. A dental CPA and a dental practice broker can help you better understand how to look at a dental practice for sale and see its potential—or its problems. A banker with dental practice experience can also discuss with you how much you might expect to be lent for the practices you are considering.

Know the Value of the Existing Dental Practice Staff

When you are buying a dental practice, you are also getting the existing employees: hygienists, billing staff, receptions, etc. Although you will be the doctor, they are the ones that really know the patients and how the practice runs. Their institutional knowledge will be invaluable to you, both during and after the transition, to keep the operation running smoothly and help the patients feel comfortable with you, the new doctor. It is imperative to show them respect to help the transition be as smooth as possible. It’s a big change for them as well!

See It for Yourself

Every dental practice is different. You won’t really know what the practice is like until you can experience it in person. You also will want to look closely at details indicating the health of the practice: how many patients have visited the office over the past 18 months, whether the practice is appropriately staffed, patient flow, and cash flow. Those last two items, in particular, can show you whether a practice is growing, stable or shrinking. If the practice is underperforming, there may be some untapped opportunities for growth.

Look Closely at the Practice’s Financials

The asking price may not reflect the actual value. Many people tend to overvalue their assets because of their emotional attachment to them. Dentists are no different. The price of a dental dental practice for sale in Texas or New Mexico should be a reflection of its value based on sound accounting and valuation methods, not a reflection of what a doctor has put into the practice. Have your team of trusted advisors review the financial information with you to help you understand what it really says about the practice and whether its in line with what a business of its type should be doing.

Understand What Is and Isn’t Part of the Deal

If a selling doctor is asking $750,000 for a practice, you need to understand what you get for that amount. That may not include the equipment. It probably won’t include the accounts receivable. If the doctor owns the building, and you want the building as part of the deal, that can be a separate transaction and will definitely be a cost in addition to the practice sale price. If you have to purchase a lease, that will also have to be negotiated.

The selling price is a good place to start, though. If you and the selling doctor can reach an agreement on the sale price, usually negotiations on the other aspects will be smoother as both parties are motivated to complete the deal.

Be Wary of Owner Financing

Simply stated, a bank is more objective. Banks certainly have an interest in the money they lend—they want it back with a return on that investment. But this means they will perform a thorough due diligence relying on independently verifiable information. In a seller-financed deal, the seller is less likely to have a third-party valuation of the practice and asking price. They are likely looking to finance their retirement out of the sale and want to capture the interest as well as the principle. This can result in them trying to get a certain number rather than the true value of the practice. 

Consider the Value of the Seller Staying On After the Transition

It is common for the selling doctor to remain working in the practice for a period after the transition. This can be useful for helping to ease the transition for the patients, the staff, and the new doctor. It can be an attractive option for a doctor who is not ready to fully retire but wants to be rid of the business responsibilities and just focus on patient care, perhaps with reduced hours, before fully stepping away. Occasionally, however, it can indicate a seller who wants to have their cake and eat it too: sell the practice but not really have to give it up. Discuss this with your advisors. But be wary of a doctor who is proposing a period in terms of years, rather than weeks or a few months.

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

As stated, as ddsmatch Southwest, we focus on finding the right buyer for dental practices we have available for sale in Texas and New Mexico. If you are ready to make your move into practice ownership, check out our listings. If you see any your are interested in, or have any questions, please contact us— it starts with a conversation.

Should I Sell My Accounts Receivable when Selling a Dental Practice?

When selling a dental practice, there are a lot of things to consider and details to manage. Among those are how to value your practice. However, one thing that is generally not factored into the selling price is the accounts receivables. Accounts receivable are the amounts owed by patients who have been provided service but either they or their insurance (or some combination of the two) have not yet remitted payment. Accounts receivable are generally handled as a separate item as a transitioning dentist may or may not want to make them part of the deal.

Similarly, when buying a dental practice, the buyer might not want to buy the accounts receivable because they can impose an unwanted administrative burden and cost. Typically, however, it may be to the advantage of a buyer to try and get them. They are usually sold at a discounted rate (for reasons explained below) and can provide a source of operating capital from day one as opposed to borrowing additional funds from a bank.

In this article we’ll discuss the three basic options you have when and the advantages and drawbacks of each. Whether you ultimately decide to sell or not sell your accounts receivable will depend largely on the particulars of your practice and, importantly, the counsel of your financial adviser and dental practice transition specialist.

Sell the Accounts Receivable

If you include the accounts receivable when selling a dental practice, you are doing two things. First, you are releasing any claim you have on payment for work you did prior to the sale. It now belongs to the buyer. Second, you are also getting rid of the responsibility of trying to collect those outstanding payments. Under this scenario, you get to walk away with no further responsibility with regard to the accounts (except having to possibly endorse some checks over to the buyer).

As mentioned, this can be advantageous for the buyer who can use the funds as operating capital. If your buyer has reached the limit of their borrowing capacity, this can be a good way for them to make sure they have funds to keep the practice operating in those early days after the dental practice transition. If they need the accounts receivable for this reason, it may also be to your advantage to sell them, to ensure that the sale closes.

And while you will receive some compensation for the sale of the accounts, it will not reflect their full face value. This is for two reasons. First, simply stated, an agreement by a patient or insurance company to pay for your services is not the same as cash in hand. There will always be risk involved in collecting payment and this risk is reflected in the discounted rate. If you use dental accounting software, you probably know that it groups your accounts receivable into different categories, 0-30 days outstanding, 31-days days, 61-90 days, and so on. The longer the account is outstanding, the less likely you are to collect, and the more expensive it will be to do so. So a buyer may offer 85% for accounts that are due in 30 days or less, 75% for 31-60 days, 50% for 61-90 days, and so on.

The second reason, acknowledged above, is that there are costs involved with collections, costs which increase with each billing cycle. This will be discussed in more detail below.

Don’t Sell the Accounts Receivable and Have the Buyer Collect Them

If, when selling a dental practice, you and the buyer choose to not make accounts receivable part of the overall deal, you still have to have someone collect on those accounts. Basically, this can be either you or the buyer. Administratively, this is a more complicated option, but it means you get to keep the payment for the work you actually did.

Two things have to be considered. One, how the buyer will keep your accounts separate, making sure you get the funds that belong to you. The administrative staff will have to keep track of your accounts and the new doctor’s accounts separately. This will become increasingly complex for patients with ongoing treatment that you started and that the buyer is completing.

Second, when buying a dental practice, the buyer may not relish the idea of running a collection and accounting office for a retired doctor. The new doctor will be incurring the costs of collections and will rightly expect you to compensate the practice for this work out of the money being collected. Some of the expenses (in terms of either employee time or actual money spent) may include: electronic statements or paper statements, electronic claims (or in rare cases manual insurance claims), postage, labor, phone calls, secondary insurance submission, and communication time with patients or account holders. These costs can take between 5-12% of the revenue being collected, with an additional 5% convenience fee (that is, you are paying for your convenience and the practice’s inconvenience), and an uncollectable debt percentage of 3%. Therefore, you could reasonably expect about 83-85% of the money that is actually collected.

Whether this is more advantageous than simply selling the accounts receivable along with the dental practice will depend on how much you have outstanding, how long its been outstanding, and who is obligated to pay (insurance companies likely being more reliable than individual patients).

Keep the Accounts Receivable and the Responsibility for Collecting

Under this option, your only costs are your own and you get to keep everything that ultimately gets paid out, less whatever administrative costs you incur. This option is really only best in circumstances where you have a minimal amount of accounts receivable and from sources that are likely to pay.

Resources are also a factor. You may be able to do it all yourself. You may also be better off just paying your (former) administrative staff to work on the project on their own time. It is also most easily done in circumstances where the person selling a dental practice is staying on in the practice for a period of time after the dental practice transition.

Get Expert Advice on Selling a Dental Practice 

A big takeaway you should get from this article is that there are a lot of factors particular to your dental practice that will determine whether selling the accounts receivable is the smart move. For help in navigating this decision, you should rely on expert advisors with experience in dental practice transitions who can help you identify and weigh your options. 

Here are ddsmatch Southwest, we are dental practice transition specialists with experience in hundreds of successful practice transitions from across the country. We find out what your goals are for your transition and bring that experience to bear to help you meet those goals. If you are considering transitioning your practice in the next five years, we offer a free, no-obligation Practice Transition Assessment, including advice on how best to prepare your practice. It all starts with a conversation. Give us a call today and find out what we can do to help you. 

Dental Practice in Rural Areas: Better for You and Your Bottom Line

Typically, the plan for a recent dental school graduate is to practice in a suburban area around an urban city. A dental practice in a rural area is seen as less appealing. However, what young doctors are finding out is that these areas are already at or over capacity for dental practices and doctors. This means more competition for jobs and patients, lower salaries, and limited opportunity for growth. More often, practices are resorting to extended and weekend hours to try and capture more patients. Costs of living are higher. Participating in PPO plans may be necessary if the competition is doing it (especially when considering student loan debt, practice loan debt, and overhead and personal expenses).  So while the urban area may appear to offer more in terms of lifestyle, dentists practicing in these areas may not be able to enjoy those supposed benefits as they imagined they would.

Below we discuss some of the advantages of dental practices in rural areas. But don’t just take our word for it, read what a recent satisfied ddsmatch Southwest client has to say about his career in a Texas small town.

Dental Practice in Rural Areas Provide More Economic Opportunities

While high-density areas leave dentists scrambling for jobs and patients, and established dentists may have deferred retirement due to economic conditions, dentists in small towns are experiencing the opposite. Most small town dentists are doing quite well because they don’t have the same kind of competition. In fact, many rural areas are underserved, making patient demand for dental services high in comparison to urban areas. 

Dr. Bill Dean, recently used ddsmatch Southwest’s dental practice transition specialists to help him sell his practice. In a recent interview about his practice transition, he noted this benefit of small town dentistry,

“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.”

“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.”

Small Town Overhead with Urban-Level Fees

Fees charged by dental practices in rural areas are comparable to those charged in suburban and urban areas. But the overhead is much lower. A small town practice typically has its overhead expenses in the 50-55% range. Two major factors are lower wages and lower real estate or lease costs. Combined with less competition (meaning you save in your marketing costs as well), this means higher profits for your practice, and more money in your pocket. The faster you can accumulate wealth, the sooner you can retire, and the easier it will be to do on your own terms.

Dr. Dean also addresses the belief that being in a small town might make you feel isolated. To the contrary, given the realities of transit in sprawling urban areas, his access to larger city amenities wasn’t an issue, and the increased opportunities to earn and own a practice are accelerated by the built-in clientele and lower overhead:

“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.”

Student Loan Forgiveness Programs

Because many rural areas are underserved, some state agencies have established loan forgiveness programs based on the number of years a doctor practices in one of the underserved areas. So, in addition to earning more, you can also work to reduce your debt faster than otherwise, accelerating your savings. Some of the programs may require participating in Medicaid. Visit ADA.org for more information.

Small Town Life Style

Many dentists who do practice in more densely populated areas grow tired of the tough economics of urban life, the competition, and the stress. These are factors that are intrinsic to city life. We’ve discussed above how a dental practice in rural areas can increase your income. It can also greatly decrease your stress while increasing job satisfaction. 

The slower pace of life allows to you both be more flexible in your schedule and to get to know your patients better. Creating a personal bond who those to whom you provide care adds an additional dynamic to your work day that can make it more enjoyable, and less of a chore. You also will have more time to enjoy the things that make life worth living, like friends and family, and hobbies and recreation. The ability for better life balance will reduce the likelihood of burnout.

Additionally, you can enjoy the esteem of your community. A dentist is a valued member of the community, providing a valuable service. You can be seen as a respected professional whose advice is valued. Diagnosis and treatment plans are more readily accepted by patients who know and trust you. 

Dr. Dean confirms these benefits. Speaking of the doctor who bought his practice, Dr. Dean noted that he was looking specifically for 

“[s]omeone 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. . . . 

“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.”

ddsmatch Southwest Has Rural Practices Available Now

The dental practice transition specialists at ddsmatch Southwest have dental practices in rural areas in Texas and New Mexico ready for buyers. If you are looking to start your career, or are looking for a change of pace where you can own your own practice and enjoy the benefits of that ownership, take a look at our available practices

If you are considering transitioning your practice in the next five years, we offer a free, no-obligation Practice Transition Assessment during which we’ll our experience to work for you, advising on how best to build value and get ready to transition on your terms. Contact us today.

ddsmatch Has Partnered with ZipRecruiter to Find and Place Dental Associates

Increasingly, dentists have been asking us, “How do I find a dental associate? Where do I find an associate? How do I pick the right candidate?” ddsmatch listened and we have the answer. We’re pleased to announce that we’ve partnered with ZipRecruiter to leverage their proven employment solutions to expand your options, along with the continued support of our team of professionals, and the thousands of dental associateship candidates on our website.

What is ZipRecruiter and How Will it Help You?

ZipRecruiter is an online job board that allows employers to post jobs to hundreds of job boards, including to ZipRecruiter’s own job board. ZipRecruiter has the #1 rated job search app on iOS & Android. Also, in 2019, ZipRecruiter was named one of the world’s most innovative companies by Fast Company. Simply stated, ZipRecruiter is one of the smartest ways to hire. It sends employment notices to hundreds of job boards with a single submission, reaching over seven million job seekers. More than 1,000,000 companies have already used Zip Recruiter to meet their employment needs.

Among the features that sets ZipRecruiter apart are: 

  • Powerful Technology: With one click, ZipRecruiter send your job to hundreds of job sites across the web, identify the best candidates, and notify them to apply.
  • Pre-Screen Interview Questions: Add pre-screen interview questions to save time and ensure you only see the most qualified candidates.
  • Reusable Job Slots: All plans include reusable job slots, so when you’re ready to post another job, simply close the position and reuse that same slot.
  • Social Network Posting: Send your job to Facebook and Twitter, then manage, screen, and rate candidates on your Candidate Dashboard.
  • Mobile Friendly Interface: ZipRecruiter is designed for mobile so you can post a job, review candidates, and more while you’re on the go.
  • Premium Customer Support: You can call them, email, or chat live with a real customer service professional who will be happy to help you get the most out of their platform.

How Do You Get Started Finding Your Dental Associate?

Getting started is as simple as 1-2-3.

  1. Contact your ddsmatch professional
  2. We complete your custom online profile
  3. We facilitate the process

If you are in a dentist in Texas or New Mexico, contact ddsmatch Southwest for a no-obligation consultation. The cost for ZipRecruiter’s services will be determined based on your specific job posting and placement needs.

Why You Should Consider a Dental Associateship for Your Practice

A dental associate can be a highly effective way to increase production in your practice. If you have reached the maximum of what you can do on your own, find you are having to set appointments for more than three to four weeks out, and are consistently adding around 30 to 40 new patients a month, your practice may be ready for an associate. 

When it’s done right, adding another doctor can be a good investment in the future of your practice. You can improve patient care, increase the services you offer, and possibly begin the dental practice transition process, if the circumstances are right.  

How to Know if Your Practice is Ready for a Dental Associate

Bringing on another doctor requires a lot of thought, planning, and due diligence. Bringing on an associate may increase expenses and decrease profits in ways you might not predict. If you do it too soon, you might struggle to reach the point where the associate’s production is covering their expense, which can be bad for your practice. 

One rule of thumb is to look at your production numbers. If your total production is consistent at $140,000 per month (breaking down roughly to $90,000 from you, the doctor, and $50,000 from your hygienists), you are probably ready to add another doctor. Another way to look at it is by treatment room, where you want to be at a production level of about $25,000 to $30,000 per room, doctor and hygienists combined. If you are interested in adding a dental associate but aren’t quite meeting those production levels, take a look at your practice to determine what changes can be made to get you there.

Also consider your referral and case acceptance rates. A good rate for adding another doctor is around 40 to 50%. Your case acceptance rate should be at about 80%. If you are not meeting these kinds of numbers, you may have internal issues in your practice that need to be looked at before you can get those numbers up. Those issues should be resolved before you start looking to add another doctor or you can end up harming your practice.

ddsmatch Can Help You Find the Right Match for Your Practice

ddsmatch is proud to serve dentists all over the country. Our dental practice transition specialists average over 20 years of dental industry experience and have served dentists through every stage of their careers. We bring that knowledge base and depth of experience to bear for you, to help you get what you want out of your practice transition. Also, we pair our dental relationships with our searchable database to create the perfect match for dentists across the U.S.

ddsmatch has been successfully connecting the dentist’s present with their future for ten years. At ddsmatch Southwest, we focus on dental practices in Texas and New Mexico. If you are interested in adding a dental associate, or are considering transitioning your practice, contact us today for a free consultation.

How Much is My Dental Practice for Sale Worth?

When it comes to valuing a dental practice for sale, there are a lot of different methods and theories. In all honesty, there are so many variable factors that there is no one formula where you plug in numbers on one end and get an objectively correct answer out the other. But there are a couple of rules of thumb that can give you a good idea of a ballpark range. Realistically, you’ll need to work closely with your accountant, your dental practice broker, and, ideally, a certified valuation analyst (here at ddsmatch Southwest, we partner with Blue & Co. for our client’s valuation needs).

The two most common methods for valuing a dental practice dental practice for sale are to use a multiple of collections or a formula relying on your earnings before interest, tax, depreciation, and amortization (EBITDA). We’ll discuss each in turn and then discuss why these numbers will only tell part of the story.

Multiple of Collections

The multiples of collections method is fairly simple, until its not. The simple part is that it’s just a multiplication equation. You take your total collections (or gross revenue from the practice) and multiply it by a percentage. This, however, is where it gets less clear: what percentage do you use? Historically, the average answer has been about 67%, although you will also hear this should be 70-80% of the average of your last three years collections. Another way to consider this approach is the price to gross revenue. That is, what will the buyer be willing to pay for each dollar of collections? $.67, $.70, $.75, or $.80?

Our use of the word “historically” should be telling. This method of valuation is become less common as the business side of the dental industry changes (more on this in the next section). However, before you get too excited about the simplicity of this method, consider the following hypothetical: if you have a practice will $1m in collections, using a multiple of collections method, the practice could be valued reasonably within the $670,000-$800,000 range, depending on other variables. The problem here is you are only looking at one number, the total collections. You don’t have any information yet about overhead and other costs. This hypothetical dental practice for sale could actually be worth much less.

EBITDA

The earnings before interest, tax, depreciation, and amortization (EBITDA) is becoming increasingly popular as the business side of the dental industry has experienced a shift towards a greater number of group practices being driven by entrepreneurial dentists and outside investors. With group practices being more and more focused on investor returns, there is a shift to an investor perspective of owning and operating dental practices. Typically, investors consider the actual debt-free cash flow, rather than gross collections, as the most reliable indicator of the likelihood of a return on their investment. The EBITDA method can be considered a price to earnings method. The question here is how much is the buyer willing to pay for each dollar of free-and-clear net earnings?

This method is trickier because determining your debt-free earnings is not as simple. Also, the range for the multiplier for EBITDA is much wider (you can see anywhere between two and 18 as the correct multiplier) and more variable by practice type. For a solo practice, a reasonable multiplier might be three-to-four times. For a multi-doctor practice, in might be four-to-five times. For a multi-location practice, it might be five-to-six times. And for a group practice with infrastructure and scalability, it could be six times and up from there.

When we apply the EBITDA method to our above hypothetical, you can see both the difference and the advantage of this method. If a dental practice for sale has $1m in collections and 60% overhead (which is about average for a dental practice), its EBITDA is $400,000. But, what if a practice has an above average amount of overhead? If a practice has $1m in collections but 75% overhead (if, say, the practice has more employees than it needs or the doctor pays themselves a hefty salary), the EBITDA is only $250,000. The multiplier of collections would place both practices at the same value, however, the second practice is clearly worth less than the first.

The Rest of the Story

There are two major factors that are not accounted for in either of these models. First, as mentioned previously, there are all kinds of variables that impact value outside of the information used in either of these valuation methods, including:

  • Location
  • Product mix
  • Payer mix
  • Fee schedules
  • Referral rates
  • New patient acquisition
  • Fixed assets
  • Whether office is leased or owned
  • Cosmetic appearance of the office
  • How modern or well-maintained is the equipment
  • Availability of financing and current interest rates
  • Transition plan (whether seller will stay on for a period)
  • Community goodwill and how well that will translate to the buyer

All of these things will impact the value that both the buyer and seller will place on the dental practice for sale. Which brings us to the second factor: market value. At the end of the day, a practice is worth whatever it can bring from an open market. All of the valuation methods are simply ways to try and reach an agreed upon range from which negotiations can start.

We Work for You to Get What You Want for Your Dental Practice for Sale

Here at ddsmatch Southwest, our goal is to help you meet your dental practice transition goals and get a deal that you think is fair. As part of our Trusted Transition Process, we work with you by discussing the current local dental practice transition marketplace, help establish the best transition options for your practice, and suggest improvements and investment options that will result in a real return in the sale. Contact us today for a free, no-obligation Practice Transition Assessment.

Using a DSO When Selling a Dental Office

In the world of dental practice transitions, there is a lot of talk these days about the increasing role of corporate dentistry. If you are wondering whether you should consider these options as you put your dental office for sale, it’s important to understand what these options are, what they aren’t, and how they are different.

Dental Service Organizations

Dental service organizations (DSOs) are management companies which own and run multiple practices. Examples include Heartland, with over 800 locations across 36 states, and Aspen Dental Management, with more than 650 locations. A DSO will have their own methods, meaning they’ll have a management organization, fee schedule, staffing requirements, and other business tools that they’ll want to impose on your office. Uniformity is part of the key to success, replicating the functioning of one office across many. If they have a good model, theoretically, a DSO can smoothly run a practice from a business standpoint and not get in the way of providing quality care.

If you sell to a DSO, you become an employee. This can be a good option for a dentist looking at retirement, but not quite ready to give up the game. You can still provide treatment for your patients, receive a salary and benefits, but not have to deal with as much of the business or administrative side of things that takes up your time after office hours. If you are looking to cut back hours or responsibilities, this can be a good option.

If your concern is getting the most money out of your practice, a DSO can similarly be a good choice. A DSO will have deeper pockets and easier access to more financing than a private buyer. And, given that a DSO typically has a long term goal of expansion into additional markets, seeing the gains from their economies of scale, they may be willing to outbid private sellers.

The downside may be your legacy and possibly losing the goodwill of your patients and community. You’ve worked all of your career to build a successful business. If you use a dental practice broker, such as ddsmatch Southwest, when you put your dental office for sale, we use our expertise to help 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.

While a DSO is staffed with real people, who care about the treatment they provide, their doctors are merely employees with a limited ability to respond outside of the corporation’s practices and policies. How much this is an issue is a personal determination that will vary from practice to practice. If you want to consider offers from DSOs, you are still well-advised to retain a dental practice broker as the issues that arise in the sale to a private buyer are mostly the same as the ones involved in selling to a DSO.

Private Equity Groups

By contrast, private equity groups typically don’t buy practices, they invest in them. Private equity groups are investment management companies that provide financial backing, as an investment tool, in either startups or operating business. A private equity firm generally doesn’t have an interest in being involved in day-to-day operations. Rather, they are looking for a return on an investment.

A common mistake people make when thinking about private equity investments is believing that the investor is looking for a return from the practice’s existing cash flow: that the investment is given in return for a percentage of the current earnings. If that were the case, private equity investing would not be a good investment tool. Why would you need an investor if you already are making enough profit? Private equity investors are not satisfied with your practice’s status quo. Rather, the investor sees an opportunity for growth and wants you to expand your practice with their equity.

Therefore, rather than selling your practice, you are, in effect, becoming a manager of the private equity group’s investment. Their investment gives them leverage over you to expand your practice. If you are looking to expand, this can be a good way to do it, rather than financing through a bank and increasing your debt load. You can greatly increase the value of your practice, the return on which you will reap when it does come time to sell. If you aren’t interested in becoming a business manager over a group of practices, then private equity investing is not a good way to go.

Currently, there is a merging of DSOs and private equity, with investors seeing DSOs as a field ready for harvest. In March 2018, Heartland Dental announced that a private equity firm had acquired a 58% stake in the company, in which it was valued at $2.8 billion. Other private equity groups have made investments in DSOs, but the jury is still out on whether Heartland Dental will be “a kind of Walgreens for the dentistry business” or whether the company is overvalued and overleveraged.

Is it a Good Idea to Sell to a DSO?

Again, this comes down to some very personal choices that must be carefully considered when you put your dental office for sale. While the ADA put the number of doctors working in DSOs at about 7.4% in 2017, it noted that for younger doctors (ages 21-34), that number jumped to 16.3%.  Doctors are leaving dental school with unprecedented amounts of student loan debt, which can make banks worry about financing for the purchase of a practice, especially when the doctor is lacking hand speed and production capabilities that only come with time and practice. The bank wants to make sure it gets its return, too. Young doctors are finding a safe bet is to join an existing practice to gain that experience, and DSOs can give them that time while offering a potential to build equity in the practice.

On the other hand, DSOs have gotten themselves into trouble with practices that indicate they may be more concerned about their bottom line than responsible treatment and ethical practices. Earlier this decade, a U.S. Senate investigation determined that some DSOs were providing unnecessary treatment to children to collect more from Medicaid. Also, early last year Benevis LLC, which operates Kool Smiles clinics in several states, settled with the U.S. Department of Justice and paid a fine of $23.9 million plus interest for submitting false Medicaid claims.

ddsmatch Southwest Can Help You Get What You Want When You Put Your Dental Office for Sale

At ddsmatch Southwest, we take the experience of hundreds of successful dental practice transitions from all across the country and put it to work for you. As seen here, there are a lot of tough questions about how to get to where you want to be when you put your dental office for sale. We can help you review your options, look at the benefits and drawbacks of each, and offer unbiased advice about what choice is most likely to get you to your goal. Our definition of a successful deal is not just one where papers are signed and money changes hands. It’s one where the parties walk away happy, feeling like they got a good deal. Contact us today and find out what we can do for you.

Are You Thinking About Selling Your Dental Practice?

If you aren’t thinking about selling your dental practice, you should be. We’re not saying you should sell it now. Rather, you should be thinking about when that day does come and what you can do now to be better positioned to maximize your practice’s value. Here, we’ll discuss some things that you can do to start preparing, no matter where you are at in your career.

Start Planning Early

We all hope to be able to retire on our own schedule, but life often has other plans in mind for us. Should you become ill or injured, should you fall prey to a repetitive motion disorder, you may find the time to sell your dental practice arriving sooner than you think. And while we are not advocating you should assume the worst, the fact is that dentists who are compelled to sell their practice on a short timeline (less than one year) are more likely to get less than the actual value of their practice.

Conventional wisdom puts planning for a dental practice sale at a minimum of between two to four years. Here at ddsmatch Southwest, we say that if you think you are five years or less out from retirement, it’s a good time to have your practice evaluated by an outside consultant who can advise you on any changes or upgrades that will bring you a return in the sale. For doctors in that five year range, we offer a free, no-obligation Practice Transition Assessment.

Starting early has a couple of benefits. First, you need to realistically consider how long the transition will take. It’s not just about doing a bit of spit-and-polish, signing papers, and handing over the keys. Depending on your practice and the buyer, you may want (or need) to stay on for a period to help the buyer transition into the practice. If you’re counting the days until you can spend your days on the golf course, keep this in mind.

Also, some of the upgrades you may need to make for your practice to be reasonably attractive to a buyer may take time to implement (if you have issues with your patient base) or to make profitable (if you need to upgrade equipment or software). If your upgrades are expensive, or require a learning curve, you need sufficient time before they stop costing you money and start earning you money.

Don’t Mentally Retire Before You Actually Retire

The closer those last days or weeks or months get, the more tempting it may be to start easing into retirement. Don’t. When the buyer’s bank assesses the value of your practice, they aren’t going to rely on numbers that are five or ten years old. They want to know what the practice is earning right now and in the recent past—one to three years. If you’ve started cutting your hours, referring more work out, cancelling insurance plans, reducing the number of patients, or doing less marketing, you run the risk of devaluing your practice.

Know What Gives Your Practice its Value

This can be summed up in three simple words: active patient records. A nice clean office with up-to-date and well-maintained equipment and a pleasant, professional staff are all great things to have. But, in and of themselves, they have little value without a strong and growing patient base. Most importantly, you need to be able to show a steady stream of work for the 18 months prior to your valuation.

When you sell a dental practice, what you are really selling is you active patient records. This, along with your brand (the practice’s reputation and goodwill in your community) account for 75% or more of your practice’s value. These “intangibles” are by far your most valuable assets. Their value is increased when paired with an efficient business. If you have high overhead costs, you’ll get less than a comparable practice with a better cash flow. The buyer is going to look for a practice that can provide a reasonable income to cover their living expenses after servicing the debt of buying the dental practice. So, a strong active patient base plus good cash flow yields a better sale price.

Some other considerations on increasing cash flow and building value include:

  1. Raising Fees. Too frequently, older doctors are reluctant to raise their fees. Given that profitability is a major driver of a dental practice’s value, you must avoid making this error. Raising your fees each year may be the best way to guarantee increases in collections and profitability, which benefit you both immediately (more income that you get to keep in the practice) and at the time of sale (higher market value). Also, your buyer is going to want to have fees that are in line with the current market but not have to immediately raises fees after the transition, possibly driving away patients.
  2. Overhead. Keep a careful eye on all of your costs. Create a budget each year with specific amounts allocated for each overhead category. Be sure you are aware of current industry standards to make sure you aren’t overpaying for lab or supply costs. If your practice isn’t growing, you cannot afford to give annual cost of living raises. If this is the case, you may instead consider bonuses that are tied to increased collections. The lower your overhead, the greater your profitability, and, therefore, the higher your market value will be.
  3. Keep marketing. Just because you are retiring doesn’t mean your practice is going stop running. It might surprise you to learn how often doctors approaching retirement will cut back on marketing efforts or stop them altogether. As discussed above, the lending bank wants to know how your practice is performing right now and in the more recent past. You need your numbers to be on a consistent upward trend. A dip at the end will be a red flag that the practice has a problem. Also, make sure that you are keeping up with modern marketing trends. Your first efforts should be on referrals. But you should also update your website, invest in online marketing tools (search engine optimization, or SEO, to make sure you show up in online searches), and get patient reviews on Facebook and Google and post them on your own website.
  4. Update your office and technology. If you are closer to retirement (under two years) you can make cosmetic improvements to your office. First impressions matter (and ongoing impressions matter to your patients). If you have more time, you should consider your equipment and technology. Your buyer will likely be young and more familiar with the latest technology. However, you will need time with new tech to learn and become proficient. Once you do, however, it can bring you a return by increasing your patient flow and your treatment acceptance rates. These, in turn, will be reflected in your books as increases in profitability.

 

 

Think About the Impact of a Transition Plan on the Practice

When selling a dental practice, it’s common for the seller to stay on for a period of time. If your buyer is not already working in your practice (such as an associate or partner), this means the practice will have to support an additional doctor. You need to consider how that will impact cash flow and any existing practice debt, and whether you have sufficient revenue to support another doctor. The bank will certainly consider this when determining whether its willing to finance the purchase. These details need to be carefully considered but may be hard to predict, as what the buyer wants will impact how long you need to stay on, if at all.

ddsmatch Southwest Can Help You Sell Your Dental Practice

At ddsmatch Southwest, we bring the experience of hundreds of successful dental practice transitions, of all types and from across the country, and put it to work for you. We use that experience to 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 and find out how we can help you meet your practice transition goals.

What to Watch Out for When Buying a Dental Practice

Buying a dental practice will be one of the biggest—if not the biggest—decision of your career. It’s also the biggest risk, so it will pay, in both the short and long run, for you to be careful, get reliable professional advice, and do all of your due diligence. This is because, absent an ability to show fraud, once the practice keys are in your hands, there will be very little you can do about any overlooked details. And this landmark moment will cast a long shadow over your career.

Here at ddsmatch Southwest, while we represent the interests of our client, we view a successful transition as one where both the buyer and seller are happy with the terms and outcome of the deal. Most frequently we represent sellers (although we also have services for buyers and dental associates) but we think it’s important for those looking to buy a dental practice to know what they should look for, and what they should look out for, when considering a dental practice for sale.

What to Look for When Buying a Dental Practice

The Practice’s Financials

This might seem obvious, but it can also be complicated. It’s not just so simple as reviewing a profit and loss statement. You should expect to be provided with all recent financial statements and tax documents, along with the records of expenses for things like payroll, employee benefits, insurance premiums, continuing education, and reimbursements. You want to be able to know what percentage of collections is covering the practices overhead. That is, what does it really cost to run this practice?

The Practice’s Valuation

The seller will give you a number of what they think the practice is worth. You need to know how they reached that conclusion (the valuation method) and what are the bases of that valuation. Don’t be satisfied with the prior year’s cash flow, or a few recent years’ of cash flow. You should be prepared to review the entire history of the practice. That will tell you the whole story. For more on valuation methods, see our post “How Much is My Dental Practice for Sale Worth?

The Practice’s Brand and Goodwill

While the financial numbers are quantifiable, and easy to evaluate if properly recorded, the intangible assets—the practice’s reputation in the community and how closely it is tied to the selling dentist—are major factors in the practice’s overall value. This can be determined by looking at patient records which will show you patient retention, patient turnover, new patient referrals. These are indicators that the practice is viewed positively in the community.

Relatedly, when buying a dental practice, you need to know how the selling dentist intends to transfer that goodwill to you. This may or may not be something the selling dentist has thought about. It may mean that the selling dentist will want (or need) to stay on for a while to ease patients through the transition. How this works will vary from practice to practice. It’s a good idea to retain your own consultant or broker to help evaluate this and give recommendations of what will work best.

If the selling dentist is not retiring, you may need to obtain a non-compete agreement to keep the patients from being syphoned off.

The Practice’s Patient Base

In addition to what is discussed above, it’s a good idea to look at things such as the types of insurance the practice accepts and how many patients are with each plan, the patient demographics (older patients or young families, for instance), and how patients are retained. This information can help you project future cash flow.

What are the Seller’s Plans?

Is the selling dentist intending to stay on as an employee or contractor? If so, for how long? Does this match with your vision for the practice? While it is common, you should be wary of a selling dentist who may want to exert control rather that ease transition. However, if the selling dentist doesn’t want to stay on, you should consider whether you will have access to the doctor in case you need to consult regarding past patient treatment plans or accounts receivables.

What to Look Out for When Buying a Dental Practice

Pressure to Rush into Closing

While it may be understandable for a seller to be anxious, do not allow yourself to be rushed. Any step that is skipped will only run to your detriment, not theirs. It’s in your interest to be cautious and take the time necessary to complete all of the due diligence. A seller rushing you into buying a dental practice may be hoping that you’ll overlook a defect. It’s simply not worth the risk.

Seller Refuses to Disclose Information

If a seller refuses to make the requisite disclosures, or suggests you don’t need to see complete sets of records, or otherwise obscures information, it is likely there is something they don’t want you to see. While a dental practice can be a complex operation with legitimate issues of confidentiality, you have absolutely no incentive to overlook any detail, especially those being requested by your team of professionals (lawyer, accountant, business valuator, broker).

Declining Production or Poor Patient Retention and Recall

Sometimes selling doctors cut their hours in anticipation of the practice transition—looking forward to retirement, for instance. While this is not the best practice, it does happen. However, if there is declining production, be sure to determine the cause and make sure there isn’t a larger problem that you will be buying. The same goes for low patient retention and recall numbers. If you see this in the records, you need to know why. If the patients are going to another practice, you need to know where and why. You may want to ask the staff about this—often they have a good sense of patient issues. If the selling dentist won’t give you access to staff, that’s another red flag.

Employee Turnover

There are a lot of factors why employees leave (or are dismissed). But if the practice records indicate an unusually high turnover rate, it could indicate that wages are too low, meaning you may have to increase your payroll and benefits costs. It could also mean that the selling doctor is either poor at hiring or a bad manager. This can have an impact on the practice’s reputation and goodwill, if patients are having negative experiences with the staff.

Overreaching Non-Disclosure Agreements (NDA)

You should expect to sign an NDA before you get anything but the most basic information about a practice. For a variety of reasons, the selling doctor has a strong incentive to not let it be know the practice is for sale. However, if the NDA includes terms such as trying to establish an exclusive relationship with you as a prospective buyer or imposes an unethical requirement prohibiting you from looking at other practices for sale, you should not sign. When buying a dental practice, you need to keep all of your options open.

ddsmatch Southwest has Experience Matching those Buying a Dental Practice with The Right Seller.

When we look for the right buyer for our sellers, we consider your lifestyle and location goals, clinical skills, personality, and professional needs before we present you with a confidential list of sellers seeking to transition out of practice or bring on a new partner or associate. The ideal ddsmatch Southwest buyer candidate will have a comparable clinical skill set as the seller, associate experience, a desire to reside long-term in the geographical area of the practice, and requisite financial qualifications. If you are considering buying a dental practice in Texas or New Mexico, contact us today to review our extensive network of dental practices.

Build Value Before Putting Your Dental Office for Sale

There are typically two phases a dentist goes through when thinking about the value of their own dental practice. The first comes early, when a dentist is concerned with take home income—that is, “How much can I earn right now?”  The second comes later, when the doctor begins to think about transitioning the practice. Then the doctor is concerned with “What is my practice worth?” The fact is, however, many things that determine what the practice is worth are built in early in a doctor’s career. Here are some important things to consider early on that will pay off when you are ready to put your dental office for sale.

Your Value is in Your Brand

“Brand” is a hot buzzword right now, as social media influencers are concerned about their personal brands. This sort of talk can be annoying. But remember what a brand actually is. It began as a mark to identify livestock (and, later, goods in commercial markets) to denote ownership and deter theft. Presently, the term has broadened to encompass an overall experience of a customer that distinguishes an organization or product from its competitors. For a dentist, it can be your own name, but it’s really about the good name your practice has, and your reputation among your patients, and in the community.

A strong brand is important for a dental practice for the purpose of attracting and keeping patients. Without it, it’s unlikely a practice will have a strong patient base. And while you may look at your practice and see deep patient files, lots of new patients each month, high referral and case acceptance rates, and a full appointment book scheduled out for several weeks, what you really have to offer when you put your dental office for sale, is a strong brand. That is what the buyer is paying money for.

This is important to consider early in your practice because you want a strong brand that is not explicitly tied to your name. If you open an office as John Doe, DDS, built a solid reputation of goodwill in the community, and are known as a provider of excellent care and quality service, what will happen when John Doe is no longer part of the practice? Patients will find a new dentist (studies have shown that up to 40% of patients will leave under these circumstances). Buyers know this and may not be willing to pay as much for a practice that is too explicitly bound up with a single dentist’s identity.

While you want to be known as a good dentist, it’s more important for the life of your practice to survive some inevitable patient attrition after the practice transition. This can be easy to address early in one’s career, when one’s name is less well known. However, even for established dentists, rebranding to a more general practice name that leverages existing affinities in the community is not a risky move and can get your more when you transition your practice.  For instance, in Farmington, Utah, a historic hotel built from stone was refurbished and operated as “Rock Hotel Dentistry” to build on existing goodwill in the town’s pioneer heritage. Consider local affinities you can leverage in building your own brand.

Be Properly Organized as a Business

In a large corporation, each department has a head. In a small business, too often the owner tries to do it all. The fact is, as a practicing dentist, you can’t. You simply don’t have the time. This is why it’s important to have a solid organization with clear lines of responsibility and a consistent monitoring program, or else you’ll find details being overlooked and balls being dropped.

How you organize may be unique to your circumstance. However, you need to have structures organized for every aspect of your clinical care, operations, accounting, marketing, and personnel. You, of course, remain CEO and are ultimately responsible for everything. But this doesn’t mean that you can’t leverage your staff’s skills or outsource things such as marketing and accounting.

On the point of accounting, it’s more important than ever to have a solid set of well-organized and detailed financial records. Buyers are not content with a simple report of production and collections. They now want to review earnings before interest, taxes, depreciation and amortization (EBITDA), gross margins, assets, the lease agreement, and patient base. As with every aspect of your organization, the more prepared you are (and the sooner you start), the more likely you are to get what your practice is worth when your put your dental office for sale.

Once you have a smoothly running operation, it’s important to regularly review each part to see where you can refine processes and update your business systems. In part, you want buyers to be impressed with your efficiency and organization. But, importantly, this can translate into higher profits for your and a more quantifiable increase in value for buyers. In a study by Deloitte, businesses that use state-of-the-art business and human resource systems can average cost savings of 22% per employee. That kind of cost savings can be passed along through the practice transition, making your practice more valuable.

On the same point, up-to-date systems for re-care and reactivation will ease the transition for the new dentist, an attractive selling point. You can do the same with automated systems for submitted claims and receiving payments from insurance providers. For more one this, read our recent article about how back-office automation can build value for your practice.

Leave Profits in the Business

A common practice among small business owners is to pay the employees, pay the bills, and take the rest home. This might seem like a good idea in the short term, however, what it’s really doing is obscuring how profitable your practice is for potential buyers.

A better practice is to pay yourself a salary just as you would an associate, typically about 30% of collectable production. This makes your take home pay a predictable recurring expense, with the remainder of your practice’s net income as profit. Your numbers will be more clear and concise, with the value of the practice more easily ascertained—the profitability will be easily quantified in your financial records, how you need it to be when it’s time to show them to potential buyers.

Also, this method makes a clearer distinction between you, personally, and your practice as a business organization. This is important because, first, you don’t want to have a murky and confusing set of books to open to potential buyers. But, more importantly, the protections that come from limited liability are lost when the owners commingle business and personal funds and expenses.

ddsmatch Southwest Can Help You Prepare Your Dental Office for Sale

If you are considering transitioning your practice in the next five years, ddsmatch Southwest offers a free, no-obligation Practice Transition Assessment. During this assessment, we find out your goals for your practice transition and offer professional, experienced advice on how to best prepare to sell your dental practice, including potential investments or improvements to increase value. We never advise a doctor to change for the sake of change, but only where we see areas that will add value in a sale.

Contact us today and arrange for your free Practice Transition Assessment.

Plan To Sell a Dental Practice?

The short answer is, much sooner than you probably think. The long answer is that it depends. Because of the variables involved, no two dental practice transitions are alike. However, a good rule of thumb is that you want to start actively planning for selling a dental practice around ten years before you think you want to retire. Below, we’ll discuss some of the variables and break the timeline down a little bit to give you a better idea of what you should think about doing and when.

Variables Impacting Transition Timelines

Dentist Take-Home Pay

While dentists regularly show up on the list of highest paying jobs in the U.S., you probably don’t need us to tell you that how this actually translates into money in your own pocket can vary widely. For instance, the latest numbers from the Bureau of Labor Statistics report the median salary for a dentist is $158,000. That number will go up and down in real life depending on where you practice and what kind of work you do (oral surgeons and orthodontists have markedly higher median salaries at $208,000 and up, while general dentists come in slightly lower, at just over $151,000).

Also, consider in a private practice how your collections vary from year to year. And, like most small businesses, your earnings ebb and flow with the larger economic well being of your community (consider the frequency with which you are asked to negotiate on fees with patients who may be experiencing financial difficulties).

If your potential buyers are fresh out of dental school, you need to consider that the costs of education, and subsequent debt load, is rising. The class of 2018 reported an average student loan debt of $251,869 (public universities) and $236,133 (private universities). When combined with the financing to purchase your practice, this is a significant amount of debt for a new dentist to have to manage. They’ll need to carefully consider what they need to realistically earn to stay afloat and whether the practice they are looking to buy has a record of consistent collections.

Location of the Practice

This is, at its most basic level, a consideration of small towns and rural areas versus urban and suburban markets. Urban centers have more people and, therefore, more potential buyers. In an urban area, once a qualified buyer is located, a dental practice transition close in six to twelve weeks after the practice is valued. In a rural area, it can sometimes take two to three years before a qualified buyer is even located. This is not even considering the economic health of your community: whether its a growing city, a shrinking town, an area that has lost major job providers, etc. The stronger your local economy, the faster you’ll probably be able to sell. However, you can have problems at the other end of the spectrum as well. A highly successful practice that is worth a high sale price may be out of reach to most buyers.

When the Dentist Thinks They Will Retire

According to a 2010 ADA survey, dentists under 40 years of age reported that they anticipated retiring at the average age of 61. Dentists over 40, however, reported that they anticipated retiring at the age of 67. A possible reason for the change is the more experience a dentist has, the more they realize what is involved in retiring and what has to be done to get ready when selling a dental practice. For this reason, the idea of planning your transition ten years out might seem like too much, but, when you are inside that process, you’ll understand.

Planning for Selling a Dental Practice

No matter how far off you think you are from retirement, thinking about the recommendations below will never hurt. And even if you inside ten, or five, or two years from transitioning your dental practice, there are things you can do to prepare that will add value and help you get the best price you can get.

Ten Years (or More) from Dental Practice Transition

This is a good time to consider your equipment and office technology. Replacing equipment and making high-tech upgrades can be costly. If you are closer to retirement, these costs may not be worthwhile for you. This is because, first, you need time to be able to pay off the equipment. Second, you need time to become proficient on the new equipment or software before you and your staff become more efficient in a way that is reflected in your earnings.

Costly equipment and technological upgrades only build value once you own the equipment outright and its earning you more money. If you don’t have the time for this kind of investment, you shouldn’t do it, as it can eat away at your bottom line in the short term. If you do have the time, it’s a good idea to bring your office up-to-date.

Five to Ten Years from Dental Practice Transition

First, you should plan on reducing your specialty procedures, making your practice as mainstream as you are able to by about five years out from your practice transition. Second, you should consider whether the improved efficiency from your equipment and tech upgrades allows you to keep more things in-house—are there things you referred out that you now have time and equipment to keep (e.g. making crowns)? Keeping more production in-house allows you to keep that money in-house as well.

Additionally, you should look at each aspect of your office and consider where your processes and procedures could be refined or made more efficient. If you haven’t done so already, it’s imperative that you switch to a digital record system, taking your office paperless. No young dentist is going to find an old fashioned filing system appealing. Rather, it will look like an old relic (which it is) that they have to deal with (which they won’t want to do).

This is also a good time to bring in a dental practice consultant to review your practice and give advice on how it could be improved and additional adjustments that could impact valuation before you try and sell your dental practice. Here at ddsmatch Southwest, we offer a free, no-obligation Practice Transition Assessment aimed at dentists who are five years out from transition. In our assessment, we look at your local market, suggest physical and image improvements, advise on potential investments to increase value, review present and future staffing integration, and help you establish the best transition options for your practice.

Two to Five Years from Dental Practice Transition

Here you want to look at your fees and determine where you can raise them. A good place to be is within the 80th percentile in your market for comparable procedures and services. Consider ways to increase your patient base or services. However, again, avoid adding specialty procedures. At this point, you don’t realistically have the time to be properly trained and gain the experience to be competitive.

You should also review your staff salaries and consider whether they are both fair for your local job market, and whether they adequately reflect each staff member’s qualifications and abilities. If your staff salaries are too low, you risk losing good employees. Staff turnover this late in the game can signal problems in the practice to potential buyers and can negatively impact patient retention (after all, patients interact more with staff than with you). Conversely, if your salaries are too high, that will reflect lost value in your practice. Experienced and reliable staff who feel valued are most likely to stay through transition, which will be an important selling point for buyers.

At this point, you should no longer consider expensive equipment or extensive remodeling. Instead, your focus should be on cosmetic improvements, like flooring and paint. Look closely at your office, and solicit input from your staff, for wear and tear that can be easily—and inexpensively—repaired. Your goal here is to make a good first impression on your buyer with a well-tended office.

Less than Two Years from Dental Practice Transition

If you haven’t already, now is the time to retain a dental transition expert. Whomever you get should be experienced, with a solid track record of successful transitions and happy clients. A good transition broker can help you put together the team you need (business valuator, lawyer) and make the final preparations for selling a dental practice.

Put ddsmatch Southwest’s Experience to Work for You

Here at ddsmatch Southwest, we bring the experience of hundreds of successful transitions from all across the country, in all kinds of markets, and put it to work for you. The proof of this are in the testimonials from our many satisfied clients. Your goals are our goals. Contact us today and find out how we can help you meet your practice transition goals.