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.
https://www.ddsmatchsouthwest.com/wp-content/uploads/2019/02/1-selling-a-dental-practice_HERO.jpg6281200adminhttps://www.ddsmatchsouthwest.com/wp-content/uploads/2018/06/DDSMatch-buy-a-dental-practice-sell-a-dental-practice.pngadmin2019-01-17 05:00:282019-03-03 07:27:10Plan To Sell a Dental Practice?
Any long-time reader of our posts knows that it’s important to looks for ways to add value to your practice, but not all ways of doing so are equal. The best ways to add value are not always the most obvious. Especially when done right before you put your dental practice for sale, buying new equipment and furniture, or upgrading your technology, might make your office snazzy, but it probably won’t increase your value as much as you may think. In fact, sometimes you can even take a loss on expensive upgrades. This is because a buying dentist wants to make the office their own—with their own choices about decor and equipment.
Better ways of boosting value are in the intangibles: your brand and your business practices. This is because those areas are where most of the value of your practice lies. No one buys a dental practice because it has digital imaging technology. If a buying dentist wants that, they can get it for themselves. Buyers will look at your practice if you have a steady, solid patient base, resulting in steady, solid collections, and low overhead. These areas are where you want to build value.
Invest Wisely: Technology that Saves Money, Not Costs Money
One great—but definitely unsexy—way way to increase the value in your practice is to reduce your billing costs through software automation. When you look at practice valuation reports, you can see that a simple, smooth process for collections is a big factor. Collections take time, and in running a small business, time is money, as the cliche says. The more time your staff takes to work on collections means higher costs in the form of wages and other administrative costs.
Therefore, investing in software or other technology that enables your staff to reduce their time and work with time-of-service collections, pretreatment estimates, and claims can be an asset for your office. When you put your dental practice for sale, if this is positioned properly, buyers will see that your office practices are efficiently organized to facilitate collections.
One thing to be careful about, though, are the HIPAA standards. You first need to understand what you can do under HIPAA. You are allowed to automate claims submissions, eligibility and benefit verifications, claims payment, and remittance advice. The automation of claims submissions and eligibility and benefit verification is fairly common practice. As of 2016, about 74% of dental offices in the U.S. had automated their claims submissions, and about 58% had automated eligibility and benefit verification.
But that is only half of what you can do, and as of 2016, virtually no dental offices had automated the other process. Only 8% of dental practices had automated claim payments. And none had automated the remittance advice. This is surprising, because if the dental and medical industry would fully automate their back-office processes, it could result in nearly $2 billion in revenue annually. That’s a lot of money to go around.
How to Automate Claims Payments and Electronic Remittance Advice (ERA)
To get your piece of that pie, and boost your dental practice value, all you need to do is follow these four simple steps to get your back-office processes fully automated.
Contact the dental insurers you work with and enroll in the health-care electronic funds transfer (EFT) standard via ACH for claims payments and ERA (ACH stands for “automated clearing house” and is an electronic funds-transfer system run by the National Automated Clearing House Association (NACHA) to facilitate payment services such as payroll, direct deposit, tax refunds and payments, consumer bills and many other services). Receive payments directly in your bank account.
Decide how you’d like to receive ERA.
Make sure that your practice management software will automatically reconcile EFT and ERA.
Ask your bank for the delivery of remittance information.
When you take advantage of the full spectrum of back-office automation allowed by HIPAA, you will reduce the time your staff spends of collections and the administrative costs involved. You thereby reduce your overhead, making your dental practice more profitable, saving as much as $36,000 per year. That’s money in your pocket that you can choose to reinvest in your practice or put away for retirement.
Also, by maximizing the automation allowed by HIPPA and using compatible practice management software that allows for automatic reconciliation and posting of receivables, your practice will show the following benefits:
Improved cash flow as funds are directly deposited into your bank account
Get paid faster because many dental insurers will pay claims that accept health-care EFT before paper claims that require a check to be issued.
Reduced instances of missing payments or fraud—direct deposits don’t get stolen or lost in the mail.
Keep your patient account records up to date faster, easier, and with greater accuracy, allowing you to make sure your billing is accurate and alleviating the risk of bad debt by facilitating collections closer to the time of service.
The ability to process more payments with less staff or fewer staff hours; the benefit here is twofold: you reduce costs and the less time you and your staff spends on book keeping is more time spent with patients.
Although we described business practices as an intangible above, the benefit of automating your back-office processes can be easily quantifiable in terms of lowered overhead costs and increased profit margins. Those numbers can be provided to buyers with the explanation of how you got there. When you want to put up your dental practice for sale, having these processes in place—with demonstrable savings—will make your more attractive to buyers. This is especially the case as the dental industry continues to move away from sole practitioners toward group practices, as automated systems are easier to fold into an existing corporate structure that the buyer already has in place.
ddsmatch Southwest Helps Add Value Before You Put Your Dental Practice for Sale
If you are considering transitioning your practice in the next five years, ddsmatch Southwest will provide you with a free, no-obligation Practice Transition Assessment. As part of that assessment, ddsmatch Southwest will help identify potential practice investments to help you increase the value of your practice before you sell. Contact ddsmatch Southwest today and request your free consultation.
https://www.ddsmatchsouthwest.com/wp-content/uploads/2019/01/1-Dental-practice-for-sale_HERO.jpg6281200adminhttps://www.ddsmatchsouthwest.com/wp-content/uploads/2018/06/DDSMatch-buy-a-dental-practice-sell-a-dental-practice.pngadmin2018-12-07 05:00:182019-03-03 01:03:05Add Value to Your Dental Practice Sale
There was a reason you went to to dental school. You wanted to go, prepared, got accepted, went, graduated, and began to practice. That takes a lot of internal motivation sustained over a long period of time to achieve a difficult end.
What was your motivation? Have you lost sight of it?
When you come into the office each day, do you look forward to your work? Or does one day blur into another, punctuated only by fluctuations of stress?
Put simply, when you think about putting your dental office for sale, is it with a sense of accomplishment? Or is it with longing for relief?
To be sure, being a dentist and running your own office is stressful. In addition to dental care, in any given day, you may also have to be a bookkeeper, a human resources office, and a general manager. No one is invested like you are. It can create a sense of being all on your own, and you’re not alone if you feel a little lost under the burden.
If you’ve lost your sense of purpose, it will affect every aspect of your practice—starting with your staff and bleeding out to your patients. Once patients sense it, they will be less likely to return.
But, you can regain the sense of purpose that you once had. In fact, you must if you want to maintain the long term success for your practice. The good news is, while turning this sort of ennui around isn’t the easiest thing in the world, you might be surprised to find a few simple things will set you back on a path you feel good about.
Remember Why You Did This
Think back to when you first decided to go to dental school. What were your reasons? Think about your education. How did that change your purpose and sense of your future?
Finally, think back to when you graduated and were preparing to start, join, or buy your own practice. Why did you want to do that? What did you imagine it would be like?
Those last two questions may be the most important. The reason why you wanted your own practice is still there. The problem is probably in the disconnect between what you thought it would be like, and how it is in reality. Take time to consider that just because something turned out differently than you expected, doesn’t necessarily mean its gone wrong.
Once you’ve remembered your purpose, consider where you are at now. What’s good about your practice? You have to have an accurate sense of both the positive and negative to make an objective assessment of your practice’s success.
Like many people, maybe you tend to look at what’s wrong over what’s right, and the human brain is wired this way. But in the modern world, happiness depends on taking time to appreciate all of the parts that make up the whole.
Once you have a sense of what’s working, then consider what isn’t. If the problems are easily identified, they are probably more easily solved with actions such as creating new office practices or policies, or by replacing or training staff.
If the problems are harder to pin down—indicating a more systemic problem—consider bringing in a business consultant to assess your practice and make recommendations. Often an outside observer can view the situation more objectively, putting them in a better position to identify what works and what doesn’t.
Consider having one-on-one conversations with your staff to get their perspective on where things are at. It’s important to do this one-on-one, rather than in a staff meeting. It takes more time, but you’ll be sure to get everyone’s input and they’ll speak more freely.
Once you’ve done these assessments, reconsider your original purpose. Is the way your practice is operating moving you toward that purpose, or away from it? Is the purpose still relevant?
Have the ways you’ve changed personally, especially after experiencing dentistry as a practicing doctor, changed? What it is you really want to accomplish? If so, consciously revise your purpose.
All of this is to make sure you are on course to achieve what you set out to accomplish (or move you toward your new goal). As noted above, a practice without purpose is likely to suffer.
When you put your dental practice for sale at the end of your career, you want to see that you are transitioning your practice at its peak, not when its fizzled out. Once you know what’s going well and what needs to be changed, you can create a plan to right the wrongs and move forward in a positive direction.
It Takes a Village (or, at Least, Your Staff and Advisors)
Once you’ve reengaged or revised your career purpose, you need to bring your team on board. You team includes all of your employees, your outside professionals (accountants, lawyers, consultants, etc.), and your informal advisors— those colleagues, friends, and family that you trust and rely on for advice.
Just as you can’t run the whole practice by yourself, you won’t be able to course-correct your office to meet your purpose by yourself. When you are discussing changes with staff, they need to understand the “why” behind the change so they’ll be bought-in. If the staff doesn’t understand the “why,” they’ll be more reluctant.
There is no need for anything but transparency here. In fact, staff can be more motivated by the idea that they are contributing to the success of the office—feeling like an important part of positive change, rather than just a replaceable cog in a system.
Another benefit of enlisting your team is that it forces you to clearly articulate your purpose and your goals for achieving that purpose. You’ll find out how well thought out your ideas and plans are. Gaps will be illuminated and can be filled in at an early stage rather than later when a problem arises.
You’ll also get feedback from your team. Are they enthusiastic or skeptical? That can indicate a sense of how realistic your plans are. Skepticism doesn’t necessarily mean your plan isn’t good, it may just be missing some intermediary steps to get from A to B before you can get to C, D, E, and so on.
Career Goals Impact Post-Career Goals
We’ve discussed your purpose for your career, however, there is something important that is largely depended on your career success— what happens after you put your dental practice for sale.
You can’t practice forever. You probably don’t want to. How do you envision your retirement? Where will you live? How will you live? What will you have to enjoy once you’ve set down your handset for the last time?
Being able to choose how you live in retirement is dependent on building value in your practice now. If you have an idea in mind of where you’d like to end up, you need to map out a clear path to get there. Without a path to follow, who knows where you’ll end up? Regardless of where you are in your career, it’s not too late to start charting that course. And it’s never too early.
ddsmatch Southwest Can Help Prepare Your Dental Office for Sale
If you are in the later stage of your career, you can benefit from a Practice Transition Assessment. This is a free service offered with no obligation and designed for doctors considering transitioning their practice in the next five years.
As part of this assessment, we will discuss with you the the current local dental practice transition marketplace and help you identify the best transition options for your practice. We will suggest practice physical and image improvements and advise on potential practice investments to increase value. This will help you understand where your practice stands and where you can get it to before placing your dental office for sale. Contact us today and find out how we can help you achieve your purpose.
https://www.ddsmatchsouthwest.com/wp-content/uploads/2018/12/4-dental-office-for-sale-dental-practice-for-sale_HERO.jpg6281200adminhttps://www.ddsmatchsouthwest.com/wp-content/uploads/2018/06/DDSMatch-buy-a-dental-practice-sell-a-dental-practice.pngadmin2018-11-27 05:00:362019-03-03 01:06:25Why Are You Selling Your Dental Office?
Change will come whether we want it or not. While we cannot always control outcomes, we are better prepared to influence it when we are ready. For instance, when you are ready to sell a dental practice, you can’t control who will be interested and what they are willing to pay, but you can position your practice as one that is stable and successful in a way that will attract buyers willing to pay for value. So we are better off proactively anticipating and preparing for change rather than passively waiting for it to happen to us. And, honestly, sometimes it’s the simplest changes that yield the biggest reward. A change of perspective can help us see our professions, our lives, ourselves in new and illuminating ways.
In this second part of two articles this month that focus on good and bad business practices, we’ll take a look at some simple things you can do that can have a big impact on your business.
Change Your Point of View
If your practice isn’t quite what you want it to be, but you aren’t sure what you can do differently, the first step is to take a wider perspective. Remember, it’s not just a way to provide quality dental care. And, it’s not just mechanism for generating revenue. While it’s both of these things, it’s more. It’s a place of employment for your staff. It’s an essential service for your community. And it’s a source of relief and healing (or fear and pain, depending on the person) for your patients. Think about how your practice looks from all of these perspectives, and the tangible and non-tangible benefits you receive.
Next, it helps to take a look at the business from purely a business perspective. While it may seem crass to think of patients as “customers,” that is what they are at a certain level: people exchanging money for services with an expectation of quality. You have to look at your practice as a business and you have to run it like a business.
While there are things particular to dentistry that make it unique, there is a lot that is typical of any small business. If you don’t have any business training or experience outside of running your office, take some time to educate yourself.
None of this will diminish the quality of care you provide. It can, however, improve your patient’s experience and your staff’s experience. Happy customers and happy employees yield a more successful business.
Set Specific Goals (and Revise Them)
If your original goal was to have your own practice, congratulations! You did it! But now what? Without a destination in mind, you are more likely to wander listlessly.
You can start with a long term goal such as those for your retirement. Where do you want to be when you finally think, “It’s time to sell my dental practice”? Where do you want to retire? How do you want to retire? What do you need in the bank to get to that destination?
Once you’ve done that, you plot the route. If that’s 20-years off, set goals of where to be in 5, 10, 15 years. Then break it down even further. How do you get to that 5-year goal?
When you get to that 5-year mark, re-evaluate. Is your end goal the same? Are your intermediary goals realistic? Has your practice or your market changed?
This way you ensure you are always on course. Without this kind of map, it’s harder to predict the outcome.
Write it All Out
When you have your goals set, make a detailed plan, step-by-step, of how to reach that first goal. And then the next, and then the next. As you do this, look closely at what you are proposing. Are these steps doable? Do you have the tools, resources, and skills to make the steps? If not, your plan is probably not feasible and will need to be revised (this may also point to unrealistic goals).
On the other hand, it may also be determined that you’ve set your sights too low. By getting out all laid out on paper, you will have a better view of what is attainable and what’s not. You will also have a better sense of the work involved. This is important because time is your most precious resource, and you must be certain that you are investing in where it will bring the greatest return.
Don’t Fall for the Entrepreneur’s Fallacy
As a small (or not so small) business owner, you are an entrepreneur. Your vision, determination, and work ethic is admirable. But, just because you’re good at being a dentist doesn’t mean that you are necessarily good at running a business, or anything else for that matter. Many entrepreneurs, inspired by their own intrepid spirit, often come to believe that no one can tell them anything. Don’t fall into this trap.
Bring in an outside consultant to look at your business, assess its value, and recommend improvements. You are a dentist. You are not an accountant. You are not a lawyer. And you don’t need to be. Frankly, it’s not worth your time.
If you try and do everything on your own, it will take you much longer than an outside professional and, frankly, you’ll likely do a poor job. The money you think you’ll be saving by not hiring a trusted expert will be lost in the extra time you spend and the mistakes you’ll make. Others have already made those mistakes. Don’t reinvent a faulty wheel.
Empower Your Team
No one needs tell you that there is too much to do and not enough time in the day. You need a reliable team that you can trust to do their jobs well. By “team,” we mean your staff, your professional service providers (accountants, lawyers, etc.), and the colleagues, friends, and family you look to for counsel and advice.
Look at the non-dental tasks that take up your time. Ask yourself, “Is there someone else who can do this?” If the answer is yes, delegate that task. If the answer is yes, but you don’t trust the team member who should be doing that, it’s time replace that team member. You need everyone in the right seats for the practice to perform its best.
If you are a micromanager, you are probably inhibiting the performance of your team. You fear that if you aren’t closely monitoring something, it’ll go wrong. If your team is competent, you are most likely inhibiting their best performance. Being micromanaged creates feelings of distrust and insecurity, and people perform poorly under those circumstances.
We all perform best when we feel like we have autonomy, the support to do our jobs properly, and recognition for a job well done. These practices result in higher job satisfaction, which creates loyalty and efficiency.
If your team isn’t competent, it’s time to make hard decisions and bring in a consultant with the right reorganization and hiring skills. Proper hiring first saves hours of management later.
Invest in Your Own Business
You owe it to yourself to take a dedicated weekend each year to consider the things discussed above. Set goals, plan how to reach those goals, bring in advisors, plot how to develop a reliable, efficient team.
A lot of this is going to require some investment: hiring experts, hiring new staff, training existing staff, making improvements to your office, learning new techniques. But these investments will pay off time and again, the more so the earlier you institute them in your career.
Remember, ultimately your end goal is likely retirement—getting what you deserve when it’s time to sell a dental practice. Don’t be afraid to put money into something that will move you further down that road.
Where to invest will vary from practice to practice, but doing the first three things (setting goals, creating a plan, bringing in expert consultants) will highlight where you can improve the most—that is, where the payoff will be greatest.
ddsmatch Southwest Will Help You Meet Your Goals for Selling Your Dental Practice
At ddsmatch Southwest, we don’t simply broker a sale. We come in early and advise on how best position your practice to help you meet your goal. If you are considering transitioning your practice in the next five years, we offer a free Practice Transition Assessment, with no-obligation, where we advise on potential practice investments to increase value and suggest physical and branding improvement, among other things.
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Typically, a dentist will only consider the value of their practice twice: when they first buy it, and again when putting up the dental practice for sale. Between the purchase and sale, most doctors are more focused on providing care and the daily operations than on building value in an ongoing enterprise. As a doctor considers transitioning their practice, they may consult with a business valuator or other outside expert who may advise on changes to maximize value in advance of selling a dental practice. There may be lost value, however, where a doctor isn’t thinking long-term about how to build value throughout their career.
When it comes to selling a dental practice, the owner must set aside personal feelings and consider what makes it a successful business, where it can be improved, and what factors really will make it attractive to buyers. Some things can’t be changed—location, for instance—but much of it can. Importantly, using smart business practices and up-to-date technology can improve the efficiency (and value!) of your practice more than you might think.
Location, Location, Location
While you can’t change your location, you can look closely at your location and see whether you are really meeting the needs and demands of your market. If, for instance, you started your practice in an area where the demographics skewed towards young families and addressed those needs, after 25 or 30 years, you will likely have a population that includes more middle-aged and older patients. This means more restorative work, less pediatric. The question here would be, have you adapted your practice—your services, your marketing, your equipment—to reflect this?
If not, your practice may have less value, as a buyer will look at the demographics of your location as they currently are, not as they were when you started. If your practice doesn’t appear well-suited to treat the population in which its located, you may have to accept a lower offer to account for the investment the buyer will have to make in adapting the practice to the current demographics.
If you aren’t ready to sell your dental practice, this is still a good way to adapt and build value. You’ll be better prepared when you do decide to transition. Knowing your demographic market will allow you to communicate to potential buyers how you’ve made the necessary adjustments over time so they don’t have to.
The Right Buyer for the Right Practice
A community can support a wide range of practices— pediatric specialists, ones that focus on cosmetic or restorative work, etc. You don’t need to try and cover all bases for all potential buyers, you just need to be sure that however you choose to focus your practice, that you’re using a good business model and maintaining a solid customer base. That’s what the buyer really wants—a strong foundation on which to build. Knowing your patient base well and having a clear record of services will communicate to the buyer whether yours is a practice they can build on.
But, this means that you should work your niche in a smart way, and you should keep your focus on buyers who are looking for a practice that is like yours. This is where a dental brokerage like ddsmatch Southwest can help. ddsmatch Southwest has buyers looking for all kinds of dental practices in Texas and New Mexico. Our specialty is matching the right buyer with the right practice.
Tangible vs. Intangible Assets
Where is the value in a dental practice? It may include land, a building, equipment, collections, a stable patient base, and growing a growing geographic market. All of these need to be carefully documented for buyers to review. But some of the real value in a dental practice cannot be reduced to spreadsheets—it is found in the intangibles of your brand reputation and the intellectual property of your practice.
Your brand is anything that builds goodwill among your patients, employees, and community. It includes your reputation, customer service (and perception of service), the quality of your work (and perception of that quality), patient loyalty, and employee loyalty. If you are selling your dental practice, you also have to be careful with your patients’ and employees’ sense of security.
The general rule is to not make the sale of the practice public to employees or patients until you absolutely must. Letting the cat out of the bag too early can create feelings of insecurity among employees, leading to potential staff turnover and the loss of team experience, patient relationships, and service quality. These may be traits your practice is known for. Likewise, while there will likely be some loss of the patient base during a transition, it can be reduced by careful communication about the transition once it’s finalized. You don’t want your sale to go south due to employee vacancies and a dwindling patient base.
Again, a dental broker can help in positioning your message for both your staff and your patients. In fact, ddsmatch Southwest brokers have experience working closely with practices and even actively participating in the staff information meeting as part of the process when appropriate.
Your other great intangible asset is your intellectual property. What is your intellectual property? It is the unique business practices that have made your practice successful over time. Even if you haven’t thought about it explicitly, successful businesses don’t just happen. If your practice is attractive to buyers, it’s because you’ve done something right. That “something right” can often be hard to quantify but it can be reduced to a set of policies that guide the operations of your business. For instance, if you have an informal policy for collecting co-pays or deductibles at the time of service (assuring continued cash flow and reducing collections risk), and your employees and patients understand and follow that policy, then you can commit it to writing and make it a formal policy. These policies, when examined in conjunction with your financial statements, show that the good practices can be relied upon, even after the keys to the practice are handed to the buyer.
Take the time to think about how your practice operates: why you do things the way that you do, whether it’s effective, and what improvements can be made. Then, write out a policy manual that describes the practices and make sure every employee has a copy and is familiar with it. Finally, make sure the policies are consistently and correctly applied in practice. If a policy or practice isn’t working as written, revise it until you get it right. This will be a road map for the buyer to keep the practice running a smoothly and successfully as it did under your management.
The Technology Trap
A common mistake doctors make when selling a dental practice is undervaluing the intangible assets and overvaluing technology. If, immediately before placing your dental practice for sale, you update all of your equipment to the latest and greatest, it is highly unlikely that you will recoup the costs of the upgrades in the sale. You may be better off keeping your old equipment and letting the buyer decide whether and what to upgrade (they’re likely planning on doing so anyway).
The exception to this rule is technology that affects income. This basically means technological upgrades that are made not for the sake of looking shiny and new, but because they are bringing something to the practice that translates into better service, higher revenues, or greater efficiency. For instance, business software might not impact your patients’ experience, but it can streamline your back end in a way that saves time and money by decreasing your overhead, accelerating your cash flow, reducing default rates, and lowering your billing and collection costs.
However, this kind of upgrade is something you should be considering at all times during your practice as a way to build your own revenue and asset value, not only as a means before the sale. If you upgrade your software but don’t have the time to create a record of how it builds value, then a buyer may assume it hasn’t.
Don’t Wait Until You Sell Your Dental Practice, Build Value Throughout the Practice’s Lifespan
Building value effectively is a marathon, not a sprint. Trying to boost value right before transition can be somewhat effective, but you’ll get much further if you are working towards it throughout your career. Owning a successful dental practice requires you to be a business owner as much as a care provider. But, being a good business owner can make you a better dentist. Paying close attention to the business side and considering improvements will translate into a better experience for you, for your staff, and for your patients. Also, by spreading the work over years, you’ll save yourself time and stress when it comes time to transition.
If you are considering transitioning in the next five years, it’s not too late to look how you can build value before you sell. At ddsmatch Southwest, we offer a free Practice Transition Assessment where we will discuss the current local dental practice transition marketplace, establish best transition options for your practice, suggest practice physical and image improvements, advise on potential practice investments to increase value, and review present and future staffing integration. Give us a call today and find out how we can help you meet your practice transition goals.
https://www.ddsmatchsouthwest.com/wp-content/uploads/2018/12/1-sell-a-dental-practice-selling-a-dental-practice_HERO.jpg6281200adminhttps://www.ddsmatchsouthwest.com/wp-content/uploads/2018/06/DDSMatch-buy-a-dental-practice-sell-a-dental-practice.pngadmin2018-11-06 05:00:042019-03-03 00:15:43How to Add Value Before Selling a Dental Practice
Anyone with experience with putting up their dental practice for sale will tell you that you need an experienced team of specialized advisors: dental brokers such as ddsmatch Southwest, a dental CPA, and a dental attorney, at the very least. There are too many details that require expertise and, frankly, this is too important to let any detail slide. Below is our recent conversation with David Cohen, a dental lawyer, of the Cohen Law Firm in Dallas, Texas, giving his perspective on what dentists considering transitioning their practice should consider and why a broker is a crucial member of your team.
Please tell us who you are and what you do for doctors with dental practices for sale.
My name is David Cohen. I own a law firm that specializes in helping dentists and specialists from a legal, transactional business perspective. What that means is I do a lot of practice transition work. I help draft and review contracts in connection with practice sales and purchases and partnerships. I also work a lot on business formations, business structuring, real estate in terms of buying and selling real estate and review of leases. Those are the main things that my practice specializes in. We have clients all over the country, and we’re well known for being very expeditious and responsive.
Primarily dentists then?
Correct. 99% of our clients are dentists.
How was it that you came to have a relationship with ddsmatch Southwest?
I just ran into Andy [Edmister], I think, at the Texas dental meeting, and we hit it off and we just talked about doing some work together. Andy gave me an opportunity on one of our transactions that went really well, and so we’ve worked on other transactions together.
What has been your experience working with Andy and ddsmatch Southwest?
The experiences have been great. Andy’s a really hard worker. He’s incredibly expeditious. He’s on the ball, and he really does everything he can for the client, but he also understands the full transaction and the scope of it, and that it has to work for everybody. He does his best to make sure that it does work for everybody, and I think in the end that that provides a really successful transaction that closes and optimizes the opportunity for it to close.
Have you done both seller transactions where you’re advocating for the seller and for the buyer, or do you generally do one or the other?
I don’t represent both at the same time typically, but I am sometimes on the buyer’s side and sometimes on the seller’s side. It just depends on the transaction. I’ve done both.
What’s your advice from a legal standpoint for a dentist who is to put up their dental practice for sale, or is even just starting to think about selling their dental practice?
I think there are two primary pieces of advice that I would have for that particular individual. Number one is make sure that they’re ready to sell. I’ve dealt with some sellers in the past that think they may be ready to sell, and they’re not, and it ends up being time-consuming for all parties involved. There’s time, money, and headaches for that particular doctor as well. They get to the finish line and realize it’s just not for them. Now, sometimes it just takes getting to the finish line for them to realize that, there’s no way around it, so I’m not knocking them. But if they can do the best they possibly can to begin with to really do some soul-searching and make sure they’re ready to sell, I think that’s extremely important before they start paying legal fees and spending their own time and money, and also other people’s time and money.
The second piece of advice that I would have is to hire a good team around you. That’s really important to know that you can’t do everything yourself. You specialize in dentistry, and even if you specialize in other areas, you probably don’t have the requisite time to do everything properly. It’s really important to have a team that’s dental specific, in my opinion, and really lean on them to help you. A team could consist of people like ddsmatch [Southwest] and Andy, or a lawyer, or a CPA, an insurance agent if they’re on the buying side—they need insurance, they need to get credentialed. Or a bank if they’re buying.
When you say, “Make sure they’re ready,” are you speaking about being emotionally ready? Or are you speaking about financially?
I think it’s all of the above. I was referring a little more to the emotional side of it, but I think it’s important to have all of the physical things ready. The office ready, or the records ready, and all of that. And I think that also comes down to surrounding yourself with the proper team, because those people are going to help you be ready from an operational standpoint to sell, but the doctor—only they can be ready from an emotional standpoint. I think it’s really important. It’s hard for anybody to let go of a business that they’ve operated, particularly for a number of years, and so there’s nothing wrong with that. But you really have to do some soul-searching and recognize if you’re ready to let go. Because if you’re not, you can either come to the end of the deal and have spent the time and the money, and that goes to waste because you’re no longer doing the deal.
But also it can kill a deal, because then you may not be as realistic about having a fair deal or thinking, “Well, I need to go work for 10 years for this buyer afterward, because I don’t want to let go and I want to continue to do this.” Now of course, there are different transactions and every one is unique in its right, and from time to time, you’ll get a seller who says to a buyer, “Hey, I’m looking to sell, but there’s one condition. I need to work for X amount of years. I know that might be more than the norm, but that’s just what’s going to work for me.” And that does happen from time to time, but in my extreme example, it just wouldn’t be realistic on a normal basis for a seller to think that they would just be retained for 10 years by a buyer to continue to work. Again, unless it was unique circumstance like an investment practice or something like that. So it’s important to be ready for those reasons.
What is something that sellers sometimes overlook as they prepare to transition their practice?
There’s one key thing I can think of that’s outside the box that sellers need to be prepared for when they sell a practice, and it’s very important because it can affect in an adverse manner the value of the practice that they sell or their ability to sell at all. And that is, if they have associates in the practice, make sure that they have an associate agreement in place with those associates. Now that sounds like a no-brainer, but there are a lot of doctors out there that don’t have associate agreements with their associates. So it’s important to have that agreement, not only because you want to protect yourself as an employer, but also you want to have a non-compete, so long as you’re in a state where non-competes are valid and enforceable against associates.
Because if you don’t, even if you’re not in fear of that associate competing, the buyer’s going to want that. And if the buyer believes that the associate can open up next door, and that associate has goodwill in the practice because they don’t have a non-compete, then that’s going to be problematic and the buyer is either not going to buy the practice or say that it’s not worth as much, and try to negotiate the value of that practice down. It can be a mess to try and get associates to sign non-competes and associate agreements after the fact, because they really don’t have any incentive to do it unless they’re dying to have a job and they know that the buyer’s going to retain them. Then, maybe they’d be willing. So, long story short, if there’s one thing outside the box that’s really important—even if a selling doctor does not feel they need an associate agreement or they’re not worried about their associate competing—it’s really important for preservation of value of the practice that they’re looking to sell to have that in place.
If we’re talking about both buyers and sellers, what are things that might not be on their radar that they should be considering?
I think the one thing that people need to understand when they’re going into a transaction is that, particularly in the dental world, is that a transaction has to work for everybody in order to be successful, and if either side comes into the deal wanting to scrap for every inch for themselves and don’t understand that there’s another party involved, it can make for a very difficult transaction. And it can actually cause tension between the parties to the extent that if you’re a buyer and you’re being a pain, the seller won’t have the incentive to help transfer that good will after the closing to the best of their ability. Of course, they have to per the contract, but you want, as a buyer, the seller to go out of their way, above and beyond, to help you transfer the good will in the practice and have a smooth transition. On the seller side, you want to make sure that the buyer’s comfortable and that the buyer feels good about the deal.
So that’s really important, to have realistic expectations and understand what negotiation is all about. In my opinion, negotiation is all about making sure that you’re getting more of what you want, but that the other side is, not below the status quo, where it’s not a win or lose game.
Negotiation’s not about winning or losing or beating the other person, it’s about getting more of what you want in the deal, and I think that’s really important. People can lose sight of that from time to time. For instance, I’ve seen sellers say that they are going to sell, but then if the buyer decides that they might sell their practice to somebody else that the seller gets to swoop back and take it back. Well, that could obviously limit the market ability of the buyer, and so it’s not something typically buyers want to do. That causes problems both from the perspective that (a) the seller doesn’t want to let go, as we’ve already talked about at the beginning of this interview. But (b) it also is an unrealistic expectation that is not about getting more of what you want, it’s about taking as much as you possibly can and having a foothold in everything even after the transaction. So that’s just one example of maybe overextending or having unrealistic expectations in the process.
I think the biggest thing that people need to understand when they go into a deal is that it’s important to get more of what they want in the deal, but it’s not about winning and losing. It has to work for everybody or it’s not going to work. Either it won’t happen because it’s not going to work, or it does happen, and then there’s a number of issues after the fact. Nobody wants issues after the fact. The buyer just bought the practice, last thing they want to do is deal with issues when they’re trying to make good on their investment and run a practice. The seller wants to ride off into the sunset. They don’t want to be looking over their shoulder with problems after the deal.
Are there any other things that might be more specific to the legal aspect of putting a dental practice for sale? Is there anything that you’ve seen with your clients realizing, “Oh, whoa, I didn’t know that would matter.”
If they [the selling doctor] doesn’t own the building and they have a third-party landlord that they’re leasing from, often they’ll go into the transaction expecting that the landlord is just going to allow them to assign the lease to the buyer without recognizing that the lease they signed probably says that they cannot assign the lease without the landlord’s consent. Now, hopefully they have some language in their lease that says, “Consent can’t be unreasonably withheld or delayed,” meaning that the landlord can’t be unreasonable about it, but they still can withhold consent if they feel it’s appropriate. It’s important that sellers understand that some landlords can be a little bit funny, and it’s important to use your team, the ddsmatches of the world, to bridge any gaps that might be there.
Or if you have a preexisting relationship with that landlord, make sure to continue to have open communications about the fact that you are embarking on a sale transaction and that you need cooperation. And then you’ll do whatever you can to get cooperation from that. I think those things are really important, because it’s not a home run. Every once in a while a landlord does not allow the lease to be assigned, or they may require some egregious things like the seller continuing to guarantee the lease after the fact, even through a renewal term. I’ve seen landlords or sellers to do that. So I think that’s one thing that’s really important, is not only the associate agreement dynamics that I mentioned, but also making sure, acknowledging that the landlord is a big part of the deal if you’re leasing. And that they can actually stop you from selling in some instances. So it’s important to have a really good relationship there.
Are there any other things that can pop up if you own your property rather than lease?
Yeah. I mean, if you own the property and you’re planning to lease the property to the buyer, it’s important to have those terms outlined and a letter of intent so there’s no surprises down the road where you’re getting to the finish line of the sale transaction, and then the buyer doesn’t want to pay the rent that you’re asking for, right? So that’s important, but if you’re actually selling the building to the buyer, it’s important to make sure that your building is in the proper condition to be sold, because the buyer is most likely going to get an inspection and a survey done. And they’re going to do their due diligence on the property. So again, you don’t want to get to the finish line and then the buyer finds defects in the property or something, and now you have an issue and you can’t even embark on the transaction. I think those would be my advice as far as owning the building is concerned.
When a dentist is considering transitioning their practice, how quiet should they keep that. Is there a problem with too many people knowing about it?
I mean, every deal’s different, every situation is different. So this may be more impactful for some than others, but I would say one piece of advice that I just ran into in a transaction is, I was representing a buyer in a deal, and the buyer in the deal ended up not being able to get the financing to buy the practice. And they also couldn’t come to an agreement on the lease with the third-party landlord for the building. So they had to back out of the deal because they couldn’t get the financing for the deal, and also even if they could, the lease was going to be an issue. That’s pretty rare. I mean, most deals do go through, but this was sort of on the rare side that it didn’t. And the seller had told the staff in the practice about the deal, and had done so for a significant period of time, actually. Even before we even had a signed purchase agreement or had gotten that negotiated. So they made that mistake, and it’s going to probably cause them adverse effects.
They actually blamed the buyer for that. We actually see things a little bit differently in the sense that we didn’t tell them to tell their staff. If you’re on the seller’s side, it’s important to not tell the staff until you have to. Now, when you have to is going to depend on your practice and your situation. For some they have no choice, they’re going to have to tell them even before the purchase agreement is signed. For others, they can get away with making sure they have signed documents before they go and tell the staff. So that’s where you bring your team in. Andy [Edmister of ddsmatch Southwest] does a great job of that, facilitating it at the right time to make sure that they’re telling staff at the right time, and you can lean on your teammates as to when you’re supposed to do that.
What would you say to a doctor who thinks they don’t need the full team of advisors or a broker, that they can do this all themselves?
First and foremost, as I mentioned before, even if the seller is motivated and has the itch to go do all the things a broker would do, they probably don’t have the time. I would be certain they probably don’t have the expertise, but let’s just say they did, let’s say they’ve been a broker in the past before they have their own practice. They probably don’t have the time to do it properly, and when you’re selling a practice and you’re going to take in a lot of money, it’s important to do everything properly. And so it’s really important to retain a broker in the transaction if you’re selling because they are going to work really hard for you to, number one, locate a buyer. And not just locate any buyer, but locate the right buyer for your practice which is something ddsmatch does very well. They’re also going to help facilitate the transaction. There are a lot of things that go into a transaction that doctors don’t realize.
Many people think sometimes that brokers just sort of sit on the sideline, put parties together, and wait for the deal to happen, and that’s all they do. That’s not the case. Brokers work really hard to make sure that every part of the transaction is covered, and that they’re also bridging the gap between any kind of negotiations between the parties. Sometimes if attorneys are butting heads or something like that, the broker can step in and do a really good job to facilitate the deal to bridge any gaps and make sure that it goes as smoothly as it possibly can. We’ve already talked in this conversation about why it’s important to keep things very smooth in a transaction, because there is so much at stake and there are so many emotions that either, one, you don’t close a deal if you’re not able to bridge those gaps. Or two, you close the deal, but then you have problems afterward. As we know, nobody wants problems after the fact either.
Brokers are very important, not just to find the particular buyers that are good for your practice, but also to help hold your hand throughout the entire transaction.
Why would you recommend dentists use ddsmatch Southwest?
I would say that if someone came to me and said, “Hey, thinking about selling through ddsmatch. Should I do that?” I would say, “Yeah. They’re an awesome company. They have really hard working brokers.” Most of the work that I’ve done with ddsmatch has been with Andy Edmister, so that’s the person that I would talk about the most, but I’m sure the same goes for the other brokers. You want somebody who’s going to work really hard to not only get you a buyer, but get you the right buyer and cares about that, and who cares about the deal. They care about all the components that we’ve talked about on this interview, such as making it a good win-win for all parties involved. Even though the brokers represent the seller in the deal, and they do so zealously, it’s important that the buyer feels good about the deal too. Because, again, you don’t want problems that could derail the deal, you don’t want problems after the deal.
So they do a really good job at making sure that it’s a win-win and that everybody is happy, and that it’s fair and reasonable for everybody. Again, they work really hard, so certainly I would advocate their services.
We Can Help You Get What You Want from Your Dental Practice for Sale
At ddsmatch Southwest, we offer two things that will get you closer to what you want out of the sale of your dental practice. First, we have our Trusted Transition Process, a clear and consistent path to help you transition your practice while maintaining the legacy you’ve worked to establish. We put the wisdom and experience of hundreds of transitions from across the county to work for you.
https://www.ddsmatchsouthwest.com/wp-content/uploads/2018/10/1-dental-practice-for-sale_HERO.jpg6281200adminhttps://www.ddsmatchsouthwest.com/wp-content/uploads/2018/06/DDSMatch-buy-a-dental-practice-sell-a-dental-practice.pngadmin2018-10-05 05:00:492019-03-02 00:13:53Why it Takes a Team to Put a Dental Practice for Sale