After a career spent building a practice, caring for patients, and being an active member in the community many doctors find retirement a bittersweet time. Selling your practice to another doctor brings the fruit of all the hard work you put in, but it is understandable to be cautious about who you sell to. You aren’t simply selling the equipment or real estate, you’re selling your legacy, and watching it live on under another doctor’s care. When it comes to dental practice transitions one thing is certain: it is never too early to start thinking, planning, and preparing for selling a dental practice. Clearly mapping out your transition at least five years ahead of your planned retirement date will not only bring you peace of mind as you move on, it will give you a roadmap to success and help you avoid transition potholes.
If you’re planning a dental practice transition in the next five years you need to start thinking and planning for it now. Below we outline the first steps you need to take to ensure a smooth transition when the time comes.
Set Your Transition Goals
When we ask our clients about their goals during their dental office transition the first thing that comes up is typically the sale price, or net profit they hope to gain. In instances where the selling doctor is retiring the sale price is often driven by what he or she needs to live on after retirement. While this is one of the most important factors when selling a dental practice, it certainly is not the only one. Before listing your dental practice think about these additional factors:
- Do you want an outright sale? In an outright sale the selling doctor hands over the keys as soon as the deal is done. This type of sale allows you to move on quickly and fully enjoy the benefits of retirement, or whatever is next in your life.
- Do you want a slower transition out of your practice? Rather than selling outright many doctors decide to take on an associate who will purchase the practice over time in what is known as a buy-in. This gives the selling doctor time to help the office staff and patients adjust to the new owner, and provides a less abrupt life change. Taking on an associate can also help doctors who want to take a step back and slow down their own production without affecting the value of their practice. Learn more about what goes into a buy-in, including the pros and cons you must consider, on our dental transitions blog.
- What are your hopes for your legacy? After years of building a thriving practice it can be difficult to watch someone take on that practice and run it differently. The buying doctor may choose to change the practice’s name, switch which insurance companies they work with, or bring in their own staff. While selling a dental practice always means handing over control to someone new, there are some steps you can take to choose a buyer who will take care of your legacy and your staff. However, choosing a buyer who will run your practice how you want may mean passing up a slightly more lucrative purchase offer. Decide what is more important to you: a buyer with deep pockets or a buyer who will run the practice the way you built it.
It takes time to determine what your priorities are during a sale, which is why it is beneficial to start thinking about your goals early. Talk with your team of advisors and do some research of your own into the benefits and drawbacks of certain types of sales. The DDSmatch Southwest dental transitions blog is a good place to start looking for answers to common transition questions, whether you are on the buying side or the selling side. If you’re headed toward retirement the DDSmatch Southwest Practice Optimizer Experience is another useful tool that will give you concrete steps for a smooth transition into retirement.
During the goal-making phase of selling a dental practice we recommend keeping an open mind about the future, and thinking through multiple options for your eventual transition. Nothing is set in stone, and you still have time to change your mind. You may think you want to hand over the keys and get on with your retirement, but when the time comes to put your plan into motion you find yourself wanting a slower exit. The important thing here is to determine what your priorities are and discuss your options with trusted professionals. Knowing your priorities and options will help you with the next phase of the transition process.
Planning Ahead for Transition Success
When you’ve nailed down the goals for your eventual transition it is time to start planning. Dental practice transitions are complicated and hinge on several factors, some of which may be competing. You need to determine which factors, such as selling or holding on to your real estate, take precedence, and be flexible with the other aspects of the sale. No two transitions are alike, which is why it is so important to work with experienced transition specialists.
When you are five years away from selling a dental practice it is time to get a practice assessment. Why do you need a practice assessment so far in advance? Assessments, performed by a dental broker or dental business valuator, provide a full picture of your practice and give you an idea of how you can prepare it for a successful sale. Planning ahead gives you plenty of time to make changes in order to get the most from your practice when it is time to sell.
At DDSmatch Southwest we work with third party business valuator, Blue & Co., to provide accurate assessments. Working with a third party valuator gives some needed distance, as most business owners tend to overestimate their practice’s assets. This isn’t bad, in fact it is expected because of the amount of work, both emotional and physical, the selling doctor has poured into the practice throughout the years. However, it is something to keep in mind when you are selling a dental practice. The experts at Blue & Co. will take an objective approach to valuation, making note of factors such as your practice’s production over the past few years, overhead costs, and equipment included in the sale. Learn more about how practices are valued on our blog.
What happens when your initial valuation isn’t as high as you would like? There are changes you can make around your office in the years leading up to a sale that will help boost its value. However, not everything you do around the office will result in a higher sales price. For example, repainting your office is typically quick and inexpensive, and gives older offices a fresh look. On the other hand, replacing large pieces of equipment in your office is not worth the money, unless you are bringing your practice up to date with digital technology. Before you make changes to your practice speak to your team of experts about investments that will yield a return when it comes time to sell.
Another factor you need to plan ahead for is your transition timeline. Selling a dental practice means negotiating financial, legal, and real estate details, which can drag on and on if there is not a non-negotiable closing date. In real estate this is called a “time is of the essence” clause. If one party fails to meet the set deadline the deal is off. Your dental practice transition specialist can help you set a non-negotiable closing date that gives the buyer plenty of time for due diligence and negotiations, while still ensuring the process moves swiftly.
However, even with a non-negotiable closing date, it is important to remember each transition is different. Factors such as whether your practice is in a big city or rural area play into how quickly the deal can be done. Again, this is where you need to speak to an experienced professional. In order to get what you want out of the deal you may need to change the schedule. An experienced transition specialist will be able to advise you on whether or not change would be wise. If 2020 has taught us anything it is to be flexible with our expectations.
Selling a Dental Practice With Expert Help
As we’ve mentioned several times, speaking with a team of trusted professionals is essential throughout your transition process. If you’re just getting started you may be wondering who to include on your team of advisors. We recommend at minimum working with a dental CPA, dental attorney, and dental broker.
Most dental professionals already have a dental CPA helping them with accounting and other financial aspects of owning a small business. If you do not, or you have a CPA who does not specialize in dental practices, it is time to find one. During a dental office transition your dental CPA will be invaluable. They will be able to parse out the tax implications of different types of sales, and help you allocate funds in a way that is advantageous to you now and in the future. This is especially important for dentists moving into retirement and looking to maintain a certain lifestyle. An experienced dental CPA will save you thousands of dollars, and help you avoid costly mistakes.
Next, you need a dental attorney to help in your transition. We recommend using an attorney who works specifically with dental offices rather than a general attorney. The reason for this is that there are many aspects of owning and selling a dental practice that are not present in other industries. There are standard practices your attorney should be aware of, as well as unique situations in each sale they will have to deal with. Working with an experienced dental attorney will reduce your costs as they will already be familiar with the ins and outs of the dental industry. In addition, their in-depth knowledge of dental transitions will protect you from legal issues that can delay the process.
Finally, you need an experienced dental broker. Your broker is your advocate throughout the transition process. They will help you set realistic goals and expectations, and walk you through the process from start to finish. Experienced brokers have been through the process countless times, and know how to make a deal that will benefit everyone involved.
Your dental practice represents years of time and investment, and carries your legacy. Selling a dental practice is not something you do on a whim, or with frequency. That is why it is so important to choose your team of experts wisely. The right team will not only help you get more out of your practice, they will help you avoid mistakes and roadblocks for a smooth, stress-free transition.
Working with the Transition Experts at DDSmatch Southwest
Your dental practice isn’t simply a job, it is your life’s work. Unfortunately, many dental practice transitions are derailed, the selling doctor doesn’t get the full value of the practice, or their goals are not met because of inexperience. With the right team in place you can avoid these outcomes, and protect your life’s work.
At DDSmatch Southwest our experienced dental brokers have worked with dentists from around the country helping them set their priorities, reach their goals, and complete their transition process efficiently. Our Trusted Transition Process™ gives clients a clear and consistent roadmap so they can have confidence in the next step of the process.
If you are considering selling a dental practice in the next five years call our office to learn about planning ahead. If you are approaching retirement ask about our Practice Optimizer Experience. This unique service will help you plan for retirement and identify areas of improvement in your practice so you can get the full value of what you’ve built.
Are you ready for the next step in the process? We’re ready to help you in your journey toward a successful dental practice transition. Call our office today for a free, no-obligation Practice Transition Assessment.