By Kevin Brady, Practice Transition Advisor
Transitioning the practice is probably one of the biggest decisions a dentist will make in their career. Deciding whether to transition the practice to a partner, associate, a new dentist, or corporate dentistry, you will need a plan and experts to help you make the right decision.
3 to 5 Years Before Retirement
Having a financial plan when you are 3-5 years out from selling your practice will allow you to know what the total value of your assets are and what value is needed from your practice to afford to retire. Knowing the value of the practice 3-5 years out will also allow you to focus on reducing debt, increasing production, and collections, which are critical factors in determining the practice valuation.
When developing your financial plan, you will need to have your CPA do a thorough review and analysis of your financials and advise of any necessary adjustments. This would include family members on the payroll who don’t work in the office, expenses that are above industry averages, and other expense benefits being run through the practice. Review your internal and external marketing programs with your marketing professional to focus on increasing new patients and adding additional revenue to the practice.
1 to 2 Years Before Retirement
Once you have an established financial plan and are 1-2 years from retirement, you need to find a dental broker to help with a practice valuation and options for selling your practice.
The benefits of enlisting a professional dental broker are:
- Independent and accredited appraisal of your practice’s worth, the patient population, equipment, and, if applicable, the real estate.
- Knowing what your minimum sales price will need to be to meet your financial goals to retire.
- Exploring the different buyer options for the sale and which one is right for you.
- Developing a marketing plan for your practice that will keep it confidential until a buyer is found.
- Determining the average length of time it will take to market and sell your practice.
- Identifying what improvements or changes could make the practice more attractive to potential buyers.
1 Year or Less Before Retirement
It is time to implement your plan to sell the practice. The average practice takes 6-8 months to sell Pre COVID-19. Some rural practices might average 18 -24 months to sell. Enlisting a professional broker will save you time putting together a marketing prospectus and then marketing the practice locally and nationally. A broker can also assist you with updating your valuation to determine the asking price for the practice. Keys areas to focus on with less than a year are reducing as much debt as possible and keeping the hygiene and doctor production as high as possible.
There is no doubt that the COVID-19 pandemic has created new considerations for anyone who is considering selling their dental practice. Selling a dental practice doesn’t happen overnight. Developing a plan with experts can ensure you get what you want out of a sale while maximizing your dental practice’s value and allowing for a smooth transition to the purchaser.
Omni Practice Group has been helping dentists for over 15 years develop plans for dentists to transition their practice. Our goal is to help you find the right buyer and make a smooth transition of your practice when the time is right.
Contact us today for a free no-obligation consultation with one of our Practice Transition Advisors. We are here to help – Kevin@omni-pg.com.
Want to learn more? Attend our webinar on Friday, February 19 – Dental Practice Valuations: How Much Is Your Practice Worth? Sign up here!Read More
By Rod Johnston, MBA, CMA, Practice Transition Advisor
You’ve heard the stories of people doing their own electrical work on their house only to be electrocuted when they try fixing the bathroom light while standing in the bathtub full of water. Or the person who decides to fix his brakes on his car only to accidentally cut his brake line and end up driving off a cliff. They have awards for some of these mishaps. They’re called the Darwin Awards.
Deciding to sell your own practice may not give you a fate as extreme as the Darwin Awards, but it could cost you money, your staff, lose patients for the buyer, or end up in a lawsuit. That’s if the sale even makes it all the way to the closing table. I have been selling practices for 15 years. I keep thinking I have seen it all, but then something out of the blue pops up. For example, I was called as an expert witness to review agreements in a prior sale where the buyers were suing the seller. The buyers thought they were buying a practice and a building. They wanted to save money and not use a broker, or an attorney. The buyers showed up at the practice after closing only to find an empty space. It turned out, they just bought the building and not the practice. The agreement used was a real estate purchase and sale agreement and was not for a practice sale – a big and costly mistake on both sides.
Lenders and attorneys report that practices that are sold without a broker have a 50% chance of failing before the practice closes. I believe the failure rate to be higher than that. Reasons they fail include buyers losing interest, seller and buyer can’t negotiate a disputed item or clause, seller and buyer don’t know the steps to the transaction, and confidentiality is breached by one of the parties. A failed sale can disrupt a practice if the staff leaves knowing the practice is on the market.
When selling a practice, you need to wear a lot of hats and possess expertise in a wide variety of areas. Transition consultants need to be knowledgeable in law, accounting, tax, real estate, valuations, psychology, negotiations, design, equipment, technology, software, project management, sales, analysis, practice management, human resources, and mediation. In addition, you need to have a lot of extra time. On average it takes 200 hours to sell a practice a lot more if the sale is to a corporate buyer. That time includes gathering data to do the valuation. Putting the valuation together. Developing a prospectus or offering. Creating advertising, placing the ad, taking phone calls, meeting prospective buyers, doing background checks on buyers, talking with lenders, assisting buyers in due diligence, working with attorneys, negotiating bumps in the road, reviewing agreements, and more.
You also run a financial risk. You could undervalue your practice or get taken by a buyer who is good at talking and negotiating a good deal for themselves. If there is a corporate buyer involved, you need a broker even more. Brokers can assist in negotiating amongst several corporate buyers to ensure you get not only the best value for your practice but also the best terms. Corporate transactions require a lot more scrutiny, due diligence, negotiating, and time. Done right and with patience and you also can reap the reward.
Selling your practice on your own may not get you a Darwin Award. But, doing so comes with a lot of risks and requires a lot of time and expertise. Why risk the equity you have built up over the years to save money? Pennywise and dollar foolish could cost you thousands, if not hundreds of thousands of dollars as well as non-monetary losses.
Give Omni a call today for a free consultation and learn how we can help. Call 877-866-6053 or email firstname.lastname@example.org.Read More
Kevin Brady, Practice Transition Advisor, gives dentists important information about credit balances in a dental practice.Read More
Buyers and Sellers – One of the things to look out for in a dental transition is Accounts Receivables. What should you be looking for? Megan Urban, Practice Transition Advisor with OMNI Practice Group, will get you started:Read More
By Megan Urban, Transition Specialist
After working with hundreds of dentists for many years, we want to share the top 5 areas of missed production/collection. With small changes to your everyday routines, you can increase collections to put towards new equipment and technology, as well as savings and retirement.
1. Patient Retention
Everyone worries about current new patient flow, but what about all the new patients you have seen? If you have 1,500 active patients, you should complete at least 2,550 codes 1110, 1120, and 4910. On average, we see at least $30,000 per year in missed collections in hygiene (patient retention) and that doesn’t include collections from potential treatment diagnosed in hygiene. Small changes to your hygiene program can help you capture more of this missed production.
Most dentists report they ask for referrals, but do you really? Most dentists state they talk about it at team meetings or huddles, but who is asking and what exactly are they saying? With comfortable scripting and a plan, you can successfully ask for referrals.
3. Incomplete Treatment
How do you and your team urge your patients to complete treatment? How does your team follow up on incomplete treatment? Do you know exactly what they say when they call? We often see about $100,000 in incomplete treatment that can be scheduled by using solid scripting.
4. No-Shows and Short-Notice Cancelations
On average, we find at least $40,000 per year in missed collections due to missed appointments. It’s much higher if it’s large production cases. With proactive scripting at scheduling and confirmations, this can be reduced.
5. Accounts Receivable
At least $90,000 is the average of uncollected production. Setting solid financial arrangements from the beginning will minimize this issue, and I’m not talking about simply stating what their balance will be. Financial arrangements and collections is also customer service. Remember the old saying, “the worst fitting pair of dentures are the ones not paid for”!
Please contact me for a complimentary analysis of these items in your practice to locate areas of opportunity.