Want to Purchase a Practice?
By Megan Urban, Practice Transition Advisor
Want to purchase a dental practice? Here is a basic starting To-Do List to get you going!
– Where do you want to practice and where will you and your family be happy?
– Get your last 3 years of personal tax returns together.
– Gather your debt details: student loan, credit card, mortgage, etc.
– Start to look at your current production, or if you are in public health, monitor your procedure frequency report.
Talk with a transition specialist that can guide you through the process. They will look at some or all the following items in detail with you:
– Select a dental-specific attorney, bank, and CPA.
– Assist you to understand details of the practice, such as active patient count, expenses, insurance participation, recare, procedures completed and those referred out, potential marketing, cash flow, and due diligence in general.
Read MoreWhy We Chose to Sell Early in Our Careers and What We Learned
By Cindy Pauley, DDS, Practice Broker
Early retirement in dentistry is different than most fields. For most people working life involves a minimum of 5-7 career changes. With dentistry, we generally sign up for our entire working life. So, anything less than a lifetime can be considered early. And so our story begins…
My husband is in our office between patients massaging his aching thumb joint because the recent cortisone shot is starting to wear off. I am popping my third Advil of the day to deal with what has become regular neck pain and I say to him, “what’s our exit plan?”
His answer is quiet and dulled by the fact that this isn’t the first time I have asked this. “I don’t know?” That’s his quick answer. “Maybe 5-10 years from now”, is his long answer.
But something has changed in me. I no longer feel the joy I once had when I am working. I know he feels the same but doesn’t say it as much. Most times it’s an actual physical ache but sometimes it’s a mental one. Twenty-eight years is a long time in any career…oh wait…except dentistry. We are supposed to graduate with our advanced degrees and never look back on the careers we have chosen for ourselves. We are to never have a thought that maybe this is no longer where my energy and passion lies.
Turns out it is not all about having the most money possible in your lifetime. Money can put a down payment on a lot of things both figuratively and literally. But there is a word I have come to love with regard to money and it is the word “enough”. Did we have “enough” to live comfortably? Did we have “enough” to not worry about finances driving the important choices in our life? It turns out some of our final decision-making depended on the value of our practice. And so I looked at my husband and said “let’s get our practice evaluated again and see what we find out.”
We already had an evaluation done by a local practice management team that had sold my husband’s first practice a decade earlier, but it seemed low to us. We had assumed, at that time, that all practice valuations were the same. We thought practices were like any other piece of real estate, but boy were we wrong. Our practice wasn’t any more profitable than the last time we had a valuation, but I took a gamble thinking that maybe all were not the same and we would try again.
I started doing research in the field and my search sent us to the Omni Group. They did practice brokering exclusively and they had been recommended to me by other dentists. I gave them a call and started talking to Rod Johnston. He was both mild-mannered and highly informative. I found out much later he just also happens to be the owner of the company. He came to our office and met with us and explained the valuation process. It seemed much more detailed and complex than the first one we had done. We forwarded the necessary documents to Omni and in about a week we had a fresh perspective on our practice’s value.
Wow, what a difference a new look made! The final price was almost 25% higher in this valuation compared to the previous. How had the other valuation been so off? Would our practice sell at the new price? Well, it didn’t take long to answer all those questions. After being on the market for about one week, we had three full price solid offers and the ability to choose our buyers and our own transition plan.
The subsequent transition met and exceeded our goals. We wanted new owners that shared our philosophy of patient care. We wanted none of the staff to find out until the final paperwork was signed, and a quick exit with little to no overlap in our time in the practice. We achieved all of those goals and a full price offer.
How did that happen so quickly and how could the price point be so different? We didn’t over-analyze at the time; we were just happy it was working out so well. The full understanding wouldn’t come until later when I decided this whole process was something I was passionate about and became a broker myself.
When the dust clears and the paperwork settles out, there are multiple pathways you can follow. The most important thing is to remember as a dentist we are not just skilled at one thing, we are in every aspect of business from top to bottom. When you run a dental practice you literally do it all. The list is long, so I won’t bore you with it, but never forget how talented you are.
My husband’s path after clinical dentistry was to form a company that would oversee the maintenance and upkeep of multi-family and commercial properties which included our own holdings. I immediately got my real estate license and formed a management company to take over the tenant relations and leasing. After hiring an employee and settling into the rhythm of our new lives I still felt I had more energy and passion that extended outside of the new world we had created.
When I added up the things that I loved: business, real estate, and the dental community it was an easy decision to move forward with my new career. I only wanted to be a practice broker in one place and that was with Omni Group.
I found out pretty quickly that what looks simple to the buyers and sellers is actually a tricky business. First, on the subject of valuations. Omni does a three-part and highly complicated deep dive into each practice. This includes the goodwill, location, production, collection, overhead, and investments one has made in their practice. As far as marketing, Omni blankets the airwaves literally across the country and Canada to get the news out of the practice you are selling. They have more buyers tuned in than any other brokerage house. They also have more listings. Relationships with lawyers and banks come in as well. It turns out that the brokers are at the ready to find competitive financing with banks that are actively lending on dental practices. Each party needs an experienced lawyer to take them to the finish line and Omni works closely with local attorneys who are experienced in dental practice transitions.
One thing that came up that I didn’t expect was how much I would care about who would take over our practice. I have bought and sold many properties in my lifetime, some more valuable than my practice. In all cases, my level of really caring who bought them was low. The highest price was usually top of mind. Not so with the dental office. Obviously, a good price was important, but it became clear that someone who supported our legacy and would take good care of the staff and patients was of equal value. We were given full ability to meet with and learn about prospective buyers of our practice and made a choice that satisfied all our requirements.
When interviewed after the sale, no dentists have ever said they sold too early. In fact, it’s often the opposite. As it was for us. If we could do it all again, we would only have started the process sooner.
The end of our journey in clinical dentistry was just the beginning of our next chapter in life. I have spent my life around enough dentists to know very few of us really fade into the sunset. Once you sell your practice, you will begin writing the next chapter of your life and I promise it will be a good one.
Read MoreMarket Prices of Dental Practices – A Closer Look
By Corey Young, DDS, Practice Transition Advisor
“What are practices going for?” I get asked this question a lot. I like to ask the following question back. Are you buying a house to live in or a rental unit? This of course usually gets me a confused look, as the person asking me this is looking for a practice and not a property. Let me explain my analogy.
A residential house is a non-cash producing, market-based asset. Its value is largely determined by the resale value of similar houses in the area. Most of the big purchases we make in life are in this category. Paying ten percent too much for such an asset usually is a bad move. Being a good shopper really pays off.
Conversely, let us look at a rental unit. Actually, let us look at two rental units. Both units are very similar on a physical basis and are two blocks apart. Unit one is selling for $250,000. Unit two is selling for $300,000. Unit one is the better deal, right? What if I told you unit one ends up losing $100 a month after everything is paid for? What if I told you unit two ends up making $200 a month after everything is paid for?
If you approached the rental unit only worried about the asking price, you are looking at the wrong numbers. If you are looking at practices only based on asking price based on a percentage of gross collections, you are doing the same thing. I have seen practices selling for 50% of gross collections that are overpriced. I have seen practices selling for 90% of gross collections that are a steal.
My advice is to not go it alone. Seek out qualified transition specialists. Find the practice that enriches your future.
Read MoreAre You Considering a “Dental Practice For Sale By Owner”?
Many dentists will seek to sell their practice by themselves, presumably to “save money”. Sometimes the grass is greener on the other side so we do things out of emotion instead of “doing the math”. If you have a couple of hundred hours of spare time and love working with intelligent, challenging people, and showing your dental practice to strangers on evenings and weekends, you are going to love the process of selling your practice.
For most dentists, their practice is one of their most valuable assets, so if that sounds like you and you would like to go “For Sale by Owner” then now is the time to start to prepare. Probably a good time to study a little law, accounting, marketing, advertising, sales, and perhaps negotiations. Think about how you are going to tell your staff or decide to wait until they figure it out. Be sure not to lose them or your practice may become more difficult to sell (and you could lose more in practice value than the commissions you are saving). If your practice has seen better days you might consider sprucing it up a bit or maybe a little remodeling? As a do-it-yourselfer, you will save even more money.
Ask yourself “how do I value my dental practice” and balance that with what the market will bear. Keep in mind that the buyer will always think they are paying too much and the seller thinks they are selling too low. Once you’re ready to go, write your ads, contact (play phone tag with) the various media vendors to figure out how to best execute your marketing plan. Piece of cake, pay the man and place your ads. Soon your phone will be ringing, don’t forget to follow-up with the inquiries in your new email address.
Schedule the viewings after hours, on your day off, and on the weekends. Don’t be too disappointed when something happens and the person doesn’t show up or when the “tire kickers” don’t give you feedback. Soon if all goes well you will receive a Letter of Intent. There will likely be a number of things you’ll need to do to assist the buyer with their due diligence so be prepared to assemble all the information ahead of time if possible. If you are leasing the office, do whatever you can to negotiate with the property owner for as smooth as a transition as possible with the buyer. WARNING: half of all deals fall apart because of landlord conflicts with the seller or buyer. If this happens to you, and there is a 50-50 chance it will. Be prepared to start over and keep your emotions in check.
Is it worth it to “Do It Yourself” to sell your dental practice? It depends upon how many hours it takes, how much distraction you are comfortable with, and how much quality of life you are willing to sacrifice.
The legal community has a saying, “He who represents himself has a fool for a client”.
Inspiring Your Successful Dream Practice
Transition your current practice to the productive, low volume, insurance-independent, profitable practice you used to dream about in dental school.
GIG ENTREPRENEURIAL MASTERMIND SUMMIT
Inn at Eagle Mountain, Fountain Hills, Arizona
April 23-25- 2020
Please download the flyer for more information:
gig_-_mbf_flyer-brochure.pdf (38 downloads)
