Points To Consider When Thinking of A Dental Practice Transition or Sale
- Consult your financial advisor or CPA – Can you afford to retire or cutback? What does your portfolio look like? What income do you need to live off of for the rest of your life?
- Get a practice Appraisal – If you’re thinking about a transition, you need to know what your practice is worth. A rule of thumb will give you a ballpark estimate, but may not be accurate. Have a professional appraise your practice. We charge $2,495 for practice appraisals with a free update on the appraisal if done within 2 years.
- Consult your Tax Accountant on the ramifications of a sale – Are you an S-Corp or C-corp. If you’re a C-Corp, you may want to figure out how to switch to an S-Corp. Do you have an employment agreement? You may want to terminate the employment agreement. Seek good tax advice and counsel prior to a transition.
- How’s your practice health? Are your numbers looking good? Still getting new patients? Technology up to date? Décor up to date, or do you still have the olive appliances in the staff room? Consider a remodel if you’re 5 years or more away from retiring. If it’s closer, consider a cheaper update like paint and carpet.
- What are the capital gains outlook? Currently, the Bush tax cuts expire at the end of 2012. There’s another 2.8% healthcare tax also kicking in. Does that make it worth it to sell sooner rather than later?
- Do all “key” employees have non-compete agreements? If you have an associate, that is essential.
- Clean up your accounts receivable. Are there a lot of credit balances? Are there a lot of accounts greater than 90 days old? Clean it up!
- Start planning with your practice Transition consultant well ahead of time. As a practice transition consultant and broker for Washington and Oregon, I can help get things in place prior to your transition.
- Do you own your building? Get an appraisal if you’re thinking of selling it as well. Or, if not, get a market rate on what the lease should be.
- Interview several attorneys who specialize in dental practice transitions in Washington or Oregon.
Planning ahead of time and asking these questions will help you feel more at ease when you do decide to do a practice transition or practice sale and seek retirement.
Rod Johnston, MBA, CMA
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