Selling Your Dental Practice Does NOT Mean You Have to Stop Practicing
Whether you have owned your practice for 40 years, or owned it for 5 years, selling your dental practice does not mean you are done practicing. We often meet with doctors who are sick and tired of managing their staff, doing the bookkeeping, playing games with the government agencies, dealing with the ups and downs of the economy, the changing environment of the profession, and on and on. The doctors are about to crack but think they cannot yet sell their practice as, according to their CPA or financial advisor, are not yet financially ready to retire. We counter this by asking them “who said you need to retire?” You can “harvest your equity” and either work back in the practice or go work for another practice. What the CPAs and financial advisors may not see is that your practice collections numbers are going down. Or, your blood pressure is skyrocketing due to the above-mentioned challenges of managing your practice to the point of a heart attack coming right around the corner. If you have a good amount of equity in your dental practice, we can sell your practice and you can put the cash in the bank and work as an employee until you are ready to retire in 5, 10, 20 years, or as long as your heart desires. Transitioning out of your practice may be the way to enjoy your profession again.
Dental Partnerships
By Megan Urban, Practice Transition Consultant, Omni Practice Group
Dental partnerships can be great or not-so-great. They can include different scenarios: buying a partnership, adding a partner to your existing dental practice, or a start-up partnership. To ensure you have the best outcome, financially and emotionally, you’ll need to consider some important questions.
- Are you friends, relatives, or colleagues with the people whom you are considering entering into a partnership with? Are you convinced you can get along in a work environment?
- How will you resolve disagreements and make decisions regarding advertising, patient care, team management, and acquiring new equipment and technology?
- How will you divide up responsibilities within the practice?
- Is there enough physical space for more than one dentist? Are there enough patients?
- How will you divide up new patients and hygiene exams?
- How are you going to determine compensation, such as 30% of individual collections, then 50% split on all additional income and costs? If one of you performs procedures with much higher lab bills, you may need to consider a lab payment These items will need to be written up by your dental attorney as part of your partnership documents.
- Do your legal documents include specifics on terminating the partnership? You will need to address details regarding non-compete agreements, disability or death, and how to sell a practice when one or both partners are ready.
- Do you know a good dental CPA who can assist you with setting up the entity or entities that make the most sense?
There are many items to consider to ensure that you make the right decision, but we can help make the process go smoothly with the best outcome for all parties. We have guided many dentists through purchasing and selling practices, partnerships, multiple locations, and every size and type of practice. We have the experience and the expertise to help you achieve your goals.
Read MoreSettling Credits Before Listing Your Practice
By Jen Bennett, Practice Transition Specialist
You’ve made the decision to sell your practice, and with that comes the to-do list of tasks that can often feel daunting. One important task that is often overlooked is settling patient credit balances.
What are credit balances and where do they come from?
In many cases, a patient will have a credit on their account when their insurance pays more toward their treatment than anticipated or you estimated a patient portion to be higher than was necessary and collected accordingly. In these instances, patients paid more out of pocket than necessary; therefore, the difference will show as a credit on their account and on your accounts receivable report or unassigned credit report. Credit balances can also result from patients mailing in a payment or making an online payment on a balance that they have already paid. These are duplicate payments typically made in error. When this happens, we recommend contacting the patients and advising them of the duplicate payment before posting it to their accounts. Many patients will request that you return their duplicate payment to them and some will elect to leave the credit on their account if they have upcoming treatment planned. If they have upcoming treatment planned, this can be an effective way to get them on the schedule. It can be difficult to reverse an online payment and, in those instances, you may have to post it to the patient’s account. In other cases, patients may pay upfront for larger treatment plans and due to unanticipated circumstances, they were not able to complete their full treatment, or perhaps less treatment became necessary. If you have a practice where patients with insurance are required to pay their patient portion due at the time of scheduling their appointment for treatment, then credit balances will appear on the patient account until the procedures are posted and until insurance has paid their portion, this is just the normal course of collecting patient portions upfront. The same applies to patients without insurance if you collect the patient portion upfront.
How should I be handling credit balances?
To keep your credit balances at a minimum I would suggest you come up with an efficient protocol with whoever is in charge of your accounts receivable, whether it be your office manager, bookkeeper, or yourself. Credit balances are typically handled by an office manager. It is our recommendation that your accounts receivable report or unassigned credit report be reviewed monthly. If there are outstanding claims on an account, no refund is due yet. If there is a credit balance and there are no outstanding claims, we recommend contacting each patient and advising them of the credit balance. And again, if they have been treatment planned for procedures ask each patient if they would like to keep the credit balance on their account and get them on the schedule for treatment. If they have no upcoming treatment, it is typically best practice to refund the patient as soon as possible to keep your accounts clean. Make sure to document these conversations about credit balances in patient notes. This will serve you well in the long run when reviewing your reports each month for credit balances. Some practices choose to monitor patient credit balances quarterly; however, if you are preparing to sell your practice, we recommend that you do this monthly. You’d be surprised how quickly credit balances add up and how often they are overlooked.
One important note of caution! When reviewing the credit balances on patient accounts, do not assume that the refund always goes to the patient! You want to look back to the last zero balance on each account and look at patient payments made and insurance payments made. Insurance companies make mistakes and sometimes they overpay and sometimes they make a duplicate payment on a claim. In these instances, the refund is due to the insurance company and not to the patient. Some insurance companies catch these errors quickly and request a refund in writing. Others do not catch them so quickly and they have up to a year to claim their refund (this may vary from state to state). Pay attention to this detail when reviewing accounts. Remember to make notes in patient account notes so you don’t have to repeat your efforts every month.
I have not been settling patient credits on a regular basis, I have thousands of dollars in credits now what?
Follow the detailed recommendations above and get your accounts with credit balances cleaned up. It is essential to do this leg work prior to the sale of your practice. Make every effort to contact your patients to refund any monies due to them. If the refunds are due to insurance company overpayments, contact them and ask that they send a request for refund letter. If you are unable to reach patients with credit balances due to them, these credit balances in many states must be reported to the state in which your practice is located. For example, in the state of Washington, credit balances over a certain dollar amount must be documented on an “Unclaimed Property Report” and filed with the state before November 1st each year. Do some research and find out what your state’s unclaimed property reporting requirements are.
*Disclaimer: The information above is not legal advice. Each state has its own rules and regulations. Be sure to review all rules and regulations as circumstances may vary.
Read MoreWhat To Do with Your Practice If You Are Sick Or Dying?
Most of us have a vague notion of what retirement might look like but that’s where our planning usually stops. Getting sick or receiving a terminal diagnosis isn’t something that is easy to think about and is even more difficult to talk about. Nobody wants to contemplate their last moments in this world.
Sadly, we have all witnessed peers who have been thrown a curve ball and had an illness or untimely death. The aftermath of these events places a huge strain on our families. However, these stresses can be lessened with some discussion and at the very least, taking the steps now to get the right people in place when you need them.
An unexpected sickness can occur at the height of our professional careers. Depending on the prognosis, it’s critical to get our affairs in order as quickly as possible. Staff might suspect that something is amiss, and you can ask them to keep health issues confidential.
If you haven’t assembled a team already, start searching for a reputable estate-planning attorney and CPA. Also include the often-overlooked professional; a practice transition broker who can assist with the transition of your practice and can begin the process with you as soon as possible. Most widows/widowers are not thinking that the responsibility of selling the practice will fall on their shoulders. Start these delicate conversations with your spouse now, so they won’t be left to deal with this in addition to emotional stress.
If you are still able to work at your practice, we can begin to market the practice heavily but discretely so we can find a buyer as quickly as possible. The best medicine for you is to heal and take care of your family. Selling might seem short-sighted if you expect to make a full recovery, but there are many other options available if you still want to continue to work after you heal.
However, for those doctors who pass unexpectantly, word of mouth tends to get ahead of any marketing and the reality is that your practice will be marketed without a doctor and thus the practice value can decrease substantially. Some of the most difficult challenges that we have encountered are in serving spouses who are left to deal with quickly selling a practice when the doctor is sick or has passed away. The value of the practice drops sharply and is often valued at 30-40% less even after just one month without a doctor.
Prepare for the unexpected. Assemble your professional team and get your estate planning documents in order. Most importantly, make this information accessible and communicate your wishes with your spouse.
Life is short, spend your days doing what you enjoy and take care of your health.
Contact us today for a free consultation.
Read MoreBenefits of Hiring a Broker
By Kevin Brady
Why use a Dental Broker to Sell your Practice?
After many years of the hard work, long hours, and substantial investment that go into building a dental practice, you’re now thinking about selling the practice. It’s easy to assume that the practice will sell quickly and for a great price when you are ready to sell. Feedback from doctors who have recently sold their practices shows that the process is more complicated and stressful than anticipated. This is why it is essential to hire a dental broker to help guide you through the process.
Potential individual buyers and DSOs (Dental Service Organizations) will have experts who can help them navigate the sale. You will also need someone to advocate for you and help you understand the process from start to finish. In most cases, the last time you were involved in a practice sale was when you bought the practice, which means you need someone to help you navigate the process.
Benefits of Hiring a Broker
Here are just a few reasons why hiring a dental broker to assist with planning and selling your practice would be a sound investment.
- Determining Fair Market Price: At Omni Practice Group, we have certified practice appraisers that put together a valuation to maximize a fair market sales price for the practice and real estate (if applicable).
- Develop a Marketing Plan for the Practice while Maintaining Confidentiality: Omni provides confidential marketing and advertising services for your practice that do not identify you or your practice until a buyer is screened and signs a confidential Non-Disclosure Agreement. Omni also provides the financial prospectus for your practice along with confidential personal showings of the practice to potential buyers. Finding the right buyer that you will want to take over your practice can take some time. Good practices can sell quickly, but some can take months or even a year to sell.
- Letter of Intent: Omni brokers negotiate on your behalf, a Letter of Intent with your approval for the purchase price of the Practice and the Accounts Receivable. Your broker will also guide you through the due diligence conditions for bank financing, help negotiate a new lease agreement, non-compete agreements, and other conditions that both the seller and the buyer will agree on. If real estate is included, your Omni broker will determine the value of the real estate with a “Broker’s Real Estate Opinion” that is used to market the real estate with the practice.
- Finalizing the Sale: Your Omni broker works with you to determine a possible closing date based on whether your practice has real estate to sell or a lease that will be negotiated with the new owner. Omni’s brokers work with attorneys to finalize the Asset Purchase Agreement for both the seller and the buyer.
Omni’s 70-point-plus checklist helps guide both the seller and the buyer through the process of items to be completed prior to the sale closing.
A banker at one of the major banks recently said, “A high percentage of deals that fall apart is due to the seller not using a dental broker.” Using a broker typically saves sellers a lot of time, money, and headaches in selling their practices.
Omni Practice Group has been helping dentists for over 15 years with the planning and transitioning of their practices. If you’re thinking about selling now or in the next few years, give us a call for a “free consultation” to help you determine a plan that works for you and how we can assist with a smooth and profitable transition – 877-866-6053.
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