Making Dentistry Fun Again
In many cases, those who have sold and worked back for the buyer found an associate position or volunteered at a clinic and found a more rewarding and less stressful life. They have no management or financial responsibility and can usually work when they want to.
So, if you’re holding on to your practice “for the fun of it”, look around you. There’s more fun to be had when you have less responsibility and risk. Call me and I’ll help you develop a practice transition plan.
Banks Ready to Finance Practice Transition Buyers
It was a rough year for sellers looking to do a practice transition or sale and also tough on practice sales for practice transition brokers. Practice sales were completely in the tank.
Fast forward to 2012, bank rates are as low as 5.25% and most around 5.75% to 6%. They will finance up to 85% of the dental practices’ last 12 months of production and typically no longer require the seller to take a note back. In addition, they’ll even finance dental real estate purchases if the real estate is available at a great rate. If you’re in the market, or on finance to buy a practice, or think you can’t sell your practice because banks are not financing practice sales, think again.
Banks are back on the field of play and ready to loan you money so get in the game!
Points To Consider When Thinking of A Dental Practice Transition or Sale
With the economy somewhat improving I’ve had an increase in Washington and Oregon from dentists asking about practice transitions or a practice sale. While as a broker, I can easily just suggest they do a practice transition, but as someone who wants to have a long career, it’s in my best interest to give existing and potential practice transition clients the best possible advice and tools to make that decision. So, with that, here are a few points to consider when thinking of a practice transition:
- Consult your financial advisor or CPA – Can you afford to retire or cut back? 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? Is technology up to date? Is 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 on the west coast.
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.
Happy Planning,
Rod Johnston, MBA, CMA
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