Seller Articles

Oftentimes, dentists are so caught up in their day-to-day grind of everything involved in running a dental practice that they do not have the time to figure out your exit strategy.  You do everything from managing the staff to negotiating a new lease and, oh yeah, you also do dentistry in between.  You are just too busy to even think about your transition.

Until, one day, your back blows out, your spouse tells you to retire, or you just plain get tired of managing staff and dealing with insurance companies, cutting reimbursements, and health departments or state taxing authorities coming by for a “little visit”.  You decide, it’s time!  Maybe you want to continue doing dentistry at some level, either part-time, or full-time.  How about selling a partnership?  Maybe you want to be completely done.  Here are the top five strategies you can think about before that time happens and where we have expertise in making it happen.

SELL AND DON’T LOOK BACK – This is the option for those who are completely done and ready to either find another career, a good fishing hole, or a favorite golf course.  You can either attempt to do it yourself or hire a broker to help you out.  The pros of this are you are done, you get your equity out of the practice and you do not have to worry about staff, insurance companies or other problems again.  The cons are that you do not know how your patients and staff will be cared for by the buying doctor.  There may be an occasional re-do, but typically not too many.  A favorite strategy for the retiring dentist moving far away.

SELL AND TRANSITION – This approach allows you to sell your practice and stay on for a short or long-term practice.  The “staying on” part can be a two-hour drop-in once per week for a couple of months, working back one or two days per week, or a more extensive two to four days per week for a year.  It’s all negotiable and depends on the amount of production in your practice.  This strategy is great for those who are closely tied to their patients and staff and want to see them well cared for after the sale.  It also ensures the patients will stay with the buying doctor if the seller is there for a bit after the sale.  The pros are that it allows for a very smooth transition.  The cons can be that the staff is still allegiant to you and the patients still want to see you.  You need to be an impartial observer more than anything at this point and let the buyer be the owner and do his/her work.

SELL AND WORK BACK – If you decide that you still enjoy dentistry, but just do not want to manage the practice anymore, then this is the strategy for you.  In certain cases, you can sell your practice and work back.  Oftentimes, this scenario allows you to make more money.  This can be done at an early age and does not mean you are retiring.  I have several case studies where a 50-year-old dentist was tired of managing his staff and getting his reimbursements cut.  We sold his practice to someone that wanted a satellite practice.  He is working back full time making more money than he ever made.  The buyer implemented marketing and other services to increase production.  Pros are that you no longer manage your practice and you may make more money.  Cons are that you may be selling to a small group or a large group that may require you to implement systems and procedures that are not what you may like.  Be selective in who you sell to.  I have found that smaller groups allow you more freedom.

PARTIAL SALE – PARTNERSHIP – If your practice has enough production, you can sell a partnership in your practice and continue to work.  There are numerous ways of structuring these deals.  And, anytime you enter a partnership, I advise you strongly to put everything in writing and have an attorney do their magic to make it legal and foolproof.  You sell a portion of your practice, say 1/3, to a buyer.  You continue to work and grow the practice.  You can then either sell another 1/3 to another buyer or continue to grow, or sell out completely.  The pros of this are that you harvest some of your equity while continuing to grow your practice.  You then grow the practice some more and then you sell another portion.  The cons are that it is like a marriage.  You will probably have disagreements with your partner.  Be sure and structure it right up front to reduce disagreements and remedy them if there are.

DEFERRED SALE – Also called an associate to own sale.  This is where you bring on an associate who works in the practice.  The associate may work one or two days to start.  You can then sell the practice to the associate at an agreed-upon time.  The price can either be determined upfront or at the time of the sale.  The way we typically do a deferred sale is to do a valuation in the beginning and agree upon the price.  We then do a valuation in the end and the buyer and seller split the equity to determine the final price.  This can be a good way to transition as the staff and patients get to know the new doctor.  It can go very smoothly.  According to the ADA, these fail about 50% of the time.  I typically see them fail when either party changes the deal in the middle of the process, one party gets jealous of the other, or personalities conflict.  We structure these so there’s a “dating” period and then we lock in the associate with a deposit.

EVERYTHING IN BETWEEN – Now you know the top five strategies for transitioning out of your practice.  We often get asked about how creative a transition can be.  You can really be as creative as you want to be.  The only challenge is finding a buyer who will be creative with you.

So, think about where you are today and what your end goals are.  We offer a free consultation to help you determine which strategy is best for you.  You can trust that we will come up with a plan that will work for both you and a prospective buyer to make your transition as smooth for everyone as possible.

Most business owners are so busy running the day-to-day operations of their business that they do not give ample consideration to a future sale of their business. Before selling a business, there are many factors to address and adequate preparation can maximize the return to the owner.

In a perfect world, the best time to sell a business is when the business is performing well with future projections looking even better, the national economy is strong and the industry is getting a lot of attention from Wall Street investors. However, regardless of the state of the economy or the industry, there are certain things owners can do to make their business sellable and as attractive as possible to potential purchasers.

To build market value, address the following items:

• Standardize and document all company procedures
• Eliminate liabilities or liens and resolve any outstanding litigation
• Investigate transferability of leases and sales & supplier contracts
• Perform maintenance on company equipment to ensure good operating condition
• Secure key employees with employment contracts
• Eliminate non-performing or non-contributing employees from the payroll
• Establish a management team that can operate without the current owner
• Reduce reliance on one or two large customers for the majority of sales
• Spruce up the physical aspects of the business facility
• Have clean, verifiable financial statements for the past three years

To improve cash flow, take the following action:

• Reduce unnecessary inventory
• Collect any outstanding receivables
• Re-negotiate favorable key supply contracts
• Reduce personal adjustments on Income Statements
• Ensure financial controls are established

Owners should be aware that there is an inherent conflict that arises with running a business and preparing it for sale. Many businesses are run with the objective to minimize tax liabilities. Unfortunately, the same techniques and accounting practices that minimize taxes also minimize the value of a business. Ideally, plans to sell a business should be made three to five years in advance of the anticipated sale. This will allow adequate time to make changes and demonstrate a track record of maximum profits.

In addition to setting a future target date to sell their business, a business owner should ask themselves what they want to get out of the sale of their business. Do they just want to finance their retirement? Is it important that their son or daughter remains with the business? Can they gain tax benefits by financing part of the sales price? Do they want to ensure the new owner will treat their customers with the same level of service? Make a list of priorities and seek the advice of business professionals to ensure there are no surprises during the process of selling a business.

Once a decision has been made to sell a business, the owner should be conscious of the need for confidentiality. Any leaks about the sale of a business can cause panic and fear for the employees, suppliers, landlords, and banks. Great care must also be taken to assure that competitors and customers do not learn of the planned business sale. Competitors may sabotage a business by leaking information to employees and customers. Key employees may start looking for other employment. Customers could be concerned about how the business will perform under new management and may seek alternative sources for the product or service. If any one of these were to happen, the value of a business could be significantly decreased. Working with an experienced Merger and Acquisition Advisor or Business Intermediary can minimize the risk. The name of the business and any detailed information should be disclosed only after it is determined that a potential buyer has the skills, experiences, financial capability, and leadership required to run the business being considered. In addition, all potential buyers should be required to sign non-disclosure agreements stating they will maintain confidentiality on all of the disclosed information.

By now it should be clear that early planning of the sale of a business will generate the most value and will likely expedite the sale of a business. To summarize, focus on building market value and improving cash flow, carefully plan the terms of the sale of the business, seek the help of business professionals and maintain confidentiality.

Whether you are approaching retirement age or just thinking about a transition, there are several things you can do to prepare your practice for sale.  Doing these things may help eliminate headaches, increase your sales price, or reduce your costs.  Here are a few tips:

1. Assess your equipment.  Upgraded practices sell faster.  If you are more than five years away from retirement, I recommend a few upgrades such as digital x-rays, recovering your chairs if needed, and freshening up the paint.  If you’re closer than five years, you will not get the tax benefit of major upgrades, so stick to the paint and carpet.
2. Clean up your accounts receivable.  Reimburse patient credits, collect old accounts and keep the A/R current.
3. If you have an associate, make sure you have an associate agreement with a non-compete.
4. If you have an employment agreement with your corporation and you are a C-Corporation, you may need to terminate yourself a few years before retiring.  Consult your tax accountant.
5. Consult your financial advisor and tax accountant.  How much do you need to retire?  How much do you have?  What are the tax consequences?
6. Get a practice valuation to see what proceeds you will get from the sale.
7. Be realistic about the time it takes to sell.  In remote areas, it can take a year or two.  Metro areas, much less.
8. Keep your production up as you near retirement.  I see dentists slow down all the time in their last few years.  Work the same number of days.
9. Assess your staff.  Do you have too many staff?  Do you have one that should have been let go seven years ago?
10. Have a practice assessment performed by a qualified consultant.  Many will do it for free or for a small fee.  This may help show you some areas to improve over the next few years.

By focusing on these items in the coming years as you near retirement, you will avoid having your practice production and thus the price of your practice go down in your later years.  Call me for a  free consultation.  I would be happy to take a look at your practice and give you my thoughts.  Or, if you are thinking about transition right now, I have a database of buyers looking in your area.

So you want to sell or transition out of your office.  What can you expect?  There’s a big difference out there between expectations and reality.  When I do dentist office transitions or sales in Washington or Oregon, the selling dentist sometimes likes to work back.  That’s a great thought and I’ve seen it work.  But, more often than not, I’ve seen a disgruntled buyer, disgruntled seller, or both.

What often happens in a dentist office transition where the seller works back, is that the staff still views the selling dentist as the boss.  What he says still goes.  The selling dentist oftentimes still views himself as the managing dentist or at least the expert in running a practice.  That may or may not be the case.   The buying dentist is left as the outsider looking in.

So, what do you do to have a successful dental office sale or transition?  Communication is the key.  The sooner and more often the two sides get together the better.  If the buyer is envisioning the practice being run one way and the seller thinks things will continue as usual, there’s going to be a problem.  Everyone needs to be on the same page as to how staff management is going to happen, how marketing will happen, who gets the new patients, etc.,  After that’s done, get the attorneys together and put it in writing.  If everyone communicates upfront and everything’s in writing and agreed to, you’ll have a better chance of having a happy ending.

Call us for a free consultation on how to make sure your dental office transition or sale is a happy one. 877-866-6053

I keep running into well-tenured dentists who have enough money to retire, they’re old enough to do a transition (past 65) and they love what they do, but they don’t want to sell their practice.  Commonly, tenured dentists have not updated their technology and they’re losing patients as a result; their practice is floundering and they ask me what they should do.

Howard Farran from Dental Town had a good article on this.  He said someone had told them they love what they do, but can’t wait to retire. His response was “Mother Theresa loved what she did” and she couldn’t wait to serve another orphan or something to that effect.  His point was that if you absolutely love what you do, why retire?

A better option is to sell your practice and work back for the buyer one or two days per week or month. By associating in a practice, or simply selling or transitioning your practice and working back one day per week, or even per month, you enjoy the fruits of your labor, enjoy life, and still get to enjoy dentistry.

Call us to learn how.  877.866.6053