Selling your dental practice? It’s not as easy as it looks
There are many considerations when preparing to sell your dental practice, not the least of which is emotional attachment. There are many steps and people that can make this huge life change much easier.
Building a successful dental practice took years of hard work to establish a good local reputation, a loyal patient base, and a dependable staff. Whether you started from the ground up or purchased an existing practice, being a dentist has been a significant part of your life for many years.When you’re ready to retire, selling your practice might be one of the most difficult decisions of your career. Why? Because a practice isn’t just an asset; it’s your legacy. There’s an emotional component that most dentists don’t factor into the process. It’s not like selling a house or car. It’s much different.
Are you ready?
You might be saying, “This practice has been my baby and my life for many years,” Or, “I still want to treat patients a couple of days a week after I sell my practice.” Before you make any decisions, ask yourself some questions:
1. Am I emotionally and financially ready to step away from the practice where I’ve invested so much of my time and resources?
2. What do I want to do after I sell? Will I retire from dentistry, work parttime, or volunteer my services?
3. How do I want to sell my practice? For example, should I sell to an associate and immediately retire, or should I transition to a DSO and gradually step aside?
It’s understandable you want to preserve your practice legacy while ensuring the ongoing care of your patients and staff meets your high standards. That’s why it’s important you find the right buyer to entrust your “baby.” It’s one thing to be financially prepared for retirement. It’s a whole other ballgame to emotionally handle walking away from your practice.
Ready, set, go!
After taking stock of your personal finances, retirement, and practice transition goals, it’s time to call in the experts to help you prepare for the sale. Your team of professionals should include a CPA, wealth management advisor, practice transition specialist, and attorney.
Certified Public Accountant (CPA)
A CPA will compile and review all your financials. Be upfront about anything that might be considered outside the normal scope of dental practice business, i.e., expenses above industry averages, any non-cash benefits, or family members on payroll who don’t work in the office. This allows your CPA to do a thorough analysis and advise any necessary adjustments.
Wealth management advisor
The sale of your practice could be the single biggest contribution to your retirement fund. Consult an expert wealth management advisor to help you plan for any related tax consequences and long-term investment strategies.
Practice transition specialist
A good practice transition specialist will review market prices in your area, establish a practice sale timeline, conduct a comprehensive practice analysis, and have a pool of financially viable buyers. Get recommendations from colleagues and interview each one to find the best match for your needs.
Attorney
Attorneys provide much-needed protection and attention to practice sale transaction details. Due diligence and sound legal advice benefits you, your practice transition specialist, and the buyer. Find an attorney who is well versed in dental practice transitions. This will save you time and money, and potentially add tens of thousands of dollars to the purchase price of your practice.
ALSO BY RYAN LINDGREN:
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Financial preparedness
Be sure to have all of your financial statements in order to accurately show the fiscal health of your practice. Make sure you prepare and review monthly and quarterly profit and loss statements with your accountant. If you have not, start doing so immediately. Review each line item to manage revenue fluctuations, expenses, and ancillary accounting issues.
The ADA, a member of the Academy of Dental CPAs, or a transition specialist can give you current industry averages for revenues, expenses, new patient flow, fee schedules, and much more.
Buyers will look at your profit and loss statements to compare each line item to industry averages. Make sure your CPA explains any noted differences upfront, otherwise you could lose significant value to your practice. It also puts to question the integrity of your practice financial information. Here’s a link to Benevis’ free practice valuation guide and worksheet to get you started.
Due diligence
Potential buyers will want to review your production against industry averages. Carefully analyze the following key reports generated by your practice management system:
Provider summary report—This report actualizes productivity by provider and type of procedure. When reviewing this report, make sure your hygiene production numbers are within industry averages. Also, if you offer specialties such as orthodontics or sleep apnea, you need to make sure any potential buyer can replicate those procedures. If they can’t, it could negatively impact the purchase price of your practice because that revenue would be deducted from the valuation.
Accounts receivable report—Buyers pay close attention to the percentage of receivables based on the delinquency bucket. Be forewarned: most buyers will not pay for balances over 90 days. Large account receivable balances are a red flag to any potential buyer. It usually signifies a lack of controls for effective practice collections and cash flow management. Carefully analyze each account and make necessary adjustments to non-collectables.
Fee schedules—Review your current fee schedule and adjust fees to the minimum 80th percentile for your area. Read The Importance of Evaluating UCRs for best practices.
Final insights
• Carefully vet all potential buyers. If they don’t have a clear understanding of the market and how it relates to the value of your practice, move on.
• Establish relationships with industry professionals. Their expertise and support will be an invaluable resource.
• Determine a specific date of sale with a realistic timeline. Clearly communicate when you want to stop practicing dentistry.
• Plan early and anticipate delays. Your location, mix of procedures, and practice revenue trends can impact the pace of your practice sale.
Visit benevis.com to learn how you can successfully sell and transition your practice.
