Are you really ready to sell your dental practice?

April 19, 2013

Faux retirement is common for many dentists. How to know it’s really time to sell your practice, and how you can help ensure you get what it’s worth.

Faux retirement is common for many dentists. How to know it’s really time to sell your practice, and how you can help ensure you get what it’s worth.

Many dentists experience a “Faux Retirement” period, caused by burnout, stress, chaos, and/or personal issues. Interestingly, once the problem has been eliminated or resolved, a “new energy” is experienced, and the dentist is “re-enthused” about practicing.

One of the most common examples of this is the transition of a practice, bringing on an associate or partner with a buy-sell expectation. Once the pressure is off the selling dentist, he or she begins to enjoy dentistry again and delays, often to the chagrin of the buyer, the sale.

How to know when it’s time

One or more of the following should define the exit stage:

  • The acknowledgement of a physical or mental impairment

  • The financial ability to retire – real financial freedom

  • The desire and excitement to pursue new and other interests

  • The willingness to walk away from the practice, the patients and the professional relationships that have developed

  • The real distaste or dislike of the practice of dentistry

We find that unless a dentist has reached the point of financial security and embraced the real desire to retire to do something else, there is a good chance they will find a void in their life and the desire or need to return to practice.

Beyond that, even with the economic climate being as it has been, we often encounter dentists who have an unrealistic value of their practice, or an unrealistic need for the proceeds from a potential sale. 

The bottom line is this: It simply does not matter how much you think your practice is worth, its actual value is only determined after it has been purchased, whereby the buyer and you have agreed upon the price. If your asking price is too high, it will not sell, if your asking price is too low, you will not receive your due compensation for your business.

Get an expert appraisal

As is spoken of time and time again, to accurately value a dental practice it is best to engage an expert who performs dental practice appraisals, and does them on a regular basis with standard, accepted business valuation methodologies. Further, they need to have specific knowledge of the dental practice, how it functions and how the operations correlate to the income (profit and loss) statement and tax returns. 

Its important to note, too, that the dental practice marketplace is different from any other profession and has many facets that are completely unlike any other business. Market value “rules of thumb” may not apply to your particular practice.

It would be the same as if you were told a patient has a toothache and without seeing that person you decide she has an abscess. It may or may not be an accurate diagnosis and would not be definitive until you examined the patient. The same goes for appraisals; your practice has to be carefully analyzed by a knowledgeable professional.

Don’t forget about tax consequences

Another extremely important issue when considering the sale of your practice is the tax consequence of your sale. Proper allocation of the purchase price can save thousands of dollars. A professional transitions specialist/expert can work with the allocations, while a competent accountant who has dental practice experience should be consulted to ensure unreasonable tax liabilities or consequences are not present.

Start planning

This just skims the surface. Beyond the idea of retirement itself as well as the various aspects of an actual valuation, there are the intricacies of the type of transition itself and then the corresponding details that go in to developing and executing the plan. This is where the true expert shines.

As a more global conversation, if you are considering the sale or transition of your practice, we recommend you plan for that transition as far in advance as possible. 

Not only does it allow for specific planning for the transition, beyond selecting the right path, it allows you to properly position the practice for a transition while concurrently allowing for the maximum amount of personal take-home income and retirement funding. While a few years is nice, even five years or more can prove to be invaluable when it comes time for a “real” retirement.

Greg lives in Bradenton, Florida and is a partner in Professional Transitions. Professional Transitions is a full-service firm providing comprehensive transition services for dentists from graduation to retirement.  Its central focus is to assist clients in realizing lifetime personal, professional and financial goals in win-win-win-win (seller-buyer-staff-patient) structured transitions.  Greg has been associated with Professional Transitions, Inc. and sister company ADS Florida, LLC since 2004.  He received his Bachelor's degree in Computer Engineering from the University of Central Florida and his MBA from Wake Forest University. Greg is also a financial analyst for the Pride Institute and Pride Transitions as well as the marketing chair for ADS nationwide. Greg has been a speaker throughout the West Coast of Florida and at several dental schools, nationally and has written for local, regional and national publications. Greg can be reached at greg@professionaltransitions.com or by calling 888.229.5764.