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You’ve worked hard and you’re approaching the finish line of your career. You’re just now starting to think about your retirement future and the thought of selling your practice. But what exactly does that mean? Should you cut back on your hours, start to scale back the practice’s workload? Maybe spend an extra day or two on your golf game or catching up with family and friends?
You’ve worked hard and you’re approaching the finish line of your career. You’re just now starting to think about your retirement future and the thought of selling your practice.
But what exactly does that mean? Should you cut back on your hours, start to scale back the practice’s workload? Maybe spend an extra day or two on your golf game or catching up with family and friends?
No. Actually this would be the time to make sure your practice is thriving. If you want to get the most out of the sale of your practice, now is the time to make sure your business is most attractive to future buyers.
“Selling doctors can’t let their practices go during the final years preceding the sale; in fact, they need to do the opposite,” said Dr. Jared Van Ittersum, who three years out of dental school has purchased four practices in Michigan along with his partner Dr. Elias Achey. “They need to keep up with management and keep the staff morale high.
“They can’t let a tired or dying spirit rub off and destroy the foundation they spent years building.”
What to consider
Many things come into play as you prepare to sell your practice. Should you add expensive technologies to help attract a buyer? Should you stick around six months, a year or longer, to help with the transition?
Different situations for the buyer and the seller will help answer some of these questions, but Dr. Van Ittersum said keeping your practice running well is the most important thing to do.
“As a prospective buyer, I want to see an energy still there in the office. Because while the selling doctor may be at the end of their career, I am only at the beginning. I want to inherit as little baggage as possible,” he said.
Doctors need to ramp things up in three major categories: hygiene production, overall collections and new patients, Dr. Van Ittersum said. It’s understandable if the selling doctor’s production is on a downward trend if they are on a path of retirement, but the other categories are harder to swallow.
“If those are going down, the practice is too, and the doctor is giving up too soon,” he said. “Put in a soft-tissue management program and let the hygienists lead it. Make sure you don’t have an enormous accounts receivables and that your team knows how to collect and manage the numbers.”
New patients show that you are still marketing and you are still trying to grow the practice. These things combined demonstrate a practice growing, not dying.
Helping in transition
For Dr. Robert Leland, Chair of the ADA New Dentist Committee, working with the seller for several years made his transition a long one, but also a smooth one.
“I came into a practice almost like a father-son buyout,” said Dr. Leland, who worked at his Hanover, Mass. practice for close to 10 years before buying the practice. “I knew about the practice before I got out of dental school, then worked with the seller for years and he worked for me for a couple years (after the purchase).
“In that respect the transition was really good. The thing that was the greatest is we did have to make some purchases during those 10 years and I had some say in them even though I wasn’t footing the bill.”
It’s important to consider if the seller plans to stay on hand for awhile, and also what the current staff’s plans are.
“Is the staff going to stay or go? Is the seller going to stay for any period of time or not? Because that may make a difference in what the seller wants to invest in,” Dr. Leland said, adding, “If possible, when the selling process initiates, the owner should have good communication with their entire staff so that there is as much transparency as possible and they have an understanding of what is coming. Because of confidentiality contracts and individual situations, this often is not possible, but makes the transition much easier and makes it easier for someone to come in and evaluate a practice.”
Technology investments can be tricky. Should you spend a lot of money on high-end equipment to help sell your practice, or skip certain purchases late in your career for fear of not getting back a return on your investment?
Both Drs. Van Ittersum and Leland believe a practice today must have at least some type of practice management system in place and that digital X-ray is a high priority, especially because today’s new dental school graduates may very well expect not to have to work with film in their careers.
“Minimally, invest in practice management software if you haven’t already, and a network of computers throughout the office with digital X-rays,” Dr. Van Ittersum said. “This, in my opinion, is the foundation every office needs to implement future technologies, and every office should have them. And enough offices do have them, so when the time comes to sell, there are a lot of other practices out there that look much better to a buyer.
“You can’t get intraoral cameras, or digital pans, or Spectras, or patient education systems until you have a computer network. And you can’t ever manage the practice well, produce reports, be efficient with collections, or ever go digital completely without practice management software.”
Practice transition consultants work for both sellers and buyers, and are very good at evaluating practice equipment and how it fits into the practice valuation.
“Be aware though, that good will is much more valuable than equipment in a sale of a dental office, so if you want to actually increase the purchase price you get, the best way is to ramp up production for the years prior to selling,” Dr. Van Ittersum said.
Dr. Leland said debt is a concern with new dentists today because they often finish dental school with somewhere between $200,000 and $400,000 of debt. He believes fewer young dentists may be in the market to buy a practice today, so sellers need to make sure their practice is an enticing one to buy.
“The biggest key for the people that are going to potentially be out looking for a practice is their enormous debt already,” Dr. Leland said. “I think you may have less people even going out to buy a practice, which I think makes it even tougher for the sellers because I think there’s a lot more for sale than there are buyers right now.”
He thinks many new dentists are looking to work in a corporate practice or a group practice that’s already set up, rather than buy right away. But those who are looking to buy tend to have a feel for what they want available in a practice the minute they make the purchase, and what they may want to purchase themselves after taking ownership.
“Do they want the Rolls Royce practice that’s already set up or do they want something where they can buy their own equipment? I think it’s somewhere in the middle,” he said. “I know me personally going in to buy a practice you didn’t want to buy a practice and then have to spend tens or hundreds of thousands of dollars to upgrade it.
“But at the same time you want to have a say in what you upgrade with.”
Dr. Leland said most sellers want to see their business succeed even after they step aside. Because of this, they often play a vital role in the transition, including helping to prepare the patients for a new clinician in charge.
“The seller’s got to say, ‘Look, I’m prepping my patients for this change,’” Dr. Leland said. “It makes it so much easier if the seller works hard with the transition. A lot of sellers do want to see their legacy live on.”
So have your practice-the place you’ve invested so much of your life in-ready for the next owner and ready to help you retire successfully. Also, help with the transition so your patients and community can continue on with the great care they’ve come to expect.