If you one day plan to sell your dental practice, don't wait until the last minute to plan for it. Here's why.
If you want to sell your home there’s not much to it. Find a realtor and have the house listed, or post it yourself if the local market conditions are strong. Then, start assessing offers. Not too complicated.
But selling a dental practice presents a much greater challenge.
“Most dentists coming out of school have so much debt that it’s really difficult for them to take on more,” explains James Schall III, DDS, co-owner of Maryland-based Berg Dental Group.
That means it’s essential to plan ahead—perhaps as much as several years—and formulate a strategy that will help you achieve your goal.
Hugh Norsted, DDS, a previous dental practice owner and current surveyor for the
, recognizes that young dentists are pretty idealistic coming out of school about starting or buying their own practice. But they quickly realize that financing such a venture is usually out of reach.
“Often they’ll look to find a practice where they can become an associate, and eventually have an opportunity to buy,” Norsted says.
That’s why it’s important for the solo practitioner to consider developing a succession plan. Whether it’s five or 10 years down the road, begin making plans now for someone to become a partner.
“Let them slowly buy in,” echoes Schall. “Let them start making some of the decisions, face some of the challenges, and reap some of the benefits.”
If you haven’t planned ahead, or circumstances don’t allow you to do so, a growing trend over the last 10 years or so has been the emergence of practice management companies, both regional and national. These companies make it easy for the practitioner because they often make cash deals, find someone to take over the practice, and even enable the practitioner to stay on, even if it’s part-time, as an employee.
“It helps the seller meet the challenge about how to transition your practice, and it’s good for patients with whom you’ve built long-term relationships because it’s easier to hand things off,” Norsted says.
One of the key challenges in selling a dental practice is staying current, especially for solo practitioners. Norsted explains that it’s easy for young practitioners to get set up and not change anything for the next 30 years.
“They don’t reinvest in the practice, in terms of new equipment and technology,” he says. “For a new buyer, especially if they’re coming out of school, they’re used to using all the new technology.”
Patients are savvy too, Norsted says, noting that it’s not surprising for a new patient to walk into a dental office, see that the practice is still using old technology, and get up from the chair and leave.
“It’s critical to stay current,” Norsted adds. “There’s much more value in a practice than if you’ve been static for the past 35 years. Now someone has to come in and convert things, and that takes time and money.”
Schall says another important consideration that can make a dental practice more attractive to a potential buyer is to have a web presence. It’s relatively inexpensive, and it’s an easy way to spread your message.
“We ask our patients, if we think they’ve had a good visit, would they mind writing something for us,” Schall says. “The computer is right there at checkout, and it only takes a minute. If you ask them to write the review when they get home, they’ll forget. Those reviews can be enticing to a new buyer, whether it’s someone out of school or a larger company.”
Norsted suggests the place to start when selling your dental practice is to know its valuation. That includes what the practitioner has earned or built up in the practice based on reputation, as well as how many dollars per patient will be turned over to the buyer.
“Dentists often think that they’ve made a big investment in equipment, but depending on how old it is, sometimes it can be worthless,” Norsted says. “But there’s real value in those patient records because it gives the new dentist an opportunity to maintain and retain those patients.”
Need help determining the fair market value for those patient records? Norsted says there are multiple formulas that can be used, and sometimes it’s best to work with a practice management consultant to make sure the valuation is realistic.
And then, what is your exit strategy?
“Are you going to turn the practice over and walk away? Or do you want to stay on for a year or two on a part-time basis and help with the transition?” asks Norsted, rhetorically. “It’s important to consider timing and strategy, and then look for the right candidate that matches that philosophy.”