Are you ready? -by Thad Miller, DDSmatch
Dental Practice sales are predicted to increase in the coming years as Boomers decide to transition their practice and enjoy retirement. Are you prepared for that time?
Selecting Your Exit Goals
“When a man does not know which harbor he is heading for, no wind is the right wind.” —Seneca
The starting point for any type of plan is defining its goals. In the case of planning a business exit that means knowing what it means to “exit your business in style.”
Philosophers, business owners, and successful people from all walks of life understand the critical importance of establishing goals, creating plans to attain those goals, and persevering to see their plans through to completion.
Having worked with dentists to create over 60 successful exits, we know that it is critical that you establish three principal exit objectives first before moving forward with your Exit Plan. This is the first step in The Trusted Transition Process™. I titled it the “Conceptual Transition Experience” We help visualize your future, set achievable goals and devise strategies to start you in the direction of your post-transition dreams, well in advance of your intended transition timeframe.
The three main points in this first step are:
How much cash do you need when you exit to support the lifestyle you desire? (Do you want to be cashed out when you leave the business or are you willing to receive the purchase price over time?)
When do you want to leave the practice? (Or, how much longer are you willing to remain active in the practice?)
To whom do you want to sell / transfer the practoce? (To a child? An associate? Co-owner? Or perhaps to an outside practitioner who can pay top dollar?)
Let’s look at an example of a dentist who arrived at his exit date without a plan to reach his goals.
Dr. Y, the owner of a successful dental practice had long thought of transferring his business to a certain young dentist from his community. He and his family were long time patients, he mentored him on his decision to go to dental school and stayed in touch with him during his education. This was ideal in theory but unfortunately, he had done little to prepare for that transfer. As tougher economic conditions challenged his practice, however, and he reached his 58th birthday, he decided it was time to retire and called me.
My response after thorough discussions with he and his financial team was “Doctor it’s helpful that you’ve established two of the three Exit Objectives critical to all successful business exits. You’ve determined that you don’t want to work much longer in the business. And second, you have decided that you want to transfer the business to the young dental student who is graduating soon.”
“But what about the third Exit Objective: how much money do you want or need when you leave the business? And, have you determined whether you need cash or can you accept a promissory note?”
At this point, Dr. Y had two choices:
He could retire immediately and try to market the practice through DDSmatch —but unfortunately not to this young dentist from the community. The young dentist had no dental practice experience and no bank would lend an amount even close to the amount of money necessary to meet Dr. Y’s expectations. If Dr. Y wanted to sell today and receive an amount that would support his post-exit lifestyle, he would have to sell to an outside dentist with sufficient cash.
Dr. Y could sell the company to this young dentist from his community, but wait six to ten years to receive (hopefully) the entire purchase price. This can work, but it has to match the Exit Objectives of the seller.
Dr. Y’s situation illustrates why setting your objectives or goals, understanding how each affects the other, creating a plan, and then acting to reach those goals is so critical to a successful exit.
If you prefer to leave your business in style (which to us means leaving your business to the successor you choose, on your timetable and with the amount of cash you desire) you must take time to formulate specific, consistent, attainable goals and objectives. Either option detailed above is an option, but talking about it now is critical to prepare.
You must determine a course of action—a plan—based upon those goals, and you must “hold to that action till the goal is reached. The key is action.” Without setting goals at the outset of your exit journey, you may drift aimlessly until, like Dr. Y, it’s too late.
Don’t be a dentist who is too busy working in your practice to work on the most important financial event of your business life. We work in tandem with your financial advisors, CPA, attorneys and others to help you get the best out of your transition for you, your staff and your patients. We are happy to help you begin by providing you with more information about setting objectives and other Exit Planning topics through The Trusted Transition Process™. It all starts with a complimentary confidential discussion.
Watch for our next issue of the e-Newsletter will discuss Step Two of The Trusted Transition Process™ — “Strategic Practice Outreach”
The examples provided are hypothetical and for illustrative purposes only and do not represent actual client experiences. If you have any questions or want additional practice transition information, please contact us at 1-855-546-0044.