Be Prepared for Life’s Surprises
Be Proactive in Listing Your Dental Office for Sale
courtesy of DDSmatch Southwest
Life comes at you fast. Everyone has their share of accidents, illness, and other life-changing events, some more tragic than others. We all share the dream of exiting our careers on our own terms and on our own schedule, but rarely do we consider how easily that can be derailed. While you may very well enjoy a decades-long practice and retire on your own terms, not everyone will be so lucky. But, you can be prepared.
Below are five steps to help you be ready to put your dental office for sale in case of an emergency.
Hope for the Best, Plan for the Worst
No one has bemoaned being too prepared, but too many find out the hard way they were not prepared enough. Even if you never need a contingency plan, you’ll benefit from the peace of mind of knowing that, should the unexpected happen, the people you care about and the practice you’ve built will be taken care of.
Clearly Define Your Retirement Goals
First, you should have a reasonable retirement plan that can be put into place at any time. Wherever you are in your career, it pays to thinking about what you need to get out of a sale of your practice if there were an emergency, so you could be able to live and support your loved ones in the way that you want. This requires a fair amount of advance planning and outside help.
If you don’t have a dental CPA, find one. The same goes for a dental attorney, a practice broker, such as DDSmatch, and possibly an insurance advisor and a practice consultant. If you don’t know how to find qualified team members, your broker can help. Here at DDSmatch, we have a large team of strategic partners and can make referrals to experts based on our extensive experience in dental practice transitions.
Once you have your team in place, they can work with you to clearly identify the amount you think you need to net from the sale of your practice. Then have your dental CPA, insurance advisor, and practice consultant take a look at your books and your practice to determine whether its realistic with your current practice. If you need to increase collections or cash flow, your advisors can help guide you well in advance about what investments will bring the most reasonable returns, and which won’t. They can suggest or talk you through other changes that can help you maximize your earnings, investments, and savings, while reducing costs and taxes.
Maximize Value without Losing Value
The old maxim that it takes money to make money is true. If you need to invest in or expand your practice to meet your retirement goals, it’s going to require a capital investment. A common mistake is a dentist investing in growth without adequately protecting their current assets and practice. Also, value-saving measures don’t have to be austere. It can include non-compete agreements with your key staff members and associates. It can include an insurance review. It can include better tax planning to identify areas for savings. It definitely should include a solid plan to protect your personal and practice assets. Your advisors can help you make a plan that won’t overly burden your current practice, savings, or income.
Remember, your goals here are to grow the practice and increase cash flow, while still being prepared for whatever comes your way. There are established methods of doing this in the dental industry: grow your patient base, optimize treatment plan acceptance, improve your patient’s overall experience (customer service). You should regularly review your fee schedule and, when you do, negotiate those with the insurance providers. This simple step can add 5-10% on average to your revenue.
Finally, an important asset to your practice is your staff. Create an office culture that inspires loyalty and, when the time for transition approaches, work with your staff to ensure they stay on through the transition.
Figure Out What Kind of Sale You Want
Basically, this is about whether you want an outright sale of the entire practice to an outside dentist or whether you want to bring on an associate with a buy-in agreement. An outright sale can be good, as it yields a lump sum payment for the entire value of the practice. It allows for a fast transition and, financially, is less risky than a buy-in. But there are things to watch out for:
Until you close escrow, it’s still your practice. Treat it that way. Don’t go into retirement mode before you close.
Don’t just take the first bidder. Get the buyer that you want to protect what you have built (brokers such as your DDSmatch team are experienced with finding and matching appropriate buyers).
Don’t try and hide negative news from your buyer. They’ll find it out eventually, and it may be much harder to manage and erode trust after the fact.
Conversely, a lot of information needs to be confidential, make sure you keep that confidence. Your advisors will help you determine which information should be held closely, and which is shared.
Don’t market your practice before its ready. A broker, business valuator (such as Blue & Co., a DDSmatch strategic partner), or an experienced dental CPA can advise on worthwhile investments that can maximize your practice value before showing it to potential buyers. If you think retirement is still a long way off, you may want to consider an inside transfer. That would mean something like selling to an associate over a period of years, three to five being fairly typical. A benefit of this is that it allows you to grow the practice in the interim, and perhaps take more time for your own interests. It can also be motivating to associates and encourage them to stay.
Again, however, it will require diligence and careful planning in conjunction with your team of advisors. Your lawyer in particular will be key–you’ll need a solid agreement that clearly details the agreement and its terms: when the transition will be, how the transition will occur, what will be the measure for valuing the practice, how will everyone be paid, and how and under what conditions can the agreement be cancelled.
Contingency Planning for the Practice
The first three steps all apply when you are putting your dental office for sale on your own terms. This step, and the next one, address contingency plans for when you must do it on life’s terms, instead. If you pass away, are injured, or start seeing signs your body is not going to cooperate with your timelines, you need to ensure that your practice continues operating at the highest level possible until a sale can be completed. This will allow you and your family to get the full value of the practice, while protecting your employees and providing continued care for your patients.
Some contingency plans may include a buy-sell agreement. This is an agreement used to reallocate a share of a business if an owner dies or leaves the business and requires that the business share is sold to the company or the remaining members of the business according to a predetermined formula. Life and disability insurance plans also play a role. The proceeds from insurance can be used in a variety of ways, including hiring an associate to work in the practice until a sale is complete.
Your Personal Contingency Plan
If you haven’t done so already, work closely with your dental lawyer and dental CPA to get your affairs in order. If you have already done this, review it with your advisors and make sure its adequate to meet your retirement and contingency goals. It should be adequate to cover your family’s needs, but also to take care of you long-term in case of disability. If you are lacking assets to cover these costs, consider life and disability insurance plans. Your documents should also include things like assigning power of attorney and an advance medical directive.
Start Planning Now: Be Ready to Put Your Dental Office for Sale
A common rule of thumb is that two to five years is the window for planning for transitioning your practice. But, when it comes to being prepared, it’s never too early to start. Here at DDSmatch, we offer a free Practice Transition Assessment for dentists who are looking at transitioning in the next five years. It’s an easy way to get a professional look at your practice and what changes would be advantageous to maximize value before you put your dental office for sale. Contact us today for your no-obligation assessment.