Making the Decision to Transition Your Practice
Making the decision to transition your dental practice is one of the most important decisions you will make in your professional life. Therefore, it is imperative that you put a great deal of thought into when and how you would like the transition of ownership to occur. Here are some of the key considerations you should take into account when planning your practice transition:
For many doctors, their dental practice is one of their most valuable assets and the proceeds from the sale of their office will be utilized to fund a significant portion of their retirement. Therefore, it is crucial for you to understand the key factors that influence the value and marketability of your practice to ensure that you are in the position to maximize the value of your opportunity. While the average sales price of a dental practice from a national perspective is approximately 70% of the most recent year’s revenue, there are a number of other factors that can influence value including revenue trends, profitability, type of patient base, type of dentistry, location (urban vs. rural, high visibility vs. low visibility), quality and age of equipment, curb appeal, etc.
The first step in the transition process is to obtain a practice valuation from a local, reputable practice transition consultant. Only then can you and your financial advisors determine if you are financially prepared to sell your office. It is also important to remember that selling your office is not synonymous with retiring, as there may be opportunities for you to continue generating personal income following the sale by working as an associate in your office or outside the established non-compete parameters. Once you have determined that you are financially prepared to sell your practice, it’s time to consider the emotional implications of the sale.
We have found that the emotional process of selling a practice often plays a more significant role than the financial implications. For many practice owners, it is extremely difficult to consider selling their practice due to the emotional ties the doctor has to their patient base, staff, and the business they have spent their entire career building. These emotions can be even more intense for those doctors who do not have other interests or hobbies outside of practicing dentistry. Therefore, it’s important to ask yourself these questions before making the decision to sell:
- How strong is my emotional connection to my practice?
- What interests or hobbies do I have to keep me busy following the sale of my practice?
- Am I ready to give up or at least share control of my practice?
- If you plan to continue working in your office following the sale, am I willing to adopt an “associate mentality” and be accepting of change?
It is also worth mentioning that the emotional implications associated with the sale of your practice will increase once you accept an offer and begin navigating the closing process. By asking yourself the above questions and dealing with these feelings prior to putting your practice on the market, you will be in the position to minimize your anxiety as you navigate the transition process.
The Importance of Planning Ahead
As practice consultants, practice owners often contact us on the day they are ready to sell. In that situation, the doctor’s options are relatively limited in regards to the type of transition strategy they can utilize to sell their office. Transitioning a practice is a “process” not an “event.” As is often the case, the doctor has also taken their foot off the gas in recent years, resulting in a significant decline in revenue, profitability, and practice value. To avoid these mistakes, we encourage you to develop a relationship with Legacy Practice Transitions at least 3 years in advance of your actual practice transition. In doing so, you will gain valuable insight regarding the current value of your practice and the key factors that impact practice value and marketability. This information will also provide you with sufficient time to develop a customized transition strategy to meet your individual needs, make changes to your office that will enhance practice value, and avoid mistakes that may negatively impact value.
Over the past few years, market conditions have been favorable for sellers. There has been a strong demand for dental practice acquisitions coupled with a limited supply of sellers. Lenders have also been providing buyers with 100% financing at historically low interest rates. While market conditions remain favorable at the moment, we are expecting several changes to occur over the next few years that could have a significant impact on practice values. Thus, you are encouraged to take a close look at both the financial and emotional considerations that will direct your transition goals. Allow adequate time for an experienced consultant to guide your steps and fulfill your economic and emotional needs with a strategic transition plan specific for you!
Please contact Legacy for information regarding our new Legacy Practice Value Protection Program. For a one time fee of $3500.00, this will involve an initial practice evaluation followed by annual evaluation updates (at no additional fees), as well as assistance and advice regarding the structure of proper documents to be prepared, which in the event of your unexpected death or disability, will allow Legacy to immediately begin marketing your practice in order to obtain maximum value in a time of possible crisis. For your personal peace of mind, and protection for your family, it is important to have such a plan in place in the unlikely event of some tragic outcome, which would prevent you from continuing to practice dentistry and support your economic needs.