Selling a Dental Practice

Important Factors When Selling a Dental Practice

Is it time to transition your dental practice? The word “transition” doesn’t really do justice to the flood of emotions you may experience when it’s time to turn over your practice to someone else. After all, you’ve spent years working hard, staying late, and going the extra mile for your patients. It can be difficult to entrust your practice to another dentist (no matter how qualified), knowing they’ll make changes and your office won’t ever be run the same way again. 

But don’t forget that this time of your life is when you can start enjoying all the fruits of your labors! After years of toiling away, you can now reap the benefits by sitting back and letting someone else take charge. Though you may feel worried about certain aspects of the dental transition, at ddsmatch Four States, we do everything we can to make selling a dental practice as stress-free and smooth as possible. 

When you have a professional team of experts at your side and plans in place for every contingency, you can have a straightforward, hassle-free experience. Here are a few key components to keep in mind for an easier, clear-cut dental practice transition. 

Determine Your Objectives

As the seller, you need to figure out what your ultimate goals are for this dental practice transition. How do you want to go about selling your practice? Obviously you’ll want to consider the sale price, but you also need to think about which situation would work best for you:

  • You sell outright to another dentist who will pay you cash for the full amount and take over immediately.
  • You work with an associate who puts money into the practice over a period of time until you and they are ready for them to take charge (this is called a buy-in)
  • After selling the practice, you help make the transition more seamless by staying on for a few weeks or months after the sale.

It’s important to consider all your options, because you want to make sure you and the buyer are on the same page. You don’t want to have any regrets about selling a dental practice when the time is right, and you deserve to have the kind of practice transition that allows you peace of mind for the future.

If you are still figuring out what your goals are, talk to trusted family members and friends to help determine the kind of transition scenario that would fit your practice and lifestyle. Often a trusted confidant can put things into perspective and help you analyze the situation from different angles. It’s also a great idea to reach out to other doctors who have already gone through the transition process and ask them what they were happy about and what they would like to do over if they could. Talking through your goals will help you discover the best route for you, your staff, and your practice overall. 

Assemble Your Team of Experts

As a dentist, you’re the expert when it comes to people’s teeth, but that doesn’t mean you’re knowledgeable about all facets of a dental practice transition. It’s imperative that you have an experienced team of advisers you can consult when you have questions before, during, and after the transition. Here’s who should be included on that team:

A Dental Attorney

It’s possible that when you started your practice, you consulted with a dental attorney to make sure you were in compliance with all laws and regulations when it came to dentistry in general. There were most likely a lot of contractual agreements that had to be drawn up and patient forms required for a legally sound practice. Now that it’s time for your dental practice transition, a dental attorney is a necessity once again. They know the ins and outs of dental practice transitions and can help you sift through the legal jargon you’ll encounter when turning over your practice to someone else. A qualified dental attorney won’t have to spend time researching all the specifics about selling a dental practice because they’ll already know them. This will not only save you money, but it will ensure that you’re legally protected when you finish the sale.

A Dental CPA

Just like you wouldn’t let a random acquaintance do your taxes for you, you don’t want just a general CPA looking at your books. A dental CPA is a necessity, not only because they understand the tax implications of a practice sale, but they also have the knowledge required to look at your accounts and records and tell you what those numbers reflect. They can inform you about ways you might be able to cut costs and how to truly evaluate what your dental practice is worth. A skilled dental CPA knows how to generate reports that determine the financial well-being of the practice and can verify that the money is being handled properly. Without a dental CPA to run the numbers for you, you could lose thousands with the sale of your practice.

A Dental Broker (Or Transition Specialist)

You shouldn’t have to handle all the details of such an involved business deal by yourself. A transition specialist is an immense help in this area. At ddsmatch Four States, we have the experience and knowledge you need to complete a successful dental practice transition. We’re considered transition specialists because we’ve helped hundreds of dentists in the Kansas, Western Missouri, Arkansas, and Oklahoma areas make favorable transitions. We’ll walk you through each step of the process so you won’t feel overwhelmed or confused as the sale progresses. 

Why Expertise Matters

With a strong team of experts on your side, you’ll be able to complete an advantageous business deal that makes the most sense for you, your staff, and your practice. Don’t try to cut corners by handling all the details alone. You’re way too busy for that. Trust in your advisors so you can come out on top.

Planning Ahead When Selling a Dental Practice

Many doctors don’t know exactly when they want to retire. The current economic situation has made it difficult to predict what the future will look like. Some dentists are postponing their retirement, while others are calling it quits earlier than they originally planned. Though the pandemic has changed things, dental practices are still being bought and sold. If you think you might want to retire, keep in mind that it’s never “too soon” to begin thinking about your plans for the future. Most advisers recommend having your practice assessed for transition when you are about five years away from selling the practice. 

What’s Included in Your Assessment

Your dental broker should be able to give you an idea of the value of your practice as it is right now. They should also advise you on what changes you should make prior to selling, and which changes are really not worth it. Remember that if you’re planning to pick the buy-in scenario where you have an associate join your practice, you will need to include him or her on the details of the changes and discuss them to make sure they are on board. It would be a bad idea to rip up all the flooring of your office and replace it with something else, only to have your associate change it again a year later once you’ve left. That’s just wasted money that could be going to something else in the practice.

If it’s getting close to the transition, it’s probably not the time to make a huge investment in new equipment. You won’t be able to get back the money from that investment before you leave. Some doctors who are looking to buy a dental practice won’t want to use antiquated equipment, so if you haven’t upgraded to digital yet, you may want to. Again, your broker will be able to advise you on the best changes to make prior to the transition. 

At ddsmatch Four States, we partner with the professionals at Blue & Co. to provide complete valuation analyses. This is done twice. The first time will be when you are beginning the process (thinking about retiring), and the second time the valuation will be performed when you are ready to actually start your practice transition and move on to our Trusted Transition Process™. By completing this process two times, you can be sure you’ll receive an accurate assessment of the true value of the practice. 

Select a Transition Date and Stick to It

When selling a home, you pick a closing date. When selling a dental practice, you also need to pick a “closing date”, or when you want the dental practice transaction to be complete by. It is absolutely vital that you pick a date and stick to it. With so many different details to negotiate such as financial, legal, real estate, etc. it can be easy to stall or postpone the transition. Just keep in mind that being in a state of constant limbo can be stressful and upsetting for both the seller and the buyer, and things can turn ugly fast. 

When you pick a firm closing date and don’t allow things to get sidetracked, everyone ends up happier. In real estate, this is known as the “time is of the essence” clause, where if a party fails to meet the deadline, the deal is off.

At ddsmatch Four States, we know you’ve poured your heart and soul into your practice, and we also know that no two dental practice transitions are the same. The different elements involved include the personalities of the buyer and seller, where the practice is located, the timing of the transition, etc. Each of the four states: Kansas, Western Missouri, Arkansas, and Oklahoma are going to deal with different factors within the dental practice transitions. 

For example, in Kansas there are currently 762 General Dentistry Practices, whereas Oklahoma has just over 1,000. There are about a million more people living in the state of Oklahoma than Kansas, so the competition for selling a dental practice in Oklahoma may be more fierce, but you may also have a lot more buyers interested. On the other hand, many young dentists looking to buy a dental practice may like the idea of beginning in a smaller, less populated Kansas town, so your dental practice may appeal to them for those reasons. 

Sometimes no matter how firm your closing date and how badly you’re ready to sell, and no matter how many interested buyers you have, delay is unavoidable. Buyers don’t come through at the last minute due to financial reasons. Your office has to suddenly undergo structural repairs. You have a family emergency that puts you out of commission for a month. Anything can happen! Bottom line: stay as firm as you can on your closing date, and be flexible when necessary. 

Selling a Dental Practice is Easier with the Experts at ddsmatch Four States 

At ddsmatch Four States we want to be your dental practice transition specialists. Dictionary.com defines a “specialist” as: a person who devotes himself or herself to one subject or to one particular branch of a subject or pursuit. Your team at ddsmatch Four States has earned the reputation of specialists because we are devoted to ensuring your dental practice transition is smooth and stress-free. We bring the experience of hundreds of transitions from all over the United States. 

If you are thinking about selling your dental practice in the Kansas, Western Missouri, Arkansas, or Oklahoma areas, we want you to trust our wide-ranging expertise. Our Practice Optimizer Experience helps Dentists like you plan and prepare for a future, and our Trusted Transition Process™ ensures that you, your patients, and your staff will be well taken care of throughout the entirety of the transition. We understand how hard it is to end part one of your successful career journey and begin the next chapter in your life, and we want to match you with a buyer who can continue your life’s work in a way that will make you proud.

We promise to guide you through the transition process while also helping you to avoid common, costly mistakes. If you are considering a transition in the next five years, give us a call today for a free, no-obligation Practice Transition Assessment. 

Retirement: When to List Your Dental Office for Sale

During the day-to-day grind, it can be easy to forget that you won’t always want to come to work, and retirement will be your future sooner than you think. Take the time now to plan for retirement so you’ll be ready when the time comes. In addition to putting money aside in a retirement account, you also need to know the current market trends so you can gauge when it’s the ideal time to list your dental office for sale. 

Statistics from the ADA and Current Retirement Trends

Statistics from a Dental Workforce study show that as of 2015, the average age of dentists in the United States was 50 years old, up from age 48 in 2005. The numbers also showed that the average age of retiring dentists in 2015 was 68, which is an increase from the average age of 66 in 2005. Findings from this study demonstrate that while dentists overall are waiting a little longer to retire, as many as half of all practicing dentists will reach retirement age in this decade.

What does that mean for you and your dental practice? In about five to ten years, increasing numbers of dental practices will be up for sale, possibly driving sale prices down. If you’re also looking to retire around this same time period, you may want to either put it off for a few extra years, or retire early to avoid a flooded market. Start planning for your retirement today so you’re ready to sell when the timing’s right. You may get a higher price for your dental practice today than in five years from now when buyers have their pick.

Retirement: Common Questions and Concerns

We get asked a lot of questions about retirement, and we want to address them as completely and openly as we can. If retirement is not on the immediate horizon for you, contemplate these questions and figure out what your game plan will be in the next ten years.

How much is my practice worth?

As a dentist, you’ve probably poured your blood, sweat, and tears into making your practice a success. This might create a gap between what the practice is worth to you, factoring in the emotional and psychological attachment, and what it is worth on the open market. The best way to find out just how much your practice is actually worth is by speaking with a dental practice transition specialist. 

At ddsmatch Four States, specialists have the expert knowledge and experience to give you an accurate estimate whether your practice is in Kansas, Western Missouri, Arkansas, or Oklahoma. They know which local market factors will play a role in the price, and how to arrive at a value that feels right for you.

Should I bring on an associate?

Many dentists want to gradually transition out of their practice by bringing on an associate. Their thought process is that this associate will end up taking over the practice and already know the ropes. This is a great option for a dentist who isn’t ready to list their dental office for sale right now, yet they do want to lessen their hours and still pop into the office a few times a week. 

ddsmatch Four States can help you figure out if your dental practice is ready to take on an associate and, if so, help you find someone that can fill that role to your satisfaction. Whether you are planning for retirement, looking to grow your dental practice, or just want a little help, the experts at ddsmatch Four States can help you pick a dental associate that meets your criteria and will benefit your practice.

Is it a good idea to sell to a DSO?

Sometimes dentists don’t want to worry about the business side of things and just want to focus on the patients and providing the absolute best care for them. If this sounds like you, selling to a DSO may be a great option. A DSO can relieve the hassle of managing the business side of things and could make working in your practice more attractive for potential associates. They can also frequently pay more than a private practitioner.

On the other hand, DSOs can also come into a practice and shake things up quite a bit. You may not like the new management style. This helpful post by a dental and medical law firm goes over the benefits and compromises of selling to a DSO.

How can I find the right buyer?

If a friend of a friend of a friend wants to buy your dental practice, should you consider it? It’s hard to find the right buyer if you don’t know where to look. ddsmatch Four States helps dentists in Kansas, Western Missouri, Arkansas, and Oklahoma find the right buyer to take over their dental practice. With the Trusted Transition Process, ddsmatch practice transition specialists can determine your wants and needs and how much your practice is worth. They can then search through their list of buyers to find someone who has the right skill set and temperament for your specific practice. Contact the experienced transition specialists at ddsmatch Four States to find out more about this process before you list your dental office for sale.

What are the things I can do now to prepare for retirement?

A financial advisor is crucial if you’re thinking about retiring in the next three to five years. If you haven’t spoken to one already, meet with an advisor as soon as possible. An advisor can look at your books and determine if you’ve got enough money set aside to retire when you want. Read this post from Dental Economics about retiring on your time table. You’ll also want to speak to a dental transition specialist with the expertise to get you on the right path towards a stress-free retirement.

What do I do about my real estate?

Even though it seems counterintuitive, when you decide to list your dental office for sale, that doesn’t mean the real estate where your office is based is included in that bargain. If you are already the owner of the building, you may decide to go ahead and sell it in addition to your practice. 

If you’re not ready to lose all your revenue streams just yet, you could also sell the practice, but keep the real estate and collect rent from the new doctor. In these types of transactions, it can be hard to know just what to do. ddsmatch Southwest has this detailed post that outlines what options buyers and sellers have in this type of scenario. Consult with a dental CPA and dental attorney to determine the impact your decision will have on taxes and which option is the right fit for your future. 

Should I sell now to get maximum value or wait?

The values and trends of dental practices are constantly changing. It’s hard to know what will happen four months from now, let alone four years when you’re contemplating retirement. Your experienced dental practice transition specialist may encourage you to sell now before the market floods, or list your dental office for sale a year from now based on your individual situation. There is no ultimate end-all be-all right answer that works for everyone.

I have a partner who won’t buy me out, now what do I do?

Maybe you and your partner had a recent disagreement, or maybe your partner just truly doesn’t have the funds to buy your share, or maybe they just don’t want to. No matter the circumstance, ddsmatch Four States is here to help. Some buyers are explicitly looking to buy into a partnership, so a dentist that wants to sell part ownership in a practice is ideal. This process can get complicated, and comes with a lot of specific legal minutiae, so your best bet is to schedule a consultation with an experienced dental transition specialist to find out more details.

Who can I trust to help me with my dental practice sale?

Before you list your dental office for sale, take your time looking at all of your options and talking to as many advisors and specialists as possible. You don’t want to sell to just anyone, and you want to ensure you’re getting a good deal while leaving a lasting legacy. Find a dental practice transition specialist that has local knowledge, years of experience in the business, and proven examples of successful transitions. For dentists practicing in Kansas, Western Missouri, Arkansas, and Oklahoma, the specialists at ddsmatch Four States can help lead you through the transition process and go over all the particulars with you so you’re confident in whatever decision you ultimately make.

Plan for Retirement Before Listing Your Dental Office for Sale

ddsmatch Four States can do more than just help you sell a dental practice in Kansas, Western Missouri, Arkansas, and Oklahoma. Using our Practice Optimizer Experience, we ensure you get fair value out of your dental practice and we help you prepare for an enjoyable retirement experience. The Practice Optimizer Experience has everything you need for a successful dental practice transition, including:

  • Conceptual Transition Experience: We’ll help you establish goals and plan out strategies so you can ease into retirement.
  • Trusted Valuation Analysis: There will actually be two valuations, the first at the beginning of the process. The second when you are ready to begin your practice transition.
  • Dental Insurance Navigator: We’ve partnered with an insurance advisor to advise on new insurance plans to consider adding to your practice, or plans to discontinue, to achieve your ideal payer mix. 
  • Clinical Opportunity Blueprint: We provide you with an analysis of your practice to reveal potential for additional earning.
  • Critical Metrics Analysis: We provide you with a customized practice report on critical items, reviewed and updated annually until your complete you practice transition.

Our Practice Optimizer Experience also includes important elements needed for an overall secure retirement, such as: 

  • Ideal Retirement Calculation: We’ll look at your investments and projected future income to figure out the ideal timing for your future transition.
  • Estate Preparedness Gameplan: We’ll put you in touch with a local area attorney who has the appropriate expertise in wills, trusts, and estates. They can help you update or outline the essential legal documents to protect your practice assets and value in the event of an unforeseen death or disability.

Feeling like now is the right time to retire? Want to retire five to ten years from now? Whatever your goals, you don’t have to do anything alone. The experts at ddsmatch Four States can go over all your questions and concerns with you and help you plan for a successful retirement. Set up a consultation today to find out more about our comprehensive plans and services.

Preparing to List Your Dental Practice for Sale Amidst Uncertainty

Each year is unpredictable and brings with it new challenges and new possibilities. Even though the future is uncertain, planning ahead for the unexpected is the best way to increase your peace of mind. As the owner of a dental practice, you probably visualize yourself retiring when you want to, without thinking about the outside circumstances that may force you to make that decision earlier than you thought. 

Some doctors have to exit their practice early due to an unforeseen development, such as a sudden illness or the need to care for an elderly family member. No matter what life throws your way, it’s best to be prepared and ready to know what steps you’ll need to take to list your dental practice for sale in the event that it’s necessary. Here are five steps that will help you formulate a successful plan.

Step One: Planning for the Worst Case Scenario

There are a lot of things that can happen when you own a dental practice and you need to prepare yourself mentally—and financially—for future losses or curveballs. Think about the following:

  • What will I do if my dental practice begins losing money?
  • How will I handle a disgruntled employee?
  • What will be my game plan if I am unwell and need to take lots of time off?
  • How will I prepare for an accident occurring in the office?
  • What will happen to my practice if I pass away or am permanently disabled?

Of course you can’t predict every outcome or every scenario, but it’s important to have a plan in place so you’re not fearful or frazzled when an unexpected event happens. Do all you can to protect your family and your practice so you can come out on top. Discuss these types of scenarios with a loved one or trusted family friend to see if they can find any gaps in your plan. 

Step Two: Figure Out Your Retirement Goals

It’s never too early to plan for retirement, but it can definitely be too late. Don’t make the mistake of waiting until you’re much further along in your career before having a solid retirement plan. Think about what you need to get out of the sale of your practice in case of an emergency so you’re able to live and support your loved ones in the way that you want. Most dentists can’t do it alone, and need the help of experts to come up with a successful plan.

It’s a good idea to hire a dental CPA and a dental attorney who can help you outline your goals and how you’ll achieve them. A dental practice transition specialist such as ddsmatch Four States will be a part of your team, as well as an insurance advisor, and perhaps even a practice consultant. It can be tough to find people to help you who are truly qualified, but at ddsmatch Four States, we’ll make referrals to experts based on our extensive experience in dental practice transitions in Kansas, Western Missouri, Arkansas, and Oklahoma.

After you have the people you need on your team, you’ll figure out the financial amount you need to net from your dental practice for sale. Ask all the members of your team to go through your financial records and see if your current practice would allow you to achieve that amount. It’s possible you’ll need to boost collections or cash flow to make that figure a reality. Talk to your team about the changes and/or investments you should make to help you maximize your earnings, investments, and savings, while also lowering your overall expenditures.

Step Three: Increase Value Where You Can

You may need to invest in or grow your practice in order to meet your retirement goals, and sometimes the only way to do that is through capital investments. Be sure you’re not only investing in expanding your practice, but also protecting your current assets. 

Be smart about cost-saving measures. Don’t be the dentist who suddenly walks into the office and tells all the employees they’re expected to do the same amount of work for a smaller salary. Your relationships with your staff members should inspire loyalty and trust. Be a good boss and treat them right. Look at cutting costs by starting with practical actions like an insurance review or better tax planning. 

You should increase your cash flow in a cautiously optimistic way, without taking high risk actions. There are established methods of doing this in the dental industry. Examples include growing your patient base, optimizing treatment plan acceptance, and improving your patient’s overall customer service experience for greater retention. 

Review your master fee schedule and participating fee schedules. When you do this, ask your professional insurance advisor to negotiate with the insurance providers—doing this can add about 5-10% to your monetary returns. 

Step Four: Evaluate the Type of Sale You Want

Some dentists opt to go ahead and sell their entire practice, while others decide to bring an on associate with a buy-in agreement. When you sell your practice outright, you’ll get a big one-time payment, which is sometimes the best option. Usually deciding to do an outright sale is less risky, but look out for the following:

  • It’s tempting to start cutting down your time in the office before escrow closes. Don’t jump the gun. Wait until the deal is officially closed before you reduce your workload.
  • Don’t just sell to the first person who’s interested. You want to sell your practice to another dentist who will honor, protect, and build on what you have created. The experts at ddsmatch Four States are experienced with finding and matching sellers with appropriate, like-minded buyers.
  • Disclose any material problems with the practice before you sell. It’s important to answer any questions your buyer has and be straightforward with them. They’ll just find out later if you don’t tell them right away, and then you’ll have lost their trust.
  • Not sure what information should be kept confidential? Your advisors can talk to you about what’s appropriate to share with others, your staff included. Pay careful attention to their guidance on this. Loose lips can sink the deal.
  • Don’t list your practice if you’re not quite ready to sell yet. A practice transition specialist, business valuator (such as Blue & Co., a ddsmatch Four States strategic partner), or an experienced dental CPA can advise you on beneficial improvements that will showcase your practice before you sell. 

Not thinking about retirement yet? Sometimes an inside transfer is the best way to go. In this scenario, you’d sell to an associate over a period of time. During that time period, you can grow your practice while taking a little more time for your own interests. If you decide this is the route for you, make sure you plan and prepare with your team of experts. Your attorney will need to outline a detailed agreement that specifies: when the transition will be, how the transition will occur, the measure for valuing the practice, how everyone will be paid, and how and under what conditions the agreement can be cancelled.

Step Five: Contingency Planning

Contingency Planning for the Practice

When you’re able to list your dental practice for sale independent of outside influences, the four steps above can be extremely helpful. But what about when you have to transition your practice before you’re ready? You’ll want to make sure your practice is still functioning at the highest level possible until you can sell it. That way you and your family will be able to sell the practice for top value, and your employees and patients can rest easy. 

Some contingency plans may include a buy-sell agreement. This agreement is 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 team of experts can guide you and talk to you about similar situations they’ve encountered and what steps would be advantageous in your particular circumstance. They can help you come up with a plan that will ensure your loved one’s future and protect the legacy you have built. 

Your Personal Contingency Plan

Your dental lawyer and dental CPA can be instrumental in arranging your personal and professional affairs. With the right tools and experience to help you plan for an emergency situation, you and your family’s needs should be taken care of in the long-term, not just the here and now. Look at life and disability insurance plans if you haven’t already, and be sure you talk to your team about things like assigning power of attorney and advance medical directives.

Devise a Plan Now: Be Ready to List Your Dental Practice for Sale

ddsmatch Four States has been successfully connecting dentists’ present with their future for many years. A major factor in our success are our proven processes, which are continually revised with new information from each dental practice transition we facilitate. 

One of our programs, the Practice Optimizer Experience, helps dentists prepare for the unexpected. This program can make things easier for you as you prepare, plan, and prioritize for your future. The Practice Optimizer Experience includes the following: 

  • Conceptual Transition Experience: We help you imagine your future, set attainable goals for a smooth transition, and formulate plans to prepare you for your life after retirement before it starts.
  • Trusted Valuation Analysis: Certified Valuation Analysts with dental industry expertise will analyze your practice twice to be sure you know what your practice is worth before you sell. The first analysis will be at the onset of the process. The second analysis will be when you are ready to actually start your practice transition.
  • Ideal Retirement Calculation: We’ll review all your investments with you and predict the future income of your practice. This will help you feel secure in the timing and planning of your future transition. You can do this with your current advisor, or we can arrange a third-party assessment.
  • Estate Preparedness Gameplan: We’ll refer you to a local attorney with expertise in wills, trusts, and estates, to review, update, or create the essential legal documents to protect your practice assets and value in the event of an unforeseen death or disability.
  • Dental Insurance Navigator: We’ve partnered with Shelley DeGroff of Integrative Dental Solutions, a PPO Advisor, to consult on the current dental insurance plans in place in your practice. Ms. DeGroff will advise on new insurance plans to consider adding to your practice, or plans to discontinue to achieve your ideal payer mix. 
  • Clinical Opportunity Blueprint: You’ll get an analysis of your practice and see what additional earnings you might expect. It will include production mix and intensity as well as new patient flow so you can take advantage of the opportunities for growth in your practice.
  • Critical Metrics Analysis: You’ll receive a customized practice report on critical items. This report will give you ideas to keep your practice running smoothly and effectively. An annual review of the results is also included.
  • The Trusted Transition Process: We know a dental practice transition can be stressful when it’s not done right. That’s why we provide you a straightforward path to help you transition from your practice, making sure we protect the legacy you’ve spent years building. Our comprehensive professional services will provide you with everything you need from the start of your transition to the successful conclusion.

Most experts agree that three to five years is the ideal window to plan for your dental practice transition, but it’s also never too early to have a contingency plan in place! Here at ddsmatch Four States, we are uniquely prepared to help doctors considering placing their dental practice for sale in Kansas, Western Missouri, Arkansas, and Oklahoma. The Practice Optimizer Experience will be of great value as you set your future goals and map out the path to achieve them. Contact us today to learn how you can get started.

Listing a Dental Practice for Sale: Input from a Dental CPA and Business Valuator

Trying to decide if you should list your dental practice for sale? Don’t do anything until you hire an experienced dental CPA to work for you. Blue & Co. is the third-party, non-biased valuator ddsmatch Four States uses. The Blue & Co team looks at all aspects of the dental practice to determine the true and fair market value price and advises both the seller and the buyer on their next steps.

We recently spoke with Matt Howard of Blue & Co. to find out just how useful CPAs can be in a dental practice transaction. As a dental CPA himself, an accredited business valuator, and a certified valuation analyst, Matt Howard knows the ins and outs of the sale of a dental practice. He helps sellers know when it’s the right time to sell their practice or bring on an associate. Howard explains a few reasons why a dental CPA is invaluable to dental practice transitions. 

Deciphering Business Valuation

You don’t want to sell your practice for less than it’s worth, or price it too high and have no takers. A dental CPA can help you figure out the true market value of your practice. For instance, at Blue & Co., their team of experts will put together a 70-page business valuation document that breaks down every financial aspect of your practice. 

A dental CPA will look at financial deviations from the norm, and ask you for more detailed information. Maybe there was a month where you were out of town for a lengthy period of time and didn’t see very many patients. Explain that to the CPA so they understand why the numbers reflect a significant change. 

As the seller, you’ll receive a draft report from Blue & Co that will go over all the numbers and factors in extensive detail. Your CPA will help you understand how they came up with the final 

valuation price. You’ll also have the opportunity to give your personal input after the initial report, so the CPA can make adjustments and present a final version to both you and the buyer. 

This report is designed to describe the true market value of a dental practice and reflect how its resources are being used, which are often not the same thing. As Howard notes: 

“The biggest noise in [the business valuation of a] . . . dental practice would be the owner’s noise. And what I mean by that is anything that’s inside the practice that is not necessarily operational, or is basically something that the owner has decided to do at the practice that doesn’t exactly reflect the operations of the practice . . . 

A lot of times, a seller will own the building, and in owning the building, they’ll pay themselves a leased rate for that building. And sometimes that isn’t a market rate. Sometimes it’s a little bit above, sometimes it’s a little bit lower. And so our job in this process is to really help really work through the practice financials, the historical financial statements, and just basically help sanitize or normalize the numbers as we see them [so] the true operations of the practice are reflected.”

When is the Right Time to Prepare for a Sale?

It’s only natural for a dentist who’s ready to sell his practice to want to cut down their workload as they get closer to that milestone. But before you start decreasing your output or reducing your hours, Howard says it’s best to proceed with a “full steam ahead” attitude so your numbers reflect how much money your practice makes in a typical year. 

For example, if a doctor decides to sell his dental practice the same year he starts seeing fewer patients, the revenue stream will automatically decrease and it will look like the practice is beginning to underperform. That sudden downturn can cause the buyer’s lending bank to reconsider loaning the buyer the money to purchase the practice. Howard explains that what banks are looking for is “a very mature practice that’s either consistently growing by inflation, or at least steady in the collection perspective.”

So, instead of slowing things down right when you’re ready to sell, you should begin preparing around five years before you want to sell, or possibly sooner. If you have a goal to retire by 62, and you’re currently 53, keep in mind that you’ll need to work hard for the next 9 years, only slowing down once the valuation and dental practice transition is complete to maximize your practice’s value. 

Should I Bring on a Dental Associate if I’m Not Ready to Place My Dental Practice for Sale?

Sometimes dentists want to lessen their workload, but they are not quite ready to place their dental practice for sale. In these cases, bringing on a dental associate may be the right solution. You may be excited about this prospect, but what about the other members of your staff? How do you know if your practice is prepared for this change? 

Howard observes, “Every practice has a limited amount of resources, of ops, of time for the staff to not hit overtime. So there’s a lot of variables at play here. Typically, we like to see over a $1.2 million collection practice in general. That way there’s plenty of room for an associate to come in, inherit some of that revenue stream, as in, hopefully the seller wants to back off a bit and transfer some of their patient base over to the associate.”

Benefits to the Seller

With a dental associateship, a seller can gow the value of the practice and keep serving their patients while cutting back on hours here and there if need be. But the seller should keep in mind that some patients who have a long-term relationship with you as their dentist may not want to see someone new and may not like the change. Usually, bringing on an associate can service more patients and keep patient satisfaction and retention high. Just be sure your dental associate is a good match for your practice. 

Benefits to the Associate

Many dentists that are just starting out are eager to join a mature, thriving, practice so they can earn money immediately. Plus they don’t have to worry about spending a lot of time trying to attract patients to the practice through extensive marketing and advertising. As an added bonus, they can learn a lot from you. 

When a dental associate joins a practice, they may get guaranteed earnings for the first couple of months they are there, and then move into a production or collections-based compensation after that. Ordinarily, an associate is in the thick of paying back student loans and their income needs to cover both their debt and reasonable living expenses.

In other words, it needs to make financial sense for both the practice and the associate to ensure the dental associateship is successful.  Blue & Co. has come up with a program they call the Associate IQ. Howard explains how this program helps dentists considering an associate: 

“[We] systematically go through the practice. We have about ten different areas that we look at to make sure that it makes sense for the practice to bring this on. Does it make sense from the owner’s side, and does it make sense from the associate’s side? 

“Some things we’ll look at, is if you only have three ops, and you want to bring in two dentists a day, that doesn’t make a lot of sense. So after looking at a bunch of these different variables and intricacies of the practice, we will come up with basically a quotient of how you rate on a scale of zero to 100 for being a good candidate for having an associate.”

Doctors need to carefully consider all of the above variables before hiring a dental associate. They should outline expectations with their associate and make sure they’re both on the same page so there are no surprises for either party. When a dental associate leaves, it can be especially difficult on the practice, as the patient base has typically grown and one doctor can no longer handle it on their own. 

If you think a dental associateship is the right move for you and your practice, it’s crucial to consult with a dental CPA to be sure you and your practice can support this change in the long run. Taking advantage of all the advice and experience a professional dental CPA has to offer can help you consider all the factors you hadn’t thought of before and guide you to an informed decision.

Should I Upgrade my Practice to Increase its Valuation?

Though it is important to make your practice attractive to the buying doctor, most upgrades won’t necessarily pay off in the sale. Howard explains: 

“If you’ve still got the shag carpet in the practice, that probably needs to go away before you start marketing it. So those types of considerations will bring it up to standard of care and that could make it more valuable. 

“However, you’re probably not going to get a one-for-one payback on your investment. So my end-all, be-all recommendation is, five years before the practice sale, unless you’re really making your practice digital or doing something that’s bringing it up to standard of care, any other significant remodels at that point would probably not be a complete one for one return on your money.”

Be sure to take a good look at your current dental equipment and patient systems to evaluate if they’re antiquated. A young dentist may not be deterred by lime green-painted walls, but they may not even consider buying your practice if you’re still using old equipment they haven’t been trained on or don’t know how to use.

The Question of Asset Allocation

As Howard succinctly puts it, “It’s not just the price, it’s the overall deal” when it comes to a sale. “And what I mean by that is this: the million dollar price is great and all. However, it’s not about what the price is, it’s about what you keep. And obviously what I’m referring to here is taxation.”

Most everything in the sale is essentially going to be allocated as an asset, or as goodwill. The sale of tangible assets are taxed as normal income. The sale of intangibles, such as goodwill, is taxed at the more favorable capital gains rate. As the seller, the more of the practice value you can allocate to goodwill, the better that is for you—the more money you keep.

Eventually, everything in the sale, for the buyer, can be depreciated over time. So, in the long run, the financial aspect of asset allocation has less of an overall impact on the buyer. For the seller, however, when that tax bill hits, it is a one-time hit. 

The good news is that how the assets are allocated is really just a subject of negotiation between the buyer and the seller to agree on a mutually beneficial arrangement. Rather than a fixed formula, this ratio is determined by the agreement of the value between the parties to the sale. With an experienced dental CPA and a competent lawyer on your side, you can be more  certain that your interests are properly represented and important details won’t be overlooked.

ddsmatch Four States Can Help You With Your Dental Practice for Sale

If you are considering placing your dental practice for sale in the Kansas, Western Missouri, Arkansas, or Oklahoma areas, we at ddsmatch Four States are your dental practice transition specialists. More than just dental practice brokers, we have refined our Trusted Transition Process to ensure the continued wellbeing of your patients, staff and community. We know how important it is that the buyer not only have the clinical skills and personality to successfully carry on your practice, but also the ability to continue your legacy. 

Our focus and expertise revolves entirely around helping you in whatever way best matches your individual goals and needs while helping you avoid common, costly mistakes. Contact us today and find out how we can help you achieve your dental practice transition goals.