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.