Getting Ready To Sell Your Practice... Read This First!

By: Michael S. Furlong

Congratulations! You are at the stage of your dental career where you are finally ready to sell your practice. Years of hard work establishing and growing your practice are about to pay off! Whether you are headed towards your retirement or have new career ambitions in mind, this final decision may be the most important of your professional career.

Although ther is no shortage of new, young denists looking to start their careers by purchasing a successful practice. The questions becomes how do you find them, screen them and present your practice to them in the best light?

FINISH STRONG

It is important to remember that how you finish is just as important as how you start. Many dentists end up robbing themselves of hundreds of thousands of dollars because they do not know how to maximize the sale! There are a few fundamentals that every single dentist needs to master if they want to get the most out of this important career milestone.

Did you know that if you are selling to another dentist, 9 times out of 10, they will be utilizing bank financing to fund their acquisition? When a bank is analyzing your practice, they will put the most weight on the most recent filed tax return. That's right... the profits and revenues you have achieved over the lifetime of the practice take a backseat to your most recent performance.

Why is this so important? There is a very strong tendency for dentists to cut back on working hours, marketing, and other provided services when they are nearing retirement. It seems like the "common sense" thing to do when in actuality it is a huge business mistake!

This is why it is so vital that you keep your practice operating full-time during the last few years. If anything, you might even want to push harder to improve your sales and profits during the time that you have left. If you can convince potential buyers that your practice is continually growing despite nearing retirement, you will add that much more value to your practice.

If you just do not have it in you anymore to practice at full speed, think about bringing an associate on to cover the missed days and keep the collection numbers in line with previous years.

LOOK AHEAD TO THE AFTER THE SALE

It is great to fantasize about all the benefits that will come with the sale, but you will have to be objectively honest about how you and your staff will gradually transition out of the practice. As you are handing the practice over to the buyer, you will want to map out a realistic plan for the following:

How will production be accounted for post sale?
What are the expectations of the buyer post sale?
How will I transition out of the practice?
How will the staff transition over to a new owner?
What type of non-compete will I be comfortable with?
Will I be OK with partial seller financing?

With some forward thinking, many or all of the questions that come up during a transition can be answered ahead of time.

KNOW WHAT YOUR PRACTICE IS WORTH

Even if you have your financial statements on point and believe you have a reasonable sales price for your practice, you will want to consult with a professional that specializes in helping dentists transition from their practice. This is not the time to be seeking "general" advisors that do not have the relevant experience in valuing dental practices for sale.

While it is important to look for things like certifications, reputation, and testimonials, the number one priority should be direct experience of sales and valuations of dental practices.
This step is key to ensuring that you get the right fair market value, avoid selling yourself short, and protect yourself from anything that could go wrong during the transition process.

WHAT IMPACTS MY VALUE?

Reaching an appropriate valuation will be based on factors that you may not even realize constitute a significant part of the practices value! Here are some key factors that will make or break how much your practice is worth:

An active patient base that experiences consistent monthly growth: This is the most important key factor as this is what buyers of your dental practice are most interested in.

Attractive profit margins: The name of the game in receiving sky-high market value is high cash flow and fixed overhead. This justifies a higher price on the practice while giving the buyer enough money to pay existing debts and cover personal living expenses.

Expenses In-Line With Industry Standards: It is important to know that your practice expenses are in-line with in the other practices on the market. If your accountant has been pumping up your expenses to reduce the tax impact, it’s time to rethink this method. What saves you now, can cost you down the road!

 Insurance Options: Medicaid, Medicare, PPO, Capitation

Demographics: Does the local demographic trends lead to a favorable future?

Market Saturation: Is there too many or too little dentists in the area

With your practice positioned for the best market value possible, expert guidance to help close the sale, a realistic transition plan to help all the employees involved, and an attitude of finishing strong, you will be able to maximize your practices valuation and get the dollar number that you want!


About The Author

Michael S. Furlong - Senior Transition Advisor

Mike has been assisting Doctors with their practice transition needs for over 10 Years has personally been involved in $100+ Million in closed practice transactions.

Mike can be reached at (800) 815-0590 or mfurlong@1stmedtransitions.com.


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