As an entrepreneur, a successful dentist, a respected part of the community and a business owner, you will at some point have to make the decision to exit. Do you have an associate willing, able and financially capable to buy a portion or all of your practice? Some, unfortunately, make a terrible, and most likely very costly, mistake of trying to do it alone. They may ask their accountant or attorney to help or share with their colleagues their desire to sell.
The truth is, the initial planning to sell should have started before the decision was made to sell. In the back of your mind, you probably said, “I can see myself doing this forever. Someday I will scale back my hours, take a day or two off during the week, travel the world and practice as much and whenever I want.” This is a common plan for a lot of professionals. In more recent decades, the decision to sell has come sooner than later while the demand and value is at or near its best mark.
Identify Reasons for Selling Your Existing Practice
But why sell? Is it due to age, your number of years in practice, health, wealth, death, disability, attitude or burn out? Could it be the results of business issues, the economy, life or personal situation or a social development like the pandemic? Neighborhood, competition, there are all kinds of reasons for wanting to sell a practice. But it’s important to remember that if there is an urgent or pressing issue to sell, the value might be impacted.
The value of the business is based on a number of variables, but consistent revenue, stable cash flow, condition of the facility and location are the main drivers. A general dental practice in a metropolitan or suburban community will most likely sell quicker and for more profit than a practice located in a rural location. The same is to be said for a specialty practice and its location.
When it comes to selling a practice, a scheduled exit is ultimately the most ideal way to do it. Giving yourself three to five years to plan is a good start for preparing your business. First, meet with a dental industry expert to determine the current value of your practice and reconnect each year thereafter to update the value. The next step is to prepare your facility for sale: do some housekeeping, maintenance, repairs and reasonable updating. Flooring, paint, ceiling tiles and lighting are relatively inexpensive. Declutter and enhance the appearance of your office. Clean up and maintain the outside as well. It isn’t wise to overly invest a significant amount of capital into new equipment and technology if you are planning to exit in less than 24 months. Clean up the financials, accounts receivables, insurance plans and fee schedules. Clean up your overhead. This includes staff, supplies, lab, subscriptions, meetings, meals, travel and office lease if possible. Consider having your consultant speak with you and your financial and tax advisors to prepare for the cash injection that you will be receiving when the practice is sold.
Plan Three to Five Years to Transition
Giving yourself this three to five-year window gives you the ability to enjoy what you have created, and potentially increase the value of your practice. By exiting on your terms, you’ll be able to better adjust to the industry and the economy. The demand and market conditions will change over time from a seller’s market to a buyer’s market and vice versa. The insurance companies will continue to adjust as they have for years. The lending institutions will adjust to industry trends impacting or improving a buyer’s ability to secure financing.
What to Expect 18 to 24 months out
At 18 to 24 months, it’s time to put the wheels in motion. Is the business ready to be sold? Did you complete and maintain the housekeeping? Are you ready? If the answer is “yes,” contact your consultant to take the practice to market.
While your practice in being confidentially marketed by a qualified and reputable transition specialist, it is critical to maintain business as usual. It’s important that you do not disclose or discuss your plans to sell. A professionally prepared offer should be packaged and presented to the buyer and their advisors after a non-disclosure document is signed. After they have reviewed the materials, they may seek to see the office. This should be done after hours and your consultant should be present. Don’t be discouraged if the first person to see your practice doesn’t make an offer. These things take time.
Once your plan is put into motion, relax and trust the process. With an experienced team by your side, you can take comfort in knowing that regardless of what lies ahead, you are better prepared for what life has in store for you.
Published by Doug Sellan