A common goal among dentists is to pay off debt, accumulate wealth (grow a successful practice), work a little, sell their practice, retire (and not necessarily in this order). Today more and more dentists are losing money in their portfolios and being forced to work until they die (likely in an operatory with a handpiece in their hand). That is no way to go, but for many aging dentists this is an unfortunate reality. On the flip side are younger dentists stepping up to the unwritten expectation (lie) that ‘successful’ dentists have to own their own practice to be successful and accomplished.
THE BEST TIME TO PLANT A TREE WAS 20 YEARS AGO. THE SECOND BEST TIME IS NOW. –CHINESE PROVERB
The best time to plan for the sale of your dental practice was 20 years ago. The second best time is 3-5 years ago. However, now is not a bad time if it all you have (even if you have to sell tomorrow).
We’ll look at this situation in two parts: 1. How to handle if you have 3 to 5 years. 2. What to do if you have to sell tomorrow.
3 to 5
To ensure you receive the highest return on your investment into your dental practice you need to invest in your dental practice. This may be the very thing you do not want to do. It may be counter-intuitive for you, but you need to spend some money on your practice and you need to put in some sweat equity.
1. Invest in yourself. Attend useful continuing education classes. Implement new strategies and ideas. Get help to push through ceilings you are uncomfortable with. Dentists are prone to change resistance and many are penny wise and pound foolish. If this offends you then you need to consider this may be an issue for you. However, you CAN overcome this to get what you want in the end. By investing in your own education you are committing yourself to your patients’ needs and desires.
2. Be present and build. Focus on building your practice for the next few years until your sale is complete. Focus on doing more dentistry for more people. Explore new innovations and employ new technologies that your patient will appreciate (not what YOU will find useful). Survey your patients and find out what is important to them and make it a priority to give them what they want. This could be different hours of operation, less radiation, new therapies, convenient payment options, esthetics (theirs and your office).
3. Mentorship and expertise. You are an expert dentist. That said, few dentists have the ability to be master clinicians and master business people. Seek mentorship of those who can, have and do produce the kind of results you desire to bring to your practice, the kind of results you patients want to see in your practice. You may have to spend money to receive the expertise you are looking for. Shop. Do your due diligence and pull the trigger on this deal. You will need someone who can help you identify your goals, your strengths and weaknesses and can help you obtain the resources to complement you and the resources that you have to achieve your goals. No successful person in the history of ever has become successful on their own. No one ever hit pay dirt without obstacles, so it is important you understand that and get help to navigate those obstacles as quickly as possibly (you don’t have time to figure things out on your own at this point).
4. Update. Spend money to replace aging equipment, redecorate your office, refresh the appearance of you and your staff. For some of you this may mean an Extreme Makeover: Dental Office Edition (we’ll see if that crazy Tye guy is available to ‘Move That Bus’ for you). Many restaurants and stores remodel every 3-5 years for a reason. Yes, it costs money to remodel, but the fresh looks actually increases sales (they have done studies on this). Apparently there is enough validity to this allegation, as numerous organizations subscribe to this.
5. Resist complacency. You may want to spend more time on the golf course, in the air, shopping, or with your family (and I certainly understand). However, you may need to be realistic and work more the next few years, examine more patients and provide more treatments to get your numbers up.
6. Get squared away. As a creature of habit you have no doubt been practicing as you have always practiced. You staff, like you, have habits. It is important that you and your staff review your processes to ensure your office complies with currently accepted standards including, but not limited to OSHA, Infection Control, HIPAA, record keeping, billing, and marketing. Being behind the times or out of compliance lowers the value of your practice because it will cost time and money to bring the office into compliance. Additionally (sadly), many incoming dentists will be so overwhelmed as new practice owners that few will give thought to ensuring the office is up-to-speed with compliance programs and they will incur liability for continuing your substandard practices. Talk about a setup for failure. Ensuring current compliance practices is a great gesture of goodwill for your buyer. Again, seek expertise to help you achieve and employ best practices for you and your dental team. A team the trains together, stays together. A well trained team positively impacts your bottom line.
7. Begin with the End in Mind, like Steven Covey stated. You need to identify your end result. What do you want your practice to look like? Not sure? Try this! How much do you expect to receive from the sale of your practice? What will your practice have to look like to get you to that number? What are you willing to do to make that happen? Are you willing to be a little uncomfortable for a little while to make it happen? If not, why not?
8. Good Ole Boy, Goodbye! Perhaps you’re a good ole fella (or gal) and you’re inclined to do things the old-fashioned way (I feel you here). I hear many stories of dentists who brought on an associate with a handshake deal for a buy-out. A year or two into the partnership the associate becomes unhappy, leaves, starts their own practice down the road (or next door to you) and your patients flock to the new office. Your practice falls apart and your nest egg goes you’re your expected $1.5 million to $25,000 (as a peace offering take it or leave it). Handshake deals are good for nobody in this situation. You need to seek an competent attorney to help you structure a buyout that is fair and equitable to both parties and addresses reasonably anticipated exit strategies if either parties wish to walk away from the agreement.
1. If you have to fire sale tomorrow and get out you will not have the time to make many changes. Resist making changes or updating equipment, as you will not be able to demonstrate the positive impact on the practice and therefore will not be able to articulate that the purchase contributes to the practices.
2. Limit your new dentist’s liabilities and wish them the greatest success by ensuring the practice is up-to-speed with OSHA, HIPAA, Infection Control, and billing practices. As I mentioned your buyer will be overwhelmed with trying to run their ‘new’ practice that they will likely overlook shortcomings in compliance and risk management. If they make a mistake and end up getting sued by a patient or shut down for fraud (infection control or a host of other issues) and you are toting a note for the buyer you may not get your money. Compliance efforts amount to ensuring your buyer’s success and increase the odds of the payoff of your note.
3. Considering financing a secondary note to enable the new dentist the cash to bring in mentors/ experts to set goals, establish/ refine systems and accomplish the things you do not have time to do before the sale. This will set your buyer up for success, which protects your note (if you are toting). Surely, you want to see your practice continue to be successful, after all, it is your legacy.