5-Year Plan to Sell Your Dental Practice: Follow These 5 Steps
The American Dental Association’s Health Policy Institute reports that there were 2,820 dentists in Oregon in 2018, and that the average age of those dentists is 47.7 years of age. The ADA HPI also points out that from 2015-2020 there are more dentists entering the profession in Oregon, than the number of dentists retiring, by 47 each year. This economic principle of supply and demand has created a “sellers’ market,” which is good news if you are looking to retire and sell in the next five years. There are simply fewer practices going up for sale each year, than the number of buyers who want to purchase.
If you are thinking about retirement in the next five years, but aren’t sure what to do in preparing your practice to maximize the sales price when the time comes, the following five steps can help you achieve that goal and reduce anxiety about your transition by being fully prepared.
Build Your Advisory Team Now Most dentists only sell their largest professional and business asset once in their lifetime. A seller’s most successful approach in their practice sale is to enlist an experienced and trusted advisory team including a practice broker, CPA and attorney who all have experience working with dentists and practice transitions. This team will protect your confidentiality from curiosity seekers and present your practice in its best, but honest light. Your advisory team will guide you through the entire selling process, from a practice valuation to the final closing. They will also offer key advice about how and where to market for maximum exposure to potential buyers, how to structure the sale for maximum tax savings, and how to minimize the risks of post-sale lawsuits.
Get Your Systems & Processes In Order Most dentists have the intention of getting their systems in order at their office, but never find the time. Now is not the time to share your 5-year plan to sell, but it is a great time to have your staff start to clean up the accounts receivable, the unscheduled treatment plans, the active patient list, and the recall system. Your practice management software can guide your staff through these tasks.
Cosmetic Refresh of Your Office No one can look into someone’s mouth and proclaim, “wow, you have a great dentist!” A dentist creates and communicates their professional and clinical philosophy to their patients through the office environment. If your office has worn carpet, frayed furniture, tattered pictures, and a tired look you should make a small investment in a cosmetic update. A fresh coat of paint, new floor coverings and some updated lighting not only make your office more welcoming and inviting to your patients, but also puts your best foot forward in the eyes of a buyer when you are ready to sell.
Equipment You will not recover dollar for dollar the money you spend on equipment prior to the sale of your practice. Only purchase equipment that you have time to use prior to the sale. Before updating your equipment, determine the years until your transition. If you plan to continue to work for less than two years, do not buy large items or “go digital”. However, if you plan on practicing three years or more, upgrading equipment will make your office more productive prior to the sale. With the new tax laws on tax credits and accelerated depreciation the investment may be smaller than you think. An equipment update will certainly make your office more attractive to buyers. The upgrades will not appreciably “add to the value” of your practice, but they will make your practice easier to sell.
Know Your Numbers Work with your CPA to understand what is driving the economic engine of your practice and how to maximize that efficiency. Be familiar not only with your production and collections numbers but go a little deeper to understand the cashflow of your practice, as this is ultimately what a buyer is paying for when you sell. You will also want to know what the value of your practice is, and your practice broker can provide that to you through a practice valuation. This allows you to know where you are today, so you can create a treatment plan for your practice and take the appropriate steps to where you want to be when the time comes to sell.