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Inside Dentistry
May 2013
Volume 9, Issue 5

Preparing To Sell Your Practice

7 steps to put you on the path to maximum profit

Roger P. Levin, DDS

Selling a dental practice is not an event—it is a process. Whether handling the sale directly or through a practice broker, the dentist should methodically prepare for the transition. Whether a dentist is retiring, relocating, or looking to change practice ownership, Levin Group has identified seven factors that will lead to the best results for the practice owner.

Create a Financial Plan

Working with a certified financial planner familiar with the dental market, the dentist should map out the financial situation and calculate the optimal timing and assets needed for retirement. This financial plan will identify when the sale of the practice should occur and how much net personal income the sale should generate.

Start Preparing 5 Years Ahead

If the practice has been experiencing plateaued or declining production, time will be needed for corrective measures to take effect. The objective is to increase practice value to a level that will command the desired selling price. A buyer will look for a pattern of improved performance. One good year after 3 bad years would not clearly demonstrate that the practice will be a sustainable business for the new owner. This is especially important now, when 75% of dental practices have experienced production declines in the past 4 years (Levin Group Data Center™, internal data).

Focus on Increased Production and Profit for 3 Years

When the time comes for practice valuation, statistical evidence of success will make a tremendous difference. With effective management and marketing systems in place, the practice will post excellent results that in turn will bolster the practice value and selling price. Dentists should anticipate that the valuation will be performed by an experienced, certified professional and will not be based on guesswork or wishful thinking. For this reason, the practice should routinely gather performance data that will demonstrate positive, sustainable trends.

Maximize Production and Control Overhead

In the interest of arriving at a fair price, the best course is often to invest judiciously in the practice. By using proven systems to bring in new patients, reactivate current patients, increase per-patient and total production, streamline scheduling, and improve collections, the practice will lay the foundation for increasing income and profitability in ways that are clearly sustainable for the new owner.

Decide on a Sales Method

As the time for selling the practice draws near, the dentist must determine how to handle the process. There are three basic options, each with distinct advantages and disadvantages. One is for the dentist to handle the entire process. Another is to identify the buyer and then entrust the follow-through to an experienced professional. The third approach, which is recommended by Levin Group, is to engage a practice transitions broker to handle the entire process.

Assign Practice Valuation to a Proven Professional

Ascertaining the value of any business is a complex process involving numerous criteria. As with a financial planner, it is essential that the person performing the valuation be knowledgeable about the dental market. Although there are many experts in this area, it is critical to be sure that the individual has numerous years of experience, will stand behind the valuation in a court of law, and will follow a certified process. It is important to bear in mind that the valuation does not necessarily reflect the sale price, which is a negotiated number.

Use Transition-Experienced Legal Representation

Rather than relying on a family attorney, the seller should find a lawyer who specializes in this legal area and understands the business of dentistry to represent his or her interests in the sale. This will ensure that labor, tax, and other issues will be handled properly and that the sales contract protects both the seller and the buyer.

Conclusion

Given the complexities involved in selling a dental practice, the seller should start planning for the event as early as possible, preparing the practice to demonstrate at least 3 years of increased production and profit, long-term retention of patients and staff, and other evidence of excellent performance and sustainability. With the right process and the aid of key professionals (ie, financial planner, valuation expert, transitions attorney, and broker), the sale of the practice can cap the dentist’s career with financial success and pave the way to a well-funded retirement.

About the Author

Roger P. Levin, DDS, is a third-generation general dentist and the chairman and chief executive officer of Levin Group, Inc., the largest dental practice consulting firm in the world. To learn how to run a more profitable, efficient and satisfying practice, visit the Levin Group Resource Center at www.levingroup.com/gp—a free online resource with tips, videos, and other valuable information. You can also connect with Levin Group on Facebook and Twitter (@Levin_Group) to learn strategies and share ideas.

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