If you have decided to sell your dental practice, you should consider a few essentials to protect yourself. Being prepared for your sale should be your first step to avoid a low transition price and a painstakingly drawn-out transaction. Also important is knowing whether you are ready financially and emotionally to undertake the process.
Work With a Financial Adviser
Planning means meeting with a financial adviser, preferably a dental CPA who understands the intricacies and nuances of transitions such as yours. Choose someone who is familiar with your personal and practice finances so you don’t miss monetary opportunities. During your conversation, discuss whether you are economically prepared to sell your practice, and whether you will be able to maintain a comfortable lifestyle. Are your personal finances in order, eg, do you have mortgage or practice debt? Should you wait until your retirement plan is more stable, and do you need to make additional contributions to it? Is your practice physically and financially attractive to a buyer?
Maintain or Enhance Practice Performance
I’ve seen many clinicians work fewer days, conduct fewer sophisticated procedures, and cut staff hours just before a sale is about to come to fruition. For fear of reduced income, employees may seek other employment and patients may go elsewhere for procedures you no longer offer. This inevitably leads to less revenue, creates an unhealthy atmosphere for employees, and can affect your patient base. These losses lower the value of your practice and threaten your goodwill (see my blog on “Goodwill Allocation”). Importantly, the potential buyer will see the dip in revenue and profit, making it difficult for the buyer to borrow enough money to meet your purchase price. No buyer wants a practice that is earning less revenue and profit than originally presented.
For a profitable and successful transition, make sure the facility looks good. Be honest with yourself. Is the décor esthetically pleasing? Are the walls, furnishings, and flooring clean and up-to-date? Is your equipment in good condition and state-of-the-art? A buyer wants to know how much s/he will have to spend after the acquisition to provide for current patients and attract new ones.
Additional Thoughts to Consider
While these points are vital to the selling process, there are many more items to consider. Be sure to work with your dental CPA along the way, and ask for help retaining an attorney who has experience with dental practices. Together, they will be an important partnership as they leverage each other’s expertise when going through the sales agreement. Above all, plan your sale and speak to those who have had experience with this major life occurrence.
About the Author
Bruce Bryen is a certified public accountant for more than 40 years, and has litigation experience in divorce, partnership disputes, and damage claims. He is the principal in the firm of RKG Tax and Business Services, LLC, located in Fort Washington, Pennsylvania. Mr. Bryen specializes in retirement planning design, income and estate tax planning, determination of the proper organizational business structure, asset protection, and structuring loan packages for presentation to financial institutions. For more information, please visit www.rkgcpa.com.