As 2020 has demonstrated, the future can be quite uncertain. Everyone has their share of accidents, illness, and other life-changing events, some more tragic than others. We all share the dream of exiting our careers on our own terms and on our own schedule, but rarely do we consider how easily that can be derailed.
You’ve likely heard about doctors beset by an unexpected disability, a sudden illness, or other circumstance, who was compelled to transition their practice sooner than they had planned. As best as we can, we need to be ready for whatever life brings our way. So, while you may very well enjoy a decades-long practice and retire how and when you want, there is no guarantee and not everyone will be so lucky. Planning ahead offers peace of mind.
Below are five steps you can take now to help you be ready to list your dental practice for sale in case of an emergency.
Step One: Hope for the Best, Plan for the Worst
The first step is simply facing the reality that we do not control most of the circumstances that impact our lives. Accidents, illness, death, the actions and carelessness of others—these are just some of the ways our life’s plan can go off course in unanticipated ways. Even the best planners can’t anticipate every contingency. Fortunately, we don’t need to be ready for everything, we just need to have a plan in place for what to do when something unexpected happens.
No one has regretted being too prepared, but too many find out the hard way they were not prepared enough. Even if you never need a contingency plan, you and your loved ones will benefit from the peace of mind of knowing that, should something unfortunate happen, you have protected your family and your practice. So, the first step is simply prioritizing the time to sit down and face the possibility of uncertainty.
Step Two: Clearly Define Your Retirement Goals
You should have a reasonable retirement plan that can be put into place at any time. Wherever you are in your career, it pays to be thinking about what you need to get out of the sale of your practice if there were an emergency, so you could be able to live and support your loved ones in the way that you want. This requires a fair amount of advance planning and outside help.
If you don’t have a dental CPA or a dental attorney, you will need both. A dental practice transition specialist such as DDSmatch Mid-Atlantic will be a part of your team, as well as an insurance advisor, and perhaps even a practice consultant. If you don’t know how to find qualified team members, your dental practice transition specialist can help. Here at DDSmatch Mid-Atlantic, we have a large number of strategic partners and can make referrals to experts based on our extensive experience in dental practice transitions in Maryland, Washington D.C., and Virginia.
Once you have your team in place, they can work with you to clearly identify the amount you need to net from the sale of your practice. Then, have your dental CPA, insurance advisor, and practice consultant take a look at your books and your practice to determine whether it’s realistic with your current practice. If you need to increase collections or cash flow, your advisors can help guide you well in advance about what changes, investments, or practice growth will bring the most reasonable returns, and which won’t. They can talk you through other changes that can help you maximize your earnings, investments, and savings, while reducing costs and taxes.
Step Three: Maximize Value without Losing Value
The old maxim that it takes money to make money is often proven true. If you need to invest in or expand your practice to meet your retirement goals, it’s probably going to require some capital investment. A common mistake for dentists is investing in growth without adequately protecting their current assets and practice. Again, your advisors will be invaluable here in determining the smartest path toward your retirement goals.
Also, when looking at cutting costs, remember that value-saving measures don’t have to be austere. It may include an insurance review. It often includes better tax planning to identify areas for savings. It definitely should include a solid plan to protect your personal and practice assets. Your advisors can help you make a plan that won’t overly burden your current practice, savings, or income.
Keep in mind that your goals here are to grow the practice and increase cash flow, while still being prepared for whatever comes your way. There are established methods of doing this in the dental industry: grow your patient base, optimize treatment plan acceptance, improve your patient’s overall customer service experience for greater retention. You should regularly review your master fee schedule and participating fee schedules and, when you do, have a professional insurance advisor negotiate those with the insurance providers—this simple step alone can add, on average, 5-10% to your revenue.
Finally, an important asset to your practice is your staff. Create an office culture that inspires loyalty and, when the time for transition approaches, work with your staff to ensure they stay on through the transition.
Step Four: Figure Out What Kind of Sale You Want
Basically, this comes down to whether you want an outright sale of the entire practice to an outside dentist or whether you want to bring on an associate with a buy-in agreement.
An outright sale can be good, as it yields a lump sum payment for the entire value of the practice. It allows for a fast transition and, financially, is less risky than a buy-in. But there are things to watch out for:
- Until you close escrow, it’s still your practice. Treat it that way. Don’t go into retirement mode and slow down before you close on the deal.
- Don’t just take the first bidder. Get the buyer that you want to protect what you have built (dental practice transition specialists such as DDSmatch Mid-Atlantic are experienced with finding and matching sellers with appropriate, like-minded buyers).
- Don’t try and hide bad news from your buyer. They’ll find it out eventually and it may be much harder to manage if they think you’ve tried to hide it, plus you may have eroded the buyer’s trust.
- Conversely, a lot of information needs to be confidential. Make sure you keep that confidence. Your advisors will help you determine which information should be held closely and which is shared, including with your staff.
- Don’t market your practice before it’s ready. A practice transition specialist, business valuator (such as Blue & Co., a DDSmatch Mid-Atlantic strategic partner), or an experienced dental CPA can advise on worthwhile improvements that can maximize your practice value before showing it to potential buyers.
If you think retirement is still a long way off, you may want to consider an inside transfer. That would mean something like selling to an associate over a period of years, three to five being fairly typical. A benefit of this is that it allows you to grow the practice in the interim, and perhaps take more time for your own interests. It can also be motivating to associates and encourage them to stay for the long term.
Again, however, it will require diligence and careful planning in conjunction with your team of advisors. Your lawyer in particular will be key—you’ll need a solid agreement that clearly details the terms: when the transition will be, how the transition will occur, what will be the measure for valuing the practice, how will everyone be paid, and how and under what conditions can the agreement be cancelled.
Step Five: Contingency Planning
Contingency Planning for the Practice
The first four steps all apply when you are listing your dental practice for sale on your own terms. This step is about what you do when you have to transition your practice on life’s terms. If you pass away, are injured, or start seeing signs your body is not going to cooperate with your timelines, you need to ensure that your practice continues operating at the highest level possible until a sale can be completed. This will allow you and your family to get the full value of the practice, while protecting your employees and providing continued care for your patients.
Some contingency plans may include a buy-sell agreement. This is an agreement used to reallocate a share of a business if an owner dies or leaves the business and requires that the business share is sold to the company or the remaining members of the business according to a predetermined formula. Life and disability insurance plans also play a role. The proceeds from insurance can be used in a variety of ways, including hiring an associate to work in the practice until a sale is complete.
Your team of advisors will likely have experience with dental practice transitions under unexpected and adverse circumstances. Take advantage of their experience and expertise by having them help you put together a plan that will protect the legacy you have built and your loved ones.
Your Personal Contingency Plan
If you haven’t done so already, work closely with your dental lawyer and dental CPA to get your affairs in order. If you have already done this, review it with your advisors and make sure it is up to date and meets your retirement and contingency goals. It should be adequate to cover your family’s needs, but also to take care of you long-term in case of disability. If you are lacking assets to cover these costs, consider life and disability insurance plans. Your documents should also include things like assigning power of attorney and an advance medical directive.
Start Planning Now: Be Ready to Put Your Dental Practice for Sale
DDSmatch Mid-Atlantic has been successfully connecting dentists’ present with their future for many years. A major factor in our success are our proven processes, which are continually revised with new information from each dental practice transition we facilitate.
One of these programs, the Practice Optimizer Experience, is well suited for the dentist looking to protect their practice against the unexpected. So, whether you are thinking about listing your dental practice for sale or not, this program can be invaluable to you as you prepare, plan, and prioritize for your future. The Practice Optimizer Experience includes the following:
- Conceptual Transition Experience: We help you visualize your future, set achievable goals for your transition, and devise strategies to start you in the direction of your post-transition dreams, well in advance of your intended transition timeframe.
- Trusted Valuation Analysis: Your dental practice will be analyzed twice by Certified Valuation Analysts with dental industry expertise. This step is an important part of your wealth management planning. The first analysis will be at the beginning of the process. The second analysis will be when you are ready to actually start your practice transition.
- Ideal Retirement Calculation: This is a financial review of all of your investments and projected future income to establish security in the timing and planning for your future transition. This can be done in tandem with your current advisor or as a supplemental third-party opinion.
- Estate Preparedness Gameplan: We’ll refer you to a local attorney with expertise in wills, trusts, and estates, to review, update, or create the essential legal documents to protect your practice assets and value in the event of an unforeseen death or disability.
- Dental Insurance Navigator: We’ve partnered with Shelley DeGroff of Integrative Dental Solutions, a PPO Advisor, to consult on the current dental insurance plans in place in your practice. Ms. DeGroff will advise on new insurance plans to consider adding to your practice, or plans to discontinue to achieve your ideal payer mix.
- Clinical Opportunity Blueprint: We provide you with an analysis of your practice to reveal its potential for additional earning. The report we provide is a blueprint of opportunities, detailing production mix and intensity, new patient flow, and more, to help you maximize the opportunities for growth in your practice.
- Critical Metrics Analysis: The analysis of your practice is not static, but evolving. We will provide you with a customized practice report on critical items. This report will be a guide to keep your practice producing at a high level. An annual review of the results is included.
- The Trusted Transition Process: When the time is right, this process provides a clear and consistent path to help you transition your practice, while maintaining the legacy you have worked so hard to establish. We offer a complete range of professional services to provide reliable information and advice from the start of your transition to the successful finish.
A common rule of thumb is that three to five years is the ideal window to planning for transitioning your practice. But, when it comes to being prepared for an emergency, it’s never too early to start. Here at DDSmatch Mid-Atlantic, we are uniquely prepared to help doctors considering placing their dental office for sale in Maryland, Washington, D.C., and Virginia. The Practice Optimizer Experience will be of great value as you set your future goals and map out the path to achieve them. Contact us today to learn how you can get started.