Ask the Transition Consultant

Sellers

What are my transition options?

There are four basic transition options. Learn more about the pros and cons involved with each below and then contact us to help you decide which is right for your situation.

Quick Practice Transition

Pros	Cons
Short timeline	Practice unrest for patients and staff
Fastest path to retirement

Strategic Sale to a Competitor

Pros	Cons
Option to continue practicing	Competition among practitioners for patient revenue
	Potential for staff loyalty issues

Associate Buy-in

Pros	Cons
Continue to work in the practice	Potentially lengthy process
Slow transition of responsibilities
Maintain control of the practice

Sale to a Corporate Entity

Pros	Cons
Potentially higher sale price	Full value of the sale price subject to restrictions
Ability to work until desired date	Corporate red-tape
	High production goals

How is my practice valued?

There are many variables that factor into your practice value such as profitability, practice characteristics, and patient base.

How can I increase the value of my practice?

Although each practice is different, focus on increasing profitability, increasing patient revenue base, updating equipment and implementing efficient policies and procedures.

What is the best time to sell or buy a practice?

The most important item here is to really understand your personal and financial goals. These goals will determine the best time to sell or buy a practice. There is not one answer that fits all circumstances.

When do I inform my patients and team members I am selling the practice?

As a basic rule, you should not inform your patients or team members until you have a plan which can be clearly communicated to secure the patient base and team members. A well-thought, properly communicated plan, will put everyone's mind at ease.

When do I take in an associate?

A practice requires at least 1,800 active patients before it is economically feasible to take in an associate. Your practice also must have the operating space required to allow both dentists to meet their financial goals.

Should I remodel my practice before selling?

You should analyze the cost-benefit of an office remodel or equipment acquisition. Upgrades will increase your practice's "curb appeal" and give it a competitive edge when selling your practice.

What happens to my employees?

Your employees are vital to your practice. The new owner will access their value and make their own determination on their employment. Their attitude and ability to accept change will be critical for them to continue with the company.

How long will it take for my practice to sell once listed?

One month to a year is typical. There are many factors that cause a practice to sell quicker than others: productivity, profitability, patient base, appearance, equipment and location are all critical factors in how quick a practice will sell.

Should I sell my building with my practice?

This will depend on many factors such as the value of the building, your retirement savings, retirement goals, loan balance, fair rental value and ability for the buyer to acquire the building. If you do lease your building to the practice, the buyer will require a first right of refusal.

What happens to the leased equipment in the office?

In most cases the leasing company will transfer the obligation to the new owner. Communication with the leasing company is critical and the sooner the better.

Will I have to carry a note in the sale of my practice?

In most cases, lenders will finance 100% of the practice purchase price, plus working capital. Factors that will affect the lender's decision will be practice value, cash flow of the practice, buyer's income to debt ratio and ability to produce the revenue necessary to pay off the loan. If the lenders will not fund the entire purchase price you may elect to take back a note.

Buyers

Is it difficult to obtain a practice loan?

In most cases, if the practice is fairly valued and your personal income to loan ratio is not too low, obtaining financing is relatively easy.

What are the advantages of buying a practice rather than building one from scratch?

Upon purchasing a practice you purchase an existing revenue base. In many cases, the patient base may have been under-serviced and will allow you the opportunity to increase the patient revenues. One disadvantage is you may need to update the equipment to practice dentistry the way you desire which is an investment in your future.

Do I have to purchase the seller's accounts receivable?

No. Logistically it is usually easiest for you to collect the accounts receivable. You can charge a management fee, which is a minimum of 5% of the balances collected.

Are there advantages to purchasing the building and the practice at the same time?

This is a lot of debt to take on at once. Your personal financial situation and lender requirements may restrict your ability to acquire both at the same time. Always make sure you have a first right of refusal if you lease the building from the seller of the practice.

How does the practice price allocation impact my income taxes?

The amount allocated to tangible assets, such as equipment, can be deducted against revenues typically over a 5 to 7 year period. The amount allocated to intangible assets, such as goodwill, is deducted against revenues over 15 years. Therefore, the more allocated to tangible assets will allow a quicker write off and lower tax liabilities in the early years when you are paying off the practice loan.