As is the case in all industries today, the dental industry is continually exposed to transition in the marketplace. While the desire to step away and opt to sell a practice can stem from a number of different reasons, the goal in this situation remains constant: maximizing your profits from the sale and making sure the transition goes as smoothly as possible. Several issues must be considered to ensure the transaction goes off without a hitch.
1. What is the current market like for dental practice transitions?
Do you know what the current market is like for a dental practice in your area? Do you have the ability to locate, identify, and contact potential buyers who have the available resources to enter into such a contract?
While this can be an extremely lengthy process, it is absolutely critical to make sure you are reaching your full earning potential from the sale. Seeking out a transition firm is a good way to get a firm understanding of the current status of the market and reach potential buyers.
2. What is the value of my business?
Take a long look at your business and consider what its true value is. Both implied and actual assets need to be accounted for when determining your practice's value. Some of the major assets to be considered include the following:
Your client list: This can be one of the most valuable assets to a dental professional who is just starting out. Have you maintained a thorough database of your past and current patients? Do you reach out to them with any frequency concerning upcoming appointments and new services that you offer?
Not only is this asset valuable to your potential buyer, it is important to your own success over the years. If you aren't maintaining this information and capitalizing on its value, prospective buyers will recognize this as a weakness and your total value will decrease.
Collections: Have you maintained thorough financial records exhibiting a high rate of collections for services rendered? Part of the value you bring to the table is the ability to verify your annual and quarterly income. This shows the position of your practice in the marketplace, as well as trends in traffic throughout the year, and provides valuable information for projecting future sales -- all of which are critical bits of information to potential buyers.
3. How long will it take to sell my practice?
Determining the amount of time it will take to complete the sale of your practice is largely dependent on how accurate and up-to-date your financial records are for the practice. Other factors also need to be considered, including the value, the demand in your particular market, and a host of small details that must be identified and researched.
4. How should the terms of the restrictive covenant be structured?
There is a considerable amount of flexibility as far as a restrictive covenant is concerned. A restrictive covenant, also known as a "no compete cause," is an agreement to not engage in dental practices within a specific geographic area for a designated amount of time. If you are selling your practice and retiring, as is most often the case, the restrictive covenant will not likely be a point of major concern for you.
However, if you are selling your practice (and aren't required to stay on and work) and instead plan on launching a new practice, this may cause you a considerable amount of difficulty. Make sure this topic is understood and agreed upon to protect yourself from possible litigation in the future.
5. How long will I need to continue working?
Recognizing the value your current customer base has to your potential buyer, it is often in your best interest to continue working through what is often called the "transition phase," which is the period of time for the shift to the new owner.
The amount of time you will need to continue working depends heavily on the opinion and desires of the buyer; industry standard is between three and five years. Your role during this time period is that of a supportive nature, as you are helping to facilitate a comfortable transition for both the members of staff that continue to work under the new ownership and for the current patients as well, with a goal of establishing a solid relationship between the patient and the new dentist.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.