Want prompt, efficient, accurate information on virtually any dental practice transition topic? You will find it here. The nationwide experts at Henry Schein Dental Practice Transitions (Henry Schein DPT), the leader in dental practice sales and transitions, answer the most frequently asked questions posed by the dentists we’ve worked with from coast to coast. If you don’t see yours, contact us with your question and we’ll answer it, usually within three business days.
I’m not planning on retiring, why should I get a practice valuation?
While most doctors get a practice valuation when they are ready to sell their practice to help them set a realistic listing price, there are times when it’s important to have a current valuation. For example, if you have an established practice, you should have a Letter of Instruction that lets your attorney, family and accountant know what to do in the event of an emergency or if you become ill. Part of that plan needs to include knowing what your practice is worth. Or, if you bring in an Associate with a buy-in plan or decide to merge your practice, you will benefit by knowing the value of your practice at the time you enter into the agreement. Financing for equipment leases, office build-outs, or buying a building—as well as estate planning—also require a practice valuation. So, you can see there are many benefits to having a current, professional valuation.
I saw an ad for a free practice valuation. Why should I pay to have one done?
There are “free practice valuations” that are advertised, but they are not done the same way or with the same level of analysis and degree of precision as the paid practice valuations. You need to ask each of the companies:
- What is the process you go through to create the practice valuation?
- What method(s) do you use to come up with your valuation?
- Who does the valuation and what are their qualifications?
- How far off are your valuations from the actual sale prices when done for a practice sale (e.g., 5% off, 10% over?)
- What factors go into the valuation?
- How long does it take you to prepare the valuation?
- What do I receive when you complete the valuation process?
Henry Schein Dental Practice Transitions does more than a “drive-by” assessment. Our practice valuations use multiple methods to triple-check the value. We evaluate the physical factors like practice location, office size, number of operatories, equipment and office finishes. There are also intangibles that we take into account, like goodwill, tenure of office staff and patient retention. These and many more aspects of the practice must be considered to get an accurate assessment of value. Only an experienced expert can give you an accurate valuation.
Why is it that two practices that are similar (e.g., size, location, equipment, number of patients, gross revenue, overhead) but in different geographic areas, have different selling prices?
Practice value and, therefore, selling price are driven in large part by location. If a practice is located in a desirable location where there are few practices available for sale, but many dentists looking to purchase a practice, prices will be higher. That same practice located in a less desirable geographic area with fewer dentists looking to purchase a practice will sell for considerably less. It’s then a matter of supply and demand.
I plan to bring on an Associate now and make him/her a Partner in two years. When should I value my practice?
The right time to value your practice is at the beginning of your relationship. The Associate will not want to work helping you build the practice’s gross revenue only to have to buy in to the practice based on the higher revenue that he/she helped generate. It is also critical that when you agree to a buy-in price and other terms that you put in writing in a formal agreement or contract. Many times when an Associate Buy-in doesn’t work, it’s because the terms of the agreement weren’t determined early on and/or they weren’t put in writing. Be sure that the terms you develop are a win-win for both you and the Associate. This is the best way to ensure a successful buy-in and long-term relationship.
SELLING YOUR DENTAL PRACTICE
Why will I likely make more selling my practice through a broker than on my own?
The right Transition Sales Consultant can help you to optimize what you make on the sale of your practice. They know how to prepare your practice for sale, price it properly, market it to create the most interest, and negotiate with all types of buyers. A top broker will also know how to find the right buyer for your practice, patients, and staff – one that will carry on the legacy that you’ve created.
What things should I consider when selecting a transition broker to sell my practice?
The most critical factor is to select a broker who has a solid track record of success in dental sales in your geographic area and an excellent reputation. Selling a practice requires significant knowledge of the dental industry and practice sales, the specifics of your local market, and how to best market your practice to attract qualified buyers. In addition, you want someone who can help you ensure a smooth closing and transition, because selling your practice is about more than finding a buyer. Your broker needs to be able to help ensure that the transaction runs smoothly and closes. This is why our transition consultants are either dental practitioners or have significant experience in the dental industry and make use of the resources of the Henry Schein organization to ensure that your sale will run smoothly.
What does Henry Schein Dental Practice Transitions do to help ensure that the buyers seeing my practice are qualified buyers?
Henry Schein DPT takes the time to get to know potential buyers before starting to show practices to them to ensure that there is an appropriate match between the practice and the buyer. That process includes understanding the buyer’s financial situation. It doesn’t make sense to show a buyer a practice that doesn’t meet their needs or for which they don’t have the financial resources. We want to help both buyers and sellers find the right match.
What’s the best way to find a transition broker or a practice transition consultant?
The best and most common way is to get a referral from someone in the industry whose opinion you value. If you have a colleague who has recently sold their practice or even purchased a practice, ask them whom they used and what their experience was like. A good reference from someone you know is often a good place to start. There are many places to get leads, including your dental sales consultant, speakers at conferences, an online search, an industry association, or an ad in a trade publication. Whatever the source, it is always worthwhile to do some follow-up research by checking references, preferably someone you know.
What type of marketing support does Henry Schein Dental Practice Transitions provide?
We develop customized marketing plans for the sale of your practice. The plan starts with listing your practice on our database of searchable dental offices for sale on our interactive website. In addition, we market your practice through a broad range of targeted channels that best highlight the features and location of your specific office. These channels may include: journals, advertising in trade publications, marketing through associations, online advertising, social media, direct marketing, and others. We maintain confidentiality to ensure that your staff and practice are protected during the sale and transition period.
As the broker, do you just find a buyer and then the rest is up to me?
At Henry Schein DPT, we work with you every step of the way from the time you start the listing process, up until and through the closing. To ensure a successful transition, we work with you, your accountant and attorney, as well as the buyer and their counsel to negotiate a fair and equitable agreement. We work with the respective attorneys to help facilitate the transaction. We can help the buyer obtain financing, to help ensure a smooth transition for you, your staff, the patients, and the buyer. We are with you every step from beginning to end, to make the transition easier and less stressful for you.
Will it matter if I lease my office space when I go to sell my practice?
The answer is that it may impact the sale, but it depends on the terms of the lease or the type of space, if you own it. Dentists who lease their space need to check their lease to see what clauses, if any, are in it regarding assignment or recapture. Lease assignment is often allowed with the written permission of the landlord, and most landlords will switch tenants as long as the rent is getting paid. However, leases often do not release the assignor (seller) from liability under the lease after the assignment. Be sure to see an adviser well-versed in lease/tenant matters before you start the transition process.
How will my owning my office space impact the sale of my practice?
If you own your office space, you must first decide whether the sale of the practice includes the building or if you are willing to act as a landlord for the buyer. Either way, the mortgage or rent expense for the buyer will directly affect their overhead expenses and the price he/she is willing and able to pay for the practice. If you have planned to receive long-term rental income from a tenant, your practice sale may be at risk if the real estate is part of the buyer’s offer. A purchaser just might walk away from a practice if unable to purchase the real estate.
BUYING A DENTAL PRACTICE
Why should I consider using a Practice Transition Consultant when looking to buy a dental practice?
A Practice Transition consultant will help you define your needs and goals to determine what practice variables you should be looking for before buying. They will ensure you ask the right questions, guide you on how to approach the purchase and provide you with the resources needed to finalize the transaction. Some consultants might have been practicing dentists or have specialized knowledge of the industry, which can help you save both time and money.
Do you collect a fee from the buyer, seller or both?
We only collect a fee from one party in a transaction. Henry Schein Dental Practice Transitions is usually paid by the seller. We also work with buyers to help them find a practice that meets their specific needs, acting as a buyer’s agent. Our role as a buyer’s agent is to make sure that you ask the right questions, provide advice on how to best structure your purchase, and collaborate with your lawyer and accountant to help structure the transaction in the most advantageous way for you, and ultimately to help you find the right practice for your needs.
This is a common misconception. Often a young person will do better long term by taking out loans and either starting up a practice or buying an established practice. Studies and financial analysis have shown that given two students in similar situations, the one who establishes their own practice earlier on will make more money long term than the one who works initially as an Associate. There is no way for the student who works as the Associate to make up the difference in income over the long term.
What will the lender be considering when thinking about financing my practice?
Major lenders will review many aspects of the practice, the sales agreement, and your own personal clinical capabilities. They also will consider other factors beyond your debt service. Five of the most important aspects lenders consider are: good credit, cash flow, clinical production, lease terms, and match between clinical skills and demand.
What is a role reversal purchase and what are the advantages?
In a role reversal purchase, you buy the existing practice but the current practice owner becomes your Associate (works for you) for a specified amount of time. One of the advantages to this arrangement is that it creates a transition period that makes employees and patients feel more comfortable and tends to increase retention. The ownership/Associate relationship is invisible to patients and they see continuity and have time to become comfortable with the change. Another advantage is that it gives the buyer time to learn about the equipment and other aspects of the practice since the former owner is there, making the transition easier, especially for dentists who haven’t run a practice before.
What is the “active patient” count?
The active patient count is defined as the number of different individuals seen by a practice during a specified period of time, typically an 18-month period. It is the most important asset you purchase when buying a practice, because of the time it takes to develop a patient base.
When is the best time to start transition or retirement planning?
The best time to start transition or retirement planning is long before you are actually ready to start preparing for retirement. You want to begin the planning process many years ahead so that you have time to identify your goals, assess your financial needs, and maximize the revenue generated by your practice. This will offer you the most options when you are ready to transition and you won’t feel pressured to take a less than satisfactory deal or miss a great opportunity when it comes along. You’ll be able to transition on your schedule when it works best for you. So whether you are 40 or 50 or 60, it is never too early to start the transition planning process.
Both the owner of the practice and the incoming dentist want the arrangement to be a success, therefore the relationship needs to be a win-win situation. In order to have a successful arrangement you need to: 1) Determine the purchase price prior to the start of the arrangement; 2) Have the details of the arrangement in writing; 3) Ensure there is sufficient patient base to support two doctors; 4) Make sure you are compatible (skills, personalities, and philosophies); 5) Set a time frame and keep it; 6) Watch out for outside interference.
Not necessarily. There is a common misconception that students with loans won’t qualify for financing to start or buy a practice, but that’s not true. Starting a practice sooner can often be a wise decision that pays off financially. You should sit down and run the financials given your situation before coming to that conclusion.