Price vs. Value

There is a difference between the price and the value of a dental practice. You may find a practice listed at a great price, but it may not necessarily be a great practice. An accurate practice valuation can guide your decisions when purchasing a practice to ensure you are receiving a quality practice for a fair price.

Condition of Equipment and Facility

Once you find a practice you are interested in, you should visit the site and tour the facility. You will want to evaluate the general condition of the office and equipment. At a later point, you should receive a formal equipment inspection. 

The practice should be conveniently located for you, your patients and employees. The space should also match your growth plans, so check if there is the possibility of expanding into the existing or adjacent space.

Financial Stability

Additionally, you will want to look for dental practices with solid finances, so thorough due diligence of the practice’s finances is a crucial step. Look at elements such as employee salaries, aged accounts receivables and the property lease agreement. 

Patient Demographics

A practice’s patient demographics are an important component to look for in a dental practice. Do patients consistently come in for regular prophy? How many patients have insurance? How many new patients does the practice see each month? These factors may all play into your decision.

Reason for Sale

As you consider different practices, you should find out why the current owner has decided to sell. Selling in order to retire is a completely different scenario than selling due to financial distress, dental licensing problems or the death of the owner. 

Overall, be sure to choose a dental practice that matches your skill set, personality, budget and growth plans. Menlo Dental Transitions has many great practices available for sale that may be exactly what you’re looking for. While we only represent sellers in transitions, we are happy to connect with you and provide resources to facilitate a smooth transition.

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Financial Information

Before listing your practice, you should ensure that your finances are in order. Here are a few items you should have available to prove your profitability to potential buyers:

• Profit and loss statements
• Balance sheets
• Tax returns for the last three years
• Detailed breakdown of expenses
  • Insurance payments
  • Retirement benefits
  • Payroll taxes
  • Salaries
  • General office expenses
• Outstanding debts

You would also benefit from knowing the percentage of billing needed to cover overhead costs, as well as the amount of revenue that is dependent on reimbursements from insurance companies. Buyers will likely ask about these metrics.

Practice Information

To continue preparing for your practice transition, you should also have the following items gathered to show a potential buyer:

• Third-party equipment valuation
• Complete description of the physical office
• Lease or deed information
• Current patient status
• Number of new patients per month
• Information on other assets

Your practice sale is also dependent on your practice reputation. Practice buyers will be interested in practices that have high client satisfaction and consistently bring in new patients. 

If you are looking to sell your dental practice, you will want to enlist the help of a transition broker to offer guidance and negotiate on your behalf. An experienced broker can help you sell your practice faster and for a higher price. Contact Menlo Dental Transitions to discuss your practice sale.

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Give Yourself Plenty of Time

As a dentist, you may wonder how far in advance you should consider your dental transition. Many factors can affect that decision: your ideal age for retirement, the current dental transitions market, and who you want to help with the process. We recommend you start preparing for your transition three years before you actually plan to sell. We also advocate for hiring an experienced practice broker to assist in the sale; non-brokered practice sales fall through or are seriously delayed about 90 percent of the time.

By giving yourself plenty of time, you will be able to transition on your terms. Dentists who wait until the last minute may have their transition go much less smoothly.

Evaluate Your Selling Options

Many dentists equate selling their practices with retirement, but that may not always be the case. You have multiple options for transitioning your practice that include continuing to provide clinical care:

• Associate Buy-In: This selling option is a gradual transition of ownership to an associate, which benefits doctors who want to cut back on hours but still have control of the practice until retirement.

• Sell and Work Back: In this scenario, the dentist sells the practice but continues to work for an agreed upon salary and schedule. Dentists who choose this option shift management, personnel and administrative responsibilities to the new owner and spend the remaining years of their career focusing on providing patient care.

• Group or DSO Sell: Dentists who sell to groups or DSOs receive a large percentage of the sales price up front. They remain in a clinical role for two to five years and then receive the remainder of their payout upon their exit. 

Of course, if you are ready for retirement, you can sell your practice and walk away following closing. 

Select Your Ideal Buyer

As a practice owner, you have spent years building trust with your patients and employees, so you will want to find the right buyer to continue your legacy. You will want to choose someone whose skill level and personality will be a good fit for your practice. Your practice broker can also help you evaluate potential buyers’ financials and negotiate a fair sales price for your business.

By planning ahead, you will be able to transition on your terms and reach your goals for retirement. Menlo Dental Transitions can help you develop a transition plan, so you can maximize the value of your practice when the time comes. With our extensive buyer network, our team of experts can help you find your ideal buyer, so you can transition at your pace and on your schedule. Contact us today to get started.

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Prepare Your Practice

Start thinking about your transition three to five years before you plan to sell your dental practice. During this time, you should assess the integrity of your building. Consider making simple upgrades such as installing new furniture, upgrading the fixtures or repainting the walls. You should also review your financials, evaluate your staff, improve your website and integrate the latest practice management software to ensure your business is attractive to potential buyers. 

Hire a Broker

Don’t go through the transition process alone. Hire a practice broker who knows the market, has a large network of potential buyers and can negotiate on your behalf. By partnering with a seasoned broker, you will secure the best possible buyer for your practice at the best possible price. 

The following video provides additional insight on the benefits of hiring a broker:

Know the Worth of Your Practice

You should have a clear understanding of the value of your dental practice. Consider receiving a formal appraisal that takes into account industry data and your financials. The value of your practice will help you determine a competitive sales price.

Market Your Practice

To get your practice in front of potential buyers, utilize digital and traditional marketing methods. Marketing tactics could include basic practice information online, in industry publications and in emails directly to your target audience. Interested parties will request more information and a time to tour your practice.

Negotiate a Contract

Interested buyers will submit Letters of Intent outlining their proposed terms. Once you decide on your preferred buyer, you will begin negotiations. Your attorney will help draft the contract, which will be reviewed by the buyer, before everyone signs. 

Transition Ownership

Once the deal is completed, you will transfer utilities, licenses, etc. to the new owner. You will also need to notify your staff and patients of the transition. Most practice sellers remain available for a short while to answer any questions the new owner may have. Then you can begin to enjoy your next stage in life.

Menlo Dental Transitions specializes in practice appraisals and sales. Our team of experts will help navigate the transition process, freeing up time and energy for you to focus on providing quality care to your patients throughout the remainder of your dental career. Contact us today to get started.

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A practice broker markets your practice to the right people while maintaining confidentiality.

Reputation is everything when it comes to a dental practice, and a practice broker understands how valuable your brand is. At Menlo Dental Transitions, we utilize a variety of tactics to market your practice. For example, we list available practices directly on our website and in select dental publications while maintaining strict confidentiality to ensure your practice is only seen by potential buyers and not your staff.

You earn more selling your business with a practice broker.

While you will have to pay a commission, you will save money overall by hiring a broker. From appraisals to negotiations, practice brokers use tried-and-true methods to determine and maintain the accurate values for your practice. Should you base the value on percent of gross revenue, profitability or cash flow? Menlo Dental Transitions’ knowledgeable brokerage team can help you find the answers to questions like these and ensure you walk away with the maximum amount for your practice.

By utilizing a broker, you eliminate stress and save time.

The process of selling a practice involves pricing, marketing, negotiating, setting up showings and much more. Many dentists are unable to focus on these activities while also managing their practices and providing quality patient care. A practice broker does the heavy lifting for you, so you can continue focusing on your career and maintaining the value of your practice until it sells.

This list contains only a few reasons why you should consider selling your practice with the help of a broker. In the following video, Menlo Dental Transitions Managing Partner Matt Porter, MBA, CVA, outlines additional benefits of hiring a broker. You can also contact our team to discuss if a practice broker is right for you.

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No formula exists to determine the exact value of your practice since many factors going into the evaluation are subjective. However, we will outline a few valuation methods that work for most practices:

Determine Your Assets

To determine a fair market value for your dental practice, you need to compile a list of your assets. Your valuation can be based on the book value of an asset, its original cost or its current appraised value. This type of valuation takes into account the unique features of your practice.

Compare to Market Data

A market comparison may be a more conclusive method for determining the value of your dental practice. You will want to identify similar practices that have recently sold in your area. Using a system of ratios, you can determine a ballpark selling price. The ratios involved in this method include ratios of sales price to annual net profits, discretionary cash flow and annual revenues. 

Look at Your Income

The third type of valuation is perhaps the most popular because it is based on income. This valuation method identifies your predicted future cash flow and earnings evaluations. Based on an actual revenue stream, this method offers a price that a buyer will likely be willing to pay for your dental practice. 

Menlo Dental Transitions firmly believes that every dentist deserves fair compensation for the hard work that went into building their practices. Our Menlo Certified Valuation Analysts utilize a variety of evaluation techniques and will work with you to secure the best price for your practice. Contact us today to start the appraisal process.

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Keep your dental equipment in good condition. 

At the very least, your equipment should be in good working order. Buyers will likely enlist a third party to evaluate your equipment to verify that it functions properly. You also want to ensure that your equipment is clean before the buyer sees it. 

Some dentists may want to upgrade their equipment before putting their practice on the market. Investing in new equipment may help you attract dental practice buyers and will also increase the value of your practice.

Upgrade your building.

Dentists should maintain the integrity of their building, as structural soundness ensures the property is safe and also adds value in an appraisal. New furniture, remodels or other interior upgrades may not drastically increase the value of your dental practice, but potential buyers will appreciate the updated feel. They will also note that the practice has been well taken care of.

Streamline your finances.

What do your insurance payments, payroll taxes and retirement benefits look like? Are your profit and loss statements and balance sheets prepared? Can you readily describe your overhead expenses, outstanding debts and reimbursements? You will want to have all your finances in order to demonstrate that your practice will be a good fit for potential buyers.

Organize your technology systems. 

You should update your filing system with new technology. Many young dentists won’t even consider a practice unless it has gone paperless. Upgraded and organized systems communicate to buyers that your office operates smoothly.

Continue attracting new patients.

With retirement approaching, some dentists coast to the end of their careers—a big mistake. Buyers want to see that you have a healthy stream of new patients coming into the practice. Evaluate how you are reaching out to new patients and strengthen your online presence to better attract practice buyers.

Menlo Dental Transitions understands the competitive marketplace and will help you develop and implement a strategy to attract your ideal buyer. We also have a large network of potential buyers that we will market the strengths of your practice to. Contact us today to discuss your practice and transition goals.

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Take Your Time

You should start thinking about your transition three to five years before you plan to sell. By planning ahead, you will be able to spend the final years of your dental career treating as many patients as possible. You will also have ample time to find your ideal buyer—someone who will take good care of your patients and employees. As you transition, it is normal to feel a range of emotions, so be sure to have a good support system to help you throughout the process.

Organize Your Finances

The sale of your dental practice will likely leave you with a hefty sum of money. You should coordinate with your accountant and financial advisor to ensure your money will last you through your retirement. Make wise investments, take advantage of tax opportunities and keep some funds saved for emergencies.

Find Meaningful Activities to Fill Your Time

As a dentist, you have likely worked a similar schedule for many years, and you may not know the best ways to fill your free time. Here are a few suggestions:

Join a dental council or board membership organization.

After you retire, you may have more time on your hands and more flexibility in your schedule to get involved with different dental organizations. Your knowledge and experience will enable you to share valuable perspectives and participate in ways you might not have been able to before.

Become a mentor.

Oftentimes, selling dentists stay involved with their former practices by providing advice to the new owners. Your insight can help them settle in and also provide you with confidence in the health of your practice. You may find other young dentists to mentor as well.

Volunteer.

Retirement is a great opportunity to get involved with your community. Look for causes and opportunities that you are most passionate about. If your interests still involve dentistry, you may find dental volunteer work a rewarding way to continue your passion without the constraints of running a practice. The Arizona Dental Association’s website lists current volunteer opportunities and events to get you started.

Teach dentistry at a college or university.

You may also find fulfillment by teaching at a dental school, whether as an instructor or guest speaker. Look for opportunities to pass your expertise on to the next generation in the industry.

Relax.

You have had a long, fulfilling career, and you deserve to enjoy retirement. Use your time to pursue your hobbies such as golf, tennis, photography, painting, gardening or piano. You may also spend your time traveling to new places. In retirement, you can choose to do whatever you like, whenever you like.

Retirement may mark the finish line in our dental career, but you don’t have to give up on doing what you love. At Menlo Group, we handle all aspects of your transition, so you can enjoy the last few years of your dental career and ease into retirement. Contact us today at info@menlotransitions.com to discuss your upcoming transition.

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