First, prepare for a smooth transition with these quick tips:
Loose lips sink ships. Telling your staff, your friends, and your patients that you are considering retiring in two years will guarantee that you will have no practice left to sell in two years. Your patients will start looking for a new and younger dentist, and your staff will have their ear to the ground for their next job. There will be plenty of time for your retirement announcement after you have sold your practice and your check has been deposited in the bank. Make sure that your CPA, your significant other, and your children realize the importance of non-disclosure.
Marketing: Continue both internal and external marketing efforts for your dental office. Maintain your website presence and continue to ask your patients for referrals. It is easier to sell a thriving practice than a dying practice.
Systems: Most dentists have the intentions of getting their systems in order at their office, but never find the time. Have your staff clean up the accounts receivable, the unscheduled treatment plans, the active patient list, and the recall system. Most computer programs will guide the staff through this process.
Profit and Loss Statement: If you lower the overhead of your practice closer to 50%, your practice is more profitable now and more attractive to a buyer. This also helps you save money for retirement. Print out a copy of your current profit and loss statement with percentages of income listed to the right of the actual expense. You should check the percentages of your dental supplies, lab, and staff compensation to make sure these expenses are not excessive.
Treatment plans: Treatment plans should be either in the computer or in the chart in a format that includes the treatment required, the number of visits, and the recall schedule for maintenance.
- Calculate what you spend in a year. (Your yearly living expenses).
- Create a spreadsheet of your assets and liabilities.
- Pay off all debt (both personal and business debt).
- Meet with your ADS broker to calculate or estimate your practice value.
- If you own your building and plan to sell it in the future, get a commercial appraisal on your building.
- Determine if you have enough money to retire or if you will have to work in your office or elsewhere after the sale of your practice.
You may need to focus on equipment and office updates as well to ensure that you get the maximum value for your practice.
You will not recover dollar for dollar the money you spend on equipment prior to the sale of your practice. Only purchase equipment that you have time to use prior to the sale. Before updating your equipment, determine the years until your transition. If you plan to continue to work for less than two years, do not buy large items or “go digital”. However, if you plan on practicing three years or more, upgrading equipment will make your office more productive prior to the sale and may make your office more attractive to buyers. The upgrades will not appreciably “add to the value” of your practice, but they will make your practice easier to sell.
Updates to the office:
- Discard all broken equipment and instruments.
- Do a cosmetic update to your facility, but do not spend thinking you will recover your expenses. Cosmetic updates include:
- Thorough cleaning of office and storage rooms
- Painting the walls
- Replacing broken or tattered pictures and furniture if you are three or more years from sale.
Contact your dental practice transition broker to help you determine which updates will provide the greatest return on investment. The sooner you consult with an experienced broker, the longer you’ll have to improve your practice and get a high valuation.
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