Mistake: Believing Common Myths About Practice Ownership

Selling or buying a practice can be one of the most exciting times in a dentist’s career. When a dentist is considering selling or buying a practice, there can be an overwhelming number of considerations, often misunderstandings – and myths – about the dental practice transition and ownership.

In this article, we will address myths from both sides of the transaction.

MYTHS

A new graduate won’t be able to buy a practice because of student loan debt.

Today many dental students are graduating with debt anywhere from $200,000 to $450,000. So why or how would a bank agree to lend a newer dentist another million to buy a practice?

Great news – dentistry is an excellent venture, and there are banks specializing in supporting dentists in achieving ownership. The long-term income benefits and financial freedom of practice ownership, along with a sound debt reduction strategy are worth the investment.

A practice should sell for X% of revenue.

How much a dental practice is worth is not a single calculation. The purchase price comes down to what the buyer is willing to offer, and what the seller agrees to accept.

A seller should have a professional valuation completed, such that an asking price is valid and supported by the data.

A buyer can offer that price, higher or lower, depending on the market and their personal wants/needs. Neither the seller nor the buyer should get wrapped up in minor or inconsequential figures that could compromise an ideal dental practice transition.

The seller should stay on post-transition.

Sometimes the switch from a dental practice owner to associate can be very successful. However, as an owner, it’s probably been a long time since you’ve been an employee.

Realize that the new owner needs your full support and deference in leadership.

Also, patients, and employees, may ask to work with you instead of the new owner, which puts the scheduling team in a real quandary.

And most importantly, the practice must be able to support two doctors while still providing the new owner with the cash flow and income necessary for viability.

A buyer would need to keep or replace all the staff.

There is no black and white answer regarding staff. Some employees may have planned for retirement when the owner sells; this would be a natural and amenable transition.

Team members deserve the chance to embrace the change and support the new owner in their vision.

Having the staff stay on is consistency for the patients and further validation of the competency and philosophy of the new owner. However, if an employee cannot embrace the buyer as their leader, it creates a toxic environment for all, and that person may have to move on.

A dental practice in my hometown is a no-brainer because I know everyone.

Many successful dentists practice in their hometown and wouldn’t have it any other way. As a buyer, this may seem like a slam dunk. However, some potential negatives must be considered.

• The new owner may find that family, and extended family, feel they deserve discounted or free treatment.
• The term “friend” may extend beyond one’s expectations. Friends may take advantage of your time and expertise without proper compensation.
• Setting clear boundaries immediately upon ownership is critical.

Working with an ADS Broker gives one the opportunity to ask questions and get expert answers. Breaking down myths can relieve stress, create more confidence in the decision and contribute to a smooth and successful transition.