What is the Value of Your Dental Practice? Tips on Setting Your Practice Value

Whether you’re transitioning out due to retirement or preparing your practice for a merger, it’s important to position your practice to be as attractive as possible to the potential buyer. Do you know the value of your dental practice? How does your practice size up in the competitive marketplace?

I’m here to get you started with some tips on setting your practice’s value. Though each situation is unique, here are some general tips to consider:

1.       Keep Up Your Numbers

If you are planning to retire within the next year or two, it is important to keep your productionnumbers up. Maintaining or increasing the growth of your practice by continuing to market and increase new patient numbers is really beneficial when trying to sell. Though you are in the transition stage, buyers look for stable production rates to get the assurance that their investment will be worthwhile. So continue to boost up your practices marketing by improving customer service, training your staff to ask for referrals, and improving your case presentation skills. These little changes can help to increase overall production and production per hour.

2.       Reevaluate your finances

Be prepared to provide a number of reports including tax returns, profit and loss statements, patient demographic reports, copies of lease agreements and several others- clickhere for a full checklist. Determining the value of a practice involves a variety of expense and revenue multipliers and an assessment of tangible and intangible assets, with the value of intangible assets playing a major role. Having a healthy cash flow is also critical.

3.       Strategically Plan for the Practice’s growth and sustainability

Location does play a role in your practice’s value. Since you are selling more than just a property, location also translates demographics and population trends. Though, in some instances, a long-established practice may be located in an area that has changed considerably over the years. Documenting the patient demographics and how they have grown as well as demonstrating how the practice has adapted as the area changed can be very useful.

4.       Developing your practice’s profile

Your practice’s profile should demonstrate your specialties as well as your established business model. Your practices profile is created by your broker and is usually included in their service package. All buyers are required to do their duediligence on a dental practice in which they are planning to purchase, a very detailed practice profile makes the sale process go smoother and faster

5.       Determine your practice’s Philosophy

What is your practice’s Philosophy? Are you primarily a cosmetic or restorative practice or combination? Understanding your patient base and documenting patient services will provide insight into the practice’s philosophy and how it meshes with a potential buyers’ goals. Good Will is a key intangible asset. What are some business practices that led to your practice’s success? Consider having established policies and procedures in place that demonstrate sustainable business practices that should continue after the transition. Your practice’s good will is the practice’s reputation in the community, it consists of your staff, patient loyalty and referrals.

6.       Keep your plans to sell private

Also another factor to keep in mind, when planning to sell your practice, it is recommended to keep the sale of the practice quiet. If employees or patients become aware to early they make start leaving in search for other places of employment or another practice to get services.  Losing employees or patients which would devalue the practice and could really hurt the sale as buyers are also looking for an existing patient base on which they can build.

For more details on how these steps can be beneficial to your specific situation, contact me directly at
410-616-2042 or email me edorner@nltransitions.com. I will be happy to set up an appointment to talk with you.

Tips on How to Sell Your Dental Practice

      1.       How do I locate Potential Buyers?

There are several approaches to take when preparing to sell your dental practice. You have worked extremely hard to build your practice and have invested a lot of money, sweat and tears to build your dental practice into what it is today.  You are still currently working in the practice and also trying to reap the benefits from your practice by doing some travelling, spending time with your family or just enjoying your hobbies.  All of that takes time and so does selling a practice. If you are planning on transitioning out of your practice, how will you determine what the actual market value of your practice is, how are you going to locate potential buyers, screen the buyers, show the practice, and also continue to do things you've been doing?  In the past, one of the approaches was to bring on an associate and after a few years have them buy into the practice and eventually take over the practice.  In recent years that has not been as successful unless there is a buy-in clause in your initial agreement, and that doesn't always come to fruition either.  Currently, only 10-20% of the associates without an initial clause to buy-in actually purchase the practice, the other 80-90% leave and either continue to be an associate in another practice or purchase a another practice outright. So what do you do now?  Just as you are an expert in dentistry, there are experts to assist you in transitioning out of practice. NL Transitions can work as your trusted adviser to not only determine the market value of your practice but do the leg work necessary to find a suitable buyer and be there to assist you from the beginning the end of the transaction.

      2.       What preparation is required before beginning the sale process?

When dentists are looking to transition out of their current dental practice, there are a few recommended steps to take in order to build more value in the practice. You can start by organizing your client and financial records so interested buyers can get a clear breakdown of the practices’ financials and client data. Ideally, your practice should be continuing to do well when you put it on the market. The office, reception area, and operatories must look current. The entire practice space should be clean and well lit so that potential buyers will be attracted to the space. Here are a few tips on boosting your office’s curb appeal.

If your practice has a website- keep it up to date. Your website should be full of content and educational materials. Both new and existing patients should have access to online forms that they can print and complete prior to coming in for an appointment- it will save so much time. Also, become more active on social media – connect with your patients, prospects and even other dentists. It is important to be aware of the latest news in the dental industry and be a part of the conversation.  Having a great online presence and reputation can be a great selling benefit. And finally, though you are planning to sell your practice, continue to market to both new and inactive patients.

      3.       What can I do to help seal the deal of the sale?

When in the process of closing the deal on your practice with a prospective buyer, improve your chances by offering your help through the transition phase. Knowing that he/she can give you a call if they have any questions, usually gives the seller extra reassurance that the decision to purchase your practice is the best one. Also, it is typically up to the seller to send your existing patients a letter recommending the buyer’s practice or give face-to-face introductions. It’s the little things combined that add much more value to the larger picture.

For more tips on selling your dental practice and information on how to make your transition process as smooth as possible call or email Ellen Dorner at 410-616-2042. Visit www.nltransitions.com for more resources on transitioning.

Selling a Dental Practice in a Distress Situation

Definition of distress - “Acute or extreme pain or anxiety, state of extreme necessity or misfortune, to compel by pain or force of circumstances“

Selling a dental practice in a distress situation is never easy or pleasant. It is laced with many difficult but related issues, i.e., maintaining staff, maintaining productivity and maintaining practice value.

When a distress situation (usually disability, death, or an extremely adverse financial condition) arises the first priority should be to “circle the wagons” and stabilize the productivity by securing a dentist capable of covering the practice. Possible sources could be younger dentists working in other offices in other geographical areas looking to supplement their income, or seeking out a dentist looking to associate in the practice for a short while with a longer term goal of ownership (this may not be very practical as it is a time consumptive process and therefore may not prevent a decline in productivity).  Perhaps even much more favorably, seek out an experienced dentist who has sold his/her practice,  still wants to work, and can cover the existing hours of the practice until a sale can be consummated.

Regarding the retention of experienced staff who are so valuable to patient relations and maintaining productivity, it is critical to provide reasonable assurances that a prudent buyer will want to retain staff and not make immediate changes in personnel or policy.

Next, if there hasn’t been a recent indication or range of value report of the dental practice done, then have one done immediately so that you have some idea of and evidence of the value of the practice and a reasonable basis for the asking price in a sale situation. This will also provide a potential buyer with valuable information when he/she is doing their own due diligence.

Whatever you do –do not close or shut down the practice. It can be costly and difficult. The value of the “goodwill” will plummet at best, and, in worst case, will disappear altogether.

While the overall goal is to realize the maximum value for the practice in this or any other type of sale situation, one should recognize  that the real value of the practice (distress or not)  is what  a buyer is willing to pay and that the price and other terms will be a negotiation.

Finally, assemble an experienced, dental- specific team of advisors who will work for you and advise you solely as your advocate and not the buyers. 

For more information, email Ellen Dorner or call her at (410) 616-2042. www.NLTransitions.com 

Important Steps for a Successful Dental Practice Sale

When planning to sell your dental practice, it is important to follow a few important steps to realize the most value from your practice. Implementing these steps from the beginning will make your practice sale significantly easier and more profitable.

1.       Continue to generate and maximize your gross collections.  It is easy to fall into the trap of declining revenues when you know that you are planning on selling your dental practice.  Unfortunately, that will also decrease the sales price of your practice. A prospective buyer wants to see a steady and growing practice when looking to purchase.  If it is declining then they become much more reticent and that will show in their offer and may even put them off to presenting an offer.  In addition, banks will use the down year in their calculations when determining whether they will approve a loan.

2.       If you are planning on selling in the next 2-3 years, continue to invest in modern dental equipment, or at least keep the equipment as up-to-date as possible.   A prospective buyer will offer less for the practice if they see that they will need to invest in new equipment early on in the process.  Buyers like to see that the dental practice they are purchasing is a practice that has kept up with the times.  It also lets them know that the patient base is used to a more modern and current practice, which is the practice philosophy of most buyers today.

3.       Your overhead numbers should be true and accurate.  If your overhead numbers include a lot of discretionary expenses, the buyer will see an inflated overhead and may be frightened off by the overhead percentage.  While a buyer will need to perform their own due diligence, you want that process to be as smooth and accurate as possible.  A buyer may not even get to the point of due diligence if they are frightened off by high overhead numbers. The sooner a buyer can have their due diligence performed, and not be impeded by removal of discretionary overhead numbers, the sooner you will be able to move on to a successful transition.

4.       If you are in a lease situation for your practice, it is important to have all the lease information available for the prospective buyer at the time they are engaging in the process.  A seller should be sure that their lease is transferable or assignable prior to selling the practice. If a buyer needs to negotiate a new lease with the landlord vs a transferrable lease with lease options they may be discouraged to buy the practice.  Having to negotiate a new lease will be more expensive for the buyer and they may not want to get involved in that situation.  It would be beneficial to have all that information ready for a prospective buyer when they are first showing interest in your practice.

5.       It goes without saying that the appearance of the office is of the utmost importance.  The first impression the buyer has is of the appearance of the practice.  Just like buying a house, maintaining “curb appeal” is critical.  Most buyers are willing to paint and make the practice “their own”, but they want to start with a good, clean canvas. Keeping the practice clean, well-organized and in top shape will bring a more positive offer from the buyer.

6.       Having data that is verifiable is crucial for a young buyer.  They will want to see practice management reports for demographics, fee schedules, participating insurance reports, A/R, and P & L statements.  Presenting this information in the beginning will keep the process moving in a positive direction and will keep the due diligence process moving along.

   For more information, contact Ellen Dorner (410) 616-2042. www.NLTransitions.com 

Checklist of Items Needed for Dental Practice Sale

Are you starting to consider selling your dental practice?

Here is a useful checklist of some of the items you will need in order to begin the process.

For further details, email Ellen Dorner (a dental broker) or pick up the phone and call her at (800) 772-1065.

General Practice Dental Office in Laurel/Wheaton, MD for Sale

Well-established GP practice in high-rise professional bldg. with free parking. Adjacent to Wheaton Plaza Shopping Center. @2200 sf - 4 ops with high-end updated equipment, lab, staff lounge, private office for Dr. Grossing in excess of 800,000.  Great opportunity for growth due to re-development in Wheaton/Laurel area. Easy access to 95 and 495 and the red line of the Metrorail..  For more information contact Ellen Dorner at NL Transitions at 410-616-2042 / toll-free at 800-772-1065 or e-mail edorner@nltransitions.com.

The Letter Of Intent (LOI) – Does a Dentist Really Need It?

Here is a post from Tim Lott, CPA, CVA and Ellen Dorner of NL Transitions, a Dental Brokerage firm.

The easy answer is no, it is not necessarily needed.   In most states it is not a legally binding agreement anyway, so why go through the effort?

There are actually some very good reasons why having a LOI is crucial to every dental practice transaction, in spite of it not always being a legally binding agreement.  In my opinion, there really is no downside to having one.  Let’s discuss what a letter of intent is and what purposes it serves.

The primary purpose of the letter of intent is just as it’s titled, to lay out what one’s intent is as it relates to the transaction at hand. It should be a one or two page letter or memo detailing some of the major points of the transaction. In the case of a sale or purchase of a dental practice, some of these major points typically identify: what’s being purchased, the parties involved, the price, the timing of the payment, the structure of the transaction, exclusions, covenant details, seller’s compensation and general terms, buyer contingencies, time frames for acceptance of offer and due diligence, deposit requirements, etc.

As mentioned above, since the majority of these letters are NOT necessarily legally binding and may be somewhat boiler-plate, they shouldn’t cost too much in the way of professional fees to put one together. While you may not need to have an attorney involved to draft and submit a letter of intent, we do suggest you have attorney look over it before submitting it to the other party. If you can hammer out the meat of the transaction BEFORE engaging your attorney you may save money and a lot of headaches having your attorneys iron out these issues.

The letter should be a way for the parties to document what they believe has been discussed as it pertains to the major points. It serves as a way to let the seller know your intent to purchase the dental practice is serious enough to make a written offer and should give them some level of confidence that you’ll be committed to the transaction.

It is customary for the seller to require a deposit with the signed letter of intent. The amounts can vary, however, it’s usually in the range of $5,000. Many times the deposit is non-refundable so if the buyer walks away from the transaction, the seller is covered for any professional fees they’ve incurred to entertain the offer. If a seller requires a substantial deposit then the seller may also have to commit to a penalty if they walk away.

The drawback of NOT having a LOI is that without consensus on the main points, the two parties can wind up going back and forth, or worse, the attorneys or other professionals go back and forth on the main points and the parties wind up spending more in professional fees than they have to. Do yourself a favor and minimize your stress level, start with a LOI BEFORE jumping right to the legal agreements. 

For more information about your situation, email Ellen Dorner or call her at (800) 772-1065. Visit our website at www.NLTransitions.com .