Selling a Dental Practice in a Distress Situation

Here is a blog from Ron Ehman from the Dental CPAs and Ellen Dorner of NL Transitions, a Dental Brokerage Firm

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, who 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 completed 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 dental 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 dental practice in this or any other type of sale situation, one should recognize  that the real value of the dental 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.

 Contact Ellen Dorner to discussion your situation, (800) 772-1065 www.NLTransitions.com 

There’s More to Selling Your Dental Practice Than the Price

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

Far too many times when dentists are preparing to sell their dental practice, they are focused mainly on the price and may wind up overlooking many other issues surrounding the practice sale that are just as important, some even more important than the price. That is not to say the price is NOT important, because it is; however, there are so many other aspects of the transaction.  Sometimes you need to know when to give on one issue so you can profit or benefit from another issue.

The following are some examples of different components of the dental practice sale where the seller can benefit.

• How are you handling the assets that you are including in the sale? How is the price going to be allocated among those assets?

o As a seller, do you know how the allocation is going to impact the income tax picture in the year of the sale?  It is important to have an income tax projection done to determine how one allocation may differ from another in terms of the income taxes you will pay.  If there’s an allocation that works better for you, compromising on the price may be necessary for you to benefit from that allocation.

• If you plan to stay and work for the buyer as an associate, how will you be compensated?

o Would you prefer to be treated as an employee or an independent contractor? What professional expenses do you want the new owner to cover?  These are all negotiable points and if you’re planning on staying on for at least a year, the compensation you receive might actually be more valuable to you then standing firm on a higher price.

• Will you be selling the accounts receivables to the buyer in addition to other dental practice assets?

o If so, how will they be valued?  If you’ve compromised on the price of the other assets, you might be in a better position to use that as your negotiating chip for a more favorable price on the accounts receivables.

• Do you currently own the real estate where your dental practice is located and if so, will you be selling it or renting to the new owner?

o Again, if you’ve compromised in other areas of the transaction, you’ll want to remind the buyer of the compromises you’ve made in those areas so the price of the real estate or monthly rent works more in your favor. The annual increases and/or expenses can be passed through to the buyer within the lease agreement.

So as you can see, there so many other areas that get negotiated during a practice sale.  If you are solely focused on the price of the practice, you may wind up losing a good buyer when, in actuality, the difference in the price may be made up in other areas of the transaction.  It is important to look at the ENTIRE picture and plan accordingly.

Have a range in mind for the price you’ll accept for the practice.  Also have a range that you’ll accept as compensation, a range for the value of the receivables and if you own the real estate, a range for the sales price or annual rent.  When you approach the transaction with a global view instead of just concentrating on the price, you’ll have a much better chance of success in not only selling the practice, but getting what you want from the ENTIRE package.

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

Selling Your Dental Practice? What Information Will You Need to Gather?

Here is a blog co-written by Tim Lott, CPA, CVA - Dental CPA and Ellen Dorner of NL Transitions.

Whether you’re in the process of buying or selling a dental practice, the one question that always comes up is what information you will need to gather to get started. There is a basic list of information that your advisor will need to develop an asking price and assess the performance of the practice.

Unlike most dental practice sales brokers, we take a unique approach with our sellers.  Over the years we have handled hundreds, if not thousands, of transactions from both the sellers’ side and the buyers’ side. It has been the buyers’ side that has helped us to understand what every seller should be compiling to help their dental practice sales advisor.

Most dental practice sales advisors are mainly concerned with developing an asking price for the practice, which means they are primarily concerned with cash flow only.  They will typically ask for tax returns, annual reports with production and collection totals for the dental practice and maybe reports broken down by categories like diagnostic, preventative, operative, etc.  They will also ask the seller to complete a questionnaire that helps the advisor learn about the practice and to develop a dental practice profile.

The ultimate goal of all of this is to attract a serious and willing buyer.  By looking at this from a buyer’s perspective, that goal is more easily attainable.  While buyers are interested in the price of the dental practice, they are also trying to learn so much more about the practice - its strengths, weaknesses, opportunities and threats (SWOT).  All buyers MUST do their due diligence on the dental practice they are buying if they are going to borrow hundreds of thousands of dollars, therefore, they will usually ask for much more information than the typical seller/advisor has asked for and, unfortunately, this sometimes annoys both the seller and their advisor.

Based on the above, we take a buyer’s approach to the information gathering from the beginning of the process.  We want to be in a position from the start to not only inform the seller of a fair asking price, but also provide the additional information about the practice when we find them a buyer.  The other benefit is that this will also provide the information a buyer will require to do their due diligence.

An additional benefit to the seller is that when the buyer and their advisors receive all of this information so promptly, they will not become discouraged and feel that the seller is “dragging their feet”. From a buyer’s perspective, if gathering the information they need feels like they are “pulling teeth” (pun intended), one of two things potentially happen, either they move onto another practice or they make a lower offer. Our approach will deter the buyer from doing either of those.

For more information about your particular situation, contact Ellen Dorner or call us at (800) 772-1065

Time to Start Planning Your Transition Out of Dentistry

It is now spring and you’ve been thinking about renewal and new starts – of your life, that is!

You’ve been a practicing dentist for over 25 years and have many times thought that it was time to start the transition out of your dental practice and try your hand at something new – whether it be a new career, travelling, playing more golf, painting, or any other interests you may have.

Transitioning out of your dental practice is not the end, it’s a beginning.  It’s the beginning of that next phase that you have worked so hard to accomplish by practicing dentistry.  So many dentists wait too long to take that next step and then say “I wish I would have…..”.  There are, unfortunately, times when we don’t have the choice to decide when to make the move, so if you are lucky enough to be in control of that, now is the time to start planning.  And it will take some planning, the transition of a dental practice does not happen overnight.

So, take the next step.  

Gather your team of professionals - your financial expert, your attorney and your practice broker – start planning that transition and enjoy the new start.  

What are you waiting for?

For a private review of your situation, email Ellen Dorner, call her at (800) 772-1065 or visit our website Dental Practice Sales.

Forward Thinking Dentist

The one question I am most asked by dentists is “when should I start the transition process?” My quick response is to be proactive instead of being reactive.  By that I mean, instead of taking a “wait and see” approach to the dental transition process, take a proactive approach. You know that you will transition eventually, so why not be ready when the time comes instead of starting the process when you’re ready to actually be done.

Planning for the dental practice transition should be started a good 3-5 years before you actually want to sell your dental practice.  Planning allows you the luxury of time in deciding how you will transition, i.e. do you want to continue working for a year or two after the sale and when you will transition.  You will avoid the frustration of feeling pressed for time to sell your dental practice quickly if you plan ahead.  Selling your practice will take several months at best, and you want to be sure you are allowing yourself the time to find the right buyer.  You have invested many years and dollars building your dental practice and you by allowing yourself time you will realize the investment you have made.

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

Thinking About Retiring from Dentistry? Stay Focused!

The decision is made – you are ready to transition out of your dental practice!  You have spent years working on growing your practice and making it the best it can be. There have been ups and downs over the years, but this has been a major focus of yours day in and day out and you are now ready to move on.  You are probably thinking that now you can relax a little bit – NOT YET!

Now more than ever, it is important to concentrate on keeping production numbers up.  This is not the time to sit back and coast until the practice is sold. Once the practice is listed, anyone interested in purchasing your dental practice will want to see steady on steadily growing production.  They want to feel confident that they are purchasing a successful dental practice, not a declining one.  In addition, without knowing how long it will take to sell your dental practice, you will also want to continue to have strong numbers so your profit margin remains where it should be and you are continuing to reap the benefits of a strong practice.

When the asking price of your practice is determined by your broker, both the past and current numbers will play a big part in that determination. With strong production/collection numbers and a solid patient base, you will be able to realize the maximum value of the long-term investment you have made.

For more information, email Ellen Dorner or call her at (800) 772-1065.

Should I Bring an Associate In To Buy My Dental Practice?

Whenever I speak to dentists about eventually transitioning out of their practice, they all have the same question:  Am I better off bringing in an associate to eventually purchase my practice?  In the past my response has been vague answer of “it depends”.  However, over the last six years, my response has been a little more definitive.

For many years, bringing in an associate was a very viable option to transitioning a practice, but the economy in the last several years has changed that.  As a result of the Great Recession of 2008, many practices were in decline or flat.  Profit margins declined and some practices even cut back on clinical days.

Before making a decision you must ask yourself a few questions:

1. Can my practice support two dentists?
2. Do I want to cut back on the amount of days that I am working?
3. Am I willing to give up some of my production in order to fill the associate’s schedule?
4. How much longer do I want to practice?
5. Am I willing to share my patients with another dentist?
6. Will I enjoy working with another dentist after being in solo practice for so long?

While the answers to some of these questions are more of an emotional one, there is one that is definitely fact or numbers based – can my practice support two dentists?

What I see in today’s dental world is more and more practices being sold outright, not to an associate. In addition to that, if the answers to question #2 and #3 are no, then bringing in an associate is definitely not the right decision for you. Don’t despair, there are a lot of positive aspects to this scenario since the control is put in your hands.

We will continue to discuss this topic in future blogs.  

Email Ellen Dorner for a review of your specific situation or pick up the phone and dial (800) 772-1065

Visit our website Dental Practice Sales for more information.