Plan ahead and reap the rewards. Start thinking about your dental transition now.

February 18, 2016|Nancy Streck

Ask anyone—change can be hard. And the reality is that every dental practice will eventually face some type of transition. Those who approach impending change with a plan will be in a better position to meet their financial and personal goals.

Start early

It’s never too early to prepare when it comes time to sell or transition your practice. Starting the process as early as five years out allows time to develop a strategy and plan, monitor it and then adjust the plan if needed.

Ask yourself these questions:

  • At what age do I want to retire?
  • How much income do I need for living expenses?
  • Where will my income come from?
  • Am I financially prepared to leave the business?

Beyond your financial goals, take into account your individual concerns and feelings. Your practice transition is as much about a smooth emotional transition as it is about financial preparation. Find activities you can pursue into retirement to help ease your transition—and even make it enjoyable.

Consider your transition options

Practice transitions can take many forms and identifying how you’d like your practice to evolve is the first step. Will you gift or sell the practice to a family member who will follow in your footsteps or find an unrelated buyer? Perhaps you can reduce your hours to allow for an associate to come into the practice. You could sell the practice to an associate or to a strategic buyer, such as a competitor. The options are endless.

Don’t overlook financial valuations

Have a practice valuation completed early and often to determine what your practice is worth—consider having it done every three to five years. This process also identifies your practice’s strengths and weaknesses, along with potential problems. Give yourself enough time to fix any issues.

Keys to seller success

When you’ve given your entire career to ensuring the best for your patients and practice, now is not the time to be lax. Stay on top of your game and focus on continuing to improve the practice and its daily operations. Keep your productivity and revenue high. Then take into account these factors that can enhance the value of your practice:

  • Use benchmarking. Look at your financials and compare it to industry data. This information can help you manage overhead properly.
  • Maintain healthy patient demographics and payer mix. Continue to solicit new patients, including those that fall into the younger demographic. You’ll also want to evaluate your mix of fee-for-service and insurance patients.
  • Review written policies and systems. Streamline your processes and then maintain written standards,
  • Raise your fees every year. Adjusting fees annually ensures optimal profitability and cash flow, and improves the overall value of your practice. Use industry data to ensure you’re within the top 80% of the market. Your new buyer will thank you for not having to immediately raise fees—and a ruckus with patients as a result.
  • Update equipment. Ensure your equipment, along with digital records, are up to date. Newer grads grew up with technology and it’s not only what they prefer, but what they expect.
  • Get a facelift. Not in the literal sense—we’re talking updating office décor. Refresh with a new coat of paint or carpeting, maintain your facilities and do a deep clean.
  • Maintain high profile in the community. Keep your name and practice top of mind, both in your local community and in the professional dental community. Attend industry functions. Seek out opportunities to get involved in your local organizations and community.
  • Build relationships with students. Consider becoming a mentor. Make your practice one they want to seek out.

Gather your team

Maintain consistent staff and then help prepare them for transition. Work with professional advisors for help with complicated issues such as practice valuation, tax implications, legal aspects, setting a realistic price and fair compensation.

Once details are finalized and you’re ready to announce the transition, consider how you want to prepare your patients for the change, as well.

For assistance with preparing your practice for transition, contact Nancy Streck or any member of the Dental Advisory Group at Schenck at 800-236-2246.

Nancy Streck, CPA, CFP®, CVA, is a senior practice consultant and member of Schenck’s Health Service team. She focuses on assisting dentists, physicians and other health care providers, providing guidance in practice management, valuation and tax planning for both the owners and their practices.