Do I want to be paid the full sales price for my practice at closing ?
Many DSOs will include a ‘ hold-back ’ in their offer to purchase a dental practice . This hold-back is typically 20 % of the sales price that is usually tied to a contingency based on the seller ’ s performance as well as a pre-determined collection threshold the practice must meet post-closing . For example , a DSO may stipulate that the seller will receive the hold-back amount only if the practice collections remain the same or higher two proceeding years after closing . In contrast , individual buyers typically pay the full sales price amount at closing and cash out the seller with no hold backs or contingencies .
Is preserving the legacy of my practice philosophy and business model important to me ?
In selecting a buyer , some practice owners prefer to sell to a dentist with similar practice philosophies in the hopes of grooming that dentist to run the practice in a similar way . Individual buyers typically do not anticipate making substantive changes in the practice , at least not immediately . They typically buy practices that align with their practice philosophies while understanding the importance of maintaining the essence of the practice for existing patients . DSOs , however , incorporate their own business model into the practice that may or may not align with the seller ’ s model and philosophy .
If your preference is to retire shortly after the sale , limit your work back commitment to less than two years , and have a greater chance of preserving the legacy of your practice , the ideal buyer would typically be an individual dentist . If you prefer to continue working for at least two years and you are flexible with regard to the buyer , a DSO may be a good option that allows you to escape the daily burden of managing a practice .
Identifying your goals and expectations for a practice sale transition are critical when determining how to plan for a successful transition . As you consider these questions , discuss your options with an experienced transition advisor .
Frank J . Brown is the current owner of Watson Brown . He began his practice transition expertise in 1989 when he began providing Texas dentists and their families ’ professional guidance on selling or buying a dental office . Frank earned his law degree from the University of Arkansas and earned his Master of Laws in taxation from Southern Methodist University School of Law . As a broker and tax attorney , Frank provides council to buyers and sellers before , during , and after their transitions while also drafting documents and valuing dental practices . For more information , call ( 469 ) 222-3200 or email Frank @ ADSTexas . com .
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