The goal of this article is to outline and examine this process and
to provide guidelines as you consider your own practice transition.
I will explain what a transition involves from a technical standpoint
and what the possible outcomes might be, so you can make a plan
that fits your timeline.
QUALITY OF LIFE
The most common practice transition
types include, but are not limited to, buying
or selling a practice, bringing in an associate,
bringing in a partner, or retiring. A key
consideration for every type of practice
transition is offering the most stable and
beneficial “quality of life” possible. Quality
of life varies from doctor to doctor, but
often includes working when you want,
where you want, for how long you want,
and if you want.
Every practice transition should be directed
toward a desired outcome, which usually
relates to time, money or both. When
considering your desired outcome,
you must consider your needs.
THE THREE CATEGORIES OF NEEDS
There are three basic categories of
needs sought by most dentists seeking
a transition: economic, emotional and
spousal.
1 Economic Needs
The main question here is usually, “How
much money do I need when I retire?”
The answer is different for everyone and
should be discussed in great detail with a
financial advisor before you retire! Keep in
mind that the ADA did a study a few years
ago and found that only 4% of dentists
were able to retire and maintain the same
quality of life in retirement that they had in
their years of practice. Careful planning is
key to becoming a member of the 4% club!
2 Emotional Needs
Emotional needs have to do with control.
If you are going to sell your practice and
continue to work, are you able to give up
or share control? What are you going to
do with your free time? Many times,
emotional issues are more difficult to
evaluate and resolve than financial needs
because they are subjective.
3 Spousal Needs
Is your spouse in support of your
transition? If your spouse is not on board
with the transition plan, it is doomed to
fail – full stop. Both spouses must want
the same thing here.
SELLING YOUR
PRACTICE
There are many different types of unique
and creative transition options with
specific advantages and disadvantages
to each type of sale. The three major
categories here include:
• Walk Away Sale - the seller will leave
the practice immediately and the
purchaser takes over immediately.
• Presale or Deferred Presale - a
transition where the seller and buyer
will work together for a period of time,
anywhere from one to seven years.
During that entire period of time, one
doctor owns the practice 100% and the
other is the employee or associate.
• Incremental Practice Sale - a transition
where there are two or more doctors
who work together for a specified period
of time, from 3 to 20 years. The timeline
is based on both parties’ needs. This type
of transition is suited to the multiple
doctor approach as they transition in
increments or stages.
Once you determine your needs and
potential options, the next step is a
practice evaluation. You need to find out
what the fair market value of your practice.
The general rule of thumb is that most
offices will sell somewhere between
65-80% of a three-year weighted gross
average. Sometimes higher or lower, but
the majority of practices will be in this
range. Share your practice evaluation
information with your financial advisor.
Discuss how this amount of cash affects
your short and long-term plans. Will you
be able to retire sooner? Will this amount
just supplement an already well-funded
retirement? Tax consequences of a sale
also need to be researched.
MAY/JUNE 2020 | PENNSYLVANIA DENTAL JOURNAL 23