Planning Your Transition When You Are Not Yet Financially Ready
If you are not financially ready to transition and
need steady income for a couple more years,
your options are either:
• Work longer
• Bring in a practice management
consultant to grow the practice 10-20%
each year
• Do a practice merger
• Do a Presale
• This option allows you to get the equity
out of your asset and continue earning
clinical income to support your lifestyle
and economic needs.
Your Type of Business Entity Matters
For instance, being a C Corp is probably the worst type of business entity for selling a practice.
There are many reasons for this, and you should discuss it with your financial advisor prior to
sale. One reason is that C Corps are subject to double taxation. It may be possible to change
your C Corp to an S Corp and reduce your tax consequences if done far enough in advance.
This is a matter to discuss with your CPA and they will guide you appropriately. Whatever you
do, don’t skip or forget this important step!
IMPORTANT CONSIDERATIONS BEFORE A TRANSITION
In general, you need to consider leases,
equipment and improvements.
LEASES EQUIPMENT IMPROVEMENTS
With a lease, we always want to make
sure that you have the ability to assign
that lease to a third party. In other
words, if you want to sell your practice
in two years, you don’t want to sign a
five-year lease if you’re not able to
assign that facility, or lease, to another
doctor. The wording of your lease is also
important, so make sure you understand
exactly what you are signing and exactly
how it will affect your ability to sell your
practice at any time and on your own
terms. Seek professional advice.
Common questions about equipment
include: Should I add new? Will it help
the sale of the practice? Will I get more
money for it? Our answer is this – you
will not get back as much money as
you put in.
Our advice is to buy equipment if:
• it makes your job easier
• it makes working more efficient.
• you want to do it.
Understand, however, that if you spend
$60k on new equipment, it does not
increase the value of the practice by
$60k. It may, however, make it easier
to sell, and it might sell in a timelier
manner. Do what you feel is in your best
interest, but don’t get too involved or
invested in a whole lot of new
equipment.
Like equipment, minor or cosmetic
improvements may help sell the
practice in a timelier manner and
possibility for maybe a little more
money. However; do not expect to
recoup large capital outlays dollar
for dollar in your sale. (This is not an
excuse not to get your sign repainted
or replace old and worn carpet. This
type of improvement should be done
regardless of whether you are
planning to sell your practice or not.)
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MAY/JUNE 2020 | PENNSYLVANIA DENTAL JOURNAL