As with anything in life, it is always better to prepare well in
advance. Practice owners need adequate time to strategically
think through their decisions and identify a successor. The goal
is to develop a transition plan that is flexible and workable for
you. Moreover, delving into the process when the business is at
its peak can help to command a higher-value sale. The ideal
period in which to start implementing a plan is several years
prior to selling or leaving the practice. This will allow time to
find a buyer or groom a future leader, as well as to prime staff
and manage the transition of patient relationships.
The ideal period in which to
start implementing a plan
is several years prior to selling or leaving the practice.
First up is deciding what your goals are for the practice into the
future. These can include growth goals, expansion of services
and their vision for potential future leaders. Likewise, practice
owners should determine what they envision for their own role.
A critical consideration is to develop a list of professional contacts that can help you navigate through the complicated financial and legal procedures involved in a practice transition. These
pros - bankers, attorneys, financial advisors, practice brokers
and certified public accountants can provide excellent advice
and guidance for these aspects of the process. Expert advice
from a CPA or practice broker may also be helpful in valuing the
practice, which is vital to its sale. These experts can also help
the practitioner identify any red flags, some of which could prevent the sale if overlooked.
You also need to figure out what part you are going to play once
the transition occurs. For practitioners who are looking to
retire, a complete sale is often the best choice. In this scenario,
the outgoing practitioner sells 100 percent interest in the practice to an existing partner or external practitioner. If the practitioner is looking to have a reduced stake in the practice, a 50
percent purchase is a common choice. This agreement allows
the outgoing practitioner to add a partner who purchases 50
percent of the practice, with the understanding that they will
purchase the remaining interest in the practice at a designated
time. The agreement should clearly state the length of time the
outgoing dentist will remain at the practice and the date that
the complete practice purchase will be finalized.
Obviously, a practitioner needs to find the right dentist to take
over the practice – one with whom you would feel completely
at ease providing care to your patients and one that fits with the
culture you established. Often, the successor will be an existing
associate or an external practitioner who has a strong standing
in the community.
The real estate implications for your transition are big. If the
practitioner owns the property where the practice resides, it
should be determined if the property will be included in the sale,
whether the owner will sell the real estate to the third party, or
if they will maintain ownership and collect rental income.
Once a transition plan has been put in place and a new practitioner has been selected, the transition should be clearly communicated to office staff and patients. This ensures staff is clear
about how and when the transition will take place, and allows
them to assist in communicating the transition to patients, vendors and other affected parties.
The new practitioner will need to be fully integrated into the
business, including training on operations and finances. A considerable amount of time should be allotted for integration, as
it can often take several months to a year.
Transition planning is vital for dental practitioners who are
looking to retire or reduce their stake in their practice.
Implementing a transition plan ensures
their successor can maintain a healthy
practice, with a strong client base and
financial success for years to come.
Derek Rawnsley is vice president and business
development officer for Pacific Continental Bank.
Email: [email protected].
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