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Articles

The Professional Advisory

  1. Is it Time to Move?
  2. Staging A Dental Practice
  3. The High Cost of Dying
  4. Deal-Busters
  5. Patients - Attract and Retain
  6. Should I Stay or Should I Go?
  7. Is There a Buyer for Every Practice?
  8. Good, Better, Best - The Market has Spoken
  9. Smooth-Sale-ing
  10. Buying Time
  11. Patients, Patience, Patients
  12. A Real Patient
  13. Why Do a Practice Valuation? I'm not Selling
  14. Irrational Exuberance or The New Normal?
  15. Do dental equipment and dental technology affect a practice value?
  16. Finding and Being a Mentor
  17. Bigger is Better
  18. Daves Top Ten List for Buyers (Vendors should read this too!)
  19. How Well Do You Know Your Practice?
  20. Dave
  21. What will happen to dental practice Values in the next 10 years?
  22. Your Premises Lease is an Important Asset
  23. What are Associates Thinking?
  24. There is Life Outside the GTA
  25. When Is the Right Time to Sell My Dental Practice?
  26. Mergers are a Viable Option
  27. Is Your Associate an Asset or a Liability?
  28. Has your Practice Facility Kept Up With Your Billings?
  29. The 100 per cent of Gross Myth
  30. The Past, The Present and The Future
  31. Caveat Emptor
  32. Overpaid Long Term Staff
  33. Selling your Practice in Stages
  34. A Potential Pitfall of Selling Shares
  35. Value in Your Practice Through Balance
  36. Only Trusted Staff Can Defraud You
  37. To Own or Not to Own Practice Real Estate? That is the Question.
  38. Coping With A Large Patient Base
  39. Successful Dental Practice Transitions
  40. Taking Care of Business
  41. The Investing Dentist Phenomenon
  42. Two areas to focus upon that could negatively impact the value of your practice
  43. Organize your Debt in Order to Sell your Practice
  44. Having a Better Team
  45. How Do I Prepare My Practice For Sale
  46. How Do I Prepare My Practice For Sale? Part 3
  47. How Do I Prepare My Practice For Sale? Part 2
  48. How Do I Prepare My Practice For Sale? Part 1
  49. Advice to My Son or Daughter Graduating from Dental School
  50. Transition - What to Expect
  51. Discussion on Digital X-Rays
  52. Partnerships and Shotguns
  53. Strategic Planning - How to Get Started
  54. Calling All Vendors - Practices have Gone Up in Value
  55. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
  56. Matrimonial Practice Valuations
  57. Purchaser's Guide to Affording a Practice
  58. Location Improvements Throughout Your Career
  59. Small Practice Valuations
  60. Partnerships – The Best and The Worst
  61. Changing Location When the Opportunity Comes Along
  62. Visual Presentation of Your Practice
  63. Presentation of Charts
  64. Your Premises Lease Can Be Your Worst Enemy
  65. How to Select an Appraiser for Your Practice
  66. How Are Your Billing Ratios?
  67. It Pays to Invest in Your Tangible Assets
  68. The Importance of Separate Financial Statements
  69. Five Time Frame Levels to Sell a Practice
  70. 12 Suggestions to Safeguard Computer Data
  71. How to Buy a Visible Practice
  72. Why is there a shortage of good practices today?
  73. The Importance of Equipment in the Purchase of a Practice
  74. The Balanced Practice
  75. Will My Practice Be Saleable in The Future?
  76. Buyer Be Aware
  77. Excess Profit - The Second Key
  78. Patients and Profits are the Keys
  79. Plan Ahead

Volume 30: Transition - What to Expect

Download the PDF version now!

When contemplating the sale of a practice, the major area of uncertainty concerns transition. It means many different things to most vendors. The vendor’s reasoning can range from wondering "How long a period could I stay on?" to "I do not want any transition. I want to sell and be gone!"

In today’s vendor market the vendor is in greater control if he/she is located in a community which is in demand. If the vendor has 2,000 or more recall patients in a sought after community, he/she can basically dictate the transition plans to the purchaser. If this is unacceptable to the vendor’s potential purchaser then another dentist with similar transition plans as the vendor’s will buy the practice. But the vendor should be aware that the world does not always unfold as one would expect. The personality of the purchasing dentist is also very important. You must relate to the purchaser in practice philosophy. Typically, the younger dentist is more interested in developing the practice i.e., stronger hygiene program and more cosmetic dentistry.

If the practice has about 1,200 recall patients it is much more difficult for the vendor to call the tune as most purchasers can treat 1,200 recall patients without the assistance of an associate. This means that if you have a smaller practice, a short transition is about the best you can expect. If there is a shortage of patients the new owner will want to do the treatment and there will be no work for the vendor associate.

I was just talking to a dentist with about 1,200 recall patients who wanted to sell and be an associate in a practice near his cottage. This normally works out well as there is a shortage of dentists in cottage country and the sale can be completed with a limited transition. We recently sold a larger practice where the vendor wished to get his capital out of the practice and still work for a number of years. We structured the sale around selling ninety per cent of the practice and the vendor continuing to hold ten per cent to ensure that he could continue to work. The purchaser also agreed to purchase the last ten per cent at a price of ten per cent of the last year’s gross. Thus, if the production goes up, so does the value of the remaining ten per cent. The trigger to sell was at the option of the vendor not the purchaser. The vendor agreed not to exercise his option to sell for a minimum of 24 months. This is not a Sequential Buy-in; it is more of a guarantee of future income as a dentist.

Another large practice we recently sold had no transition time after the sale, although the purchaser came into the practice as an associate a couple of weeks prior to the completion of the sale. Special arrangements should be in place prior to the future purchaser arriving to ensure the completion of the sale.

Basically, tell your broker what transition plan you would like as that will have significant impact on the type of purchaser they will attempt to attract. Generally, a newer graduate requires more transition time whereas a more experienced dentist requires less or no time.

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