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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 32: How Do I Prepare My Practice For Sale? Part 1

Download the PDF version now!

Time marches on, circumstances change and nothing is forever. Sooner or later you are faced with the inevitable question, How Do I Prepare My Practice For Sale? To help construct a game plan that best fits your needs the "preparation plans" will be discussed in a series of four articles according to time frame:

Part 1: Eight to ten years from selling time (Volume #32)
Part 2: Four to seven years away (Volume #33)
Part 3: One to three years away (Volume #34)
Part 4: Sell the practice now (Volume #35)

Part 1: Eight to Ten Years Before Planned Sale

In this category you have time to plan. It all starts with a valuation which should specify the current value as well as identifying areas of weakness in your practice such as: a) over staffing, b) location, c) old, tired facility, d) building lease risks.

Assessing weaknesses

  1. Identify your true staff requirements and get yourself onside over time. If you are paying thirty per cent of your gross billings as wages you are paying too much. This will be seen as a weakness in your practice as the purchaser will most likely be hiring all your staff. The extra expense will also reduce your profit and thus your practice value.
    Too often staff requirements are set by the staff. I have seen a practice billing $600,000 and having two receptionists. A good rule of thumb is one star receptionist for up to $900,000 billing – and you want a star in this position. This assumes that you are only open 40 hours per week or less. Larger practices can be structured around an office manager and this will be discussed in a future article.
  2. Is your facility what one would call “contemporary” with good visibility and easy access? Second floor with no visibility, a hole in the wall for the receptionist and no elevator is not where it is at today. If you find yourself in this position you should consider moving. You have time to amortize the cost to your practice and would have good value when you put your practice up for sale eight to ten years down the road. Any facility with a contemporary design will have eye appeal to a purchaser.
  3. When was the last time you did a major overhaul of your practice facility? As in location (above) any renovations can be amortized over the next eight to ten years. Adjusting room sizes and colour schemes can truly improve not only your practice but also your attitude. Your patients will notice.
  4. Three times recently we had situations where the landlord informed the dentist that the lease was not going to be renewed owing to major renovations. This made the practice un-saleable. The forced move meant that not only was there a cost of relocation but it also caused a delay factor in order to show the purchaser that the patients moved with the practice.

In one of the above situations it was a smaller medical /dental building in which a retailer bought the building and wanted the main floor immediately, and ultimately to occupy the entire building. The medical doctors moved out leaving only the dentist and one other professional. Patients were forced come into the building through the back door. The dentist should have moved when the doctors moved out. Now what choices does the dentist have? The dentist could pay for renovations for a new location if one was available, purchase another practice in the area and move the practice into the purchased premises or sell to a local dentist and move with the patients. The dentist did not want to practice too much longer and I recommended selling and moving with the patients. You can see from this last example, a lease does not always protect you.

If you are eight to ten years away from selling your practice, now is the time to plan. There is a comfort feeling of having a more attractive facility to work in and it will be more appealing to the purchaser. Since you are looking eight to ten years away, your facility and equipment are going to age in that time period. One must take this into consideration – an eighteen year old chair and unit today will be nearly thirty years old when you decide to retire. This does not have the best image for the purchaser. The purchaser is adding up the cost of the practice plus $35,000 to $50,000 for each old operatory. Turn key purchases sell better than older facilities.

If you have missed the eight to ten year planning period, the four to seven year recovery period will be discussed in the next issue.

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