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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 70: Buying Time

Download the PDF version now!

 

We often consult with dentists about the ideal time to sell their practice. The conversation usually starts with an overview of the process and what the current market is like for their type of practice. We then delve into some postulation over what the future holds for the market. We try to relate other dentist’s experiences, and arm them with data and information to help them form opinions and make good decisions. Generally several months pass, and quite often years pass before the dentist actually decides to sell, no matter how robust the market might be.

The decision to sell a dental practice is most often predicated on some life event or goal that the selling dentist experiences or strives for. In the life event category, there is a very wide range of things that happen that cause dentists to take action, pick up the phone and begin the process of changing their future. We have had things like:

  • The worst Monday I’ve ever had
  • My staff treat me poorly and I need to get away from them
  • A good friend just died and he never had a chance to enjoy his retirement
  • My back is killing me
  • The commute to the office is getting longer every year
  • I still love dentistry but I no longer want the responsibility of being an owner,
  • The RCDSO won’t let me treat my spouse anymore and that is ridiculous (this decision by the College, which has since been reversed, was very good for the practice sales business!)

You get the point. There are all kinds of things that occur that make people pause and consider their options.

 On the goal side, we often hear: 

  • I have other interests that I want to pursue
  • My spouse has retired and we want to travel
  • My kids are settled, so I don’t need to work as hard
  • I want to go back to school
  • Life is short, I want to really enjoy things
  • I want to move to a different part of the country

 Again, many, many different reasons, but the outcome is clear. A different future is in store.

 Each of these reasons boils down to one thing and that is time. In dentistry, it is very difficult (though not impossible) to prosper without spending time doing it. Therefore, most dentists are left with the option of continuing to work or changing their professional life in order to have more time for the things they want to do. I call this “buying time” because that is what the decision to sell a dental practice means; you are trading future profits for more free time.

 I have often said that from a financial point of view, the best course of action for dentists is to work their practice into the ground and throw away the keys just before it’s your time. I say that because a dental practice is a great investment and provides a fantastic return on invested capital. Even taking into consideration, the elevated prices that practices trade at now and the tax advantageous a share sale structures, it is still better financially to hold than sell. This can be proven by the significant investment that multiple practice owners and more particularly, corporate owners are making in dentistry. These investors are very smart business people and they see the significant returns that dentistry offers. They are happy to pay the higher multiples that today’s market demands because the returns they achieve are still far greater than they could earn investing their capital in other businesses or public companies. So, if it is a great investment for them, it is also a great investment for you. The math confirms the theory. Practices trade at four to eight times adjusted net earnings. This is after the overhead, dentist (you in your own practice) and taxes have been paid. Therefore, you could earn money working in the practice (40 per cent of your production) and earn money owning the practice. It is this ownership income that is attractive to others. If we assume a six times multiple it would take six years of ongoing ownership to be even with what you got for selling the practice. It is highly unlikely that you could get anywhere near that return if you invested the proceeds from the sale in another kind of investment. It would still be better financially to work the practice as long as possible. If that is so, then why don’t more dentists do that? Simply, time.

You will know when the time is right to plan a different future. The life event or goal will arise and you will decide that it is your time to start “Buying Time”.

David Lind is a Principal and Broker of Record in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices.  He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: david.lind@ppsales.com

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