Volume 1: Plan Ahead
Doctors often ask me, "When should I start to talk to someone like you regarding the sale of my practice down the road?"
I would generally indicate that you should start the planning 8 years before you wish to sell but remember, most transition periods are from 6 months to 5 years after the sale. So, from the start of the plan, to finally hanging up your handpiece, could be as far away as 13 years.
Why 8 years ahead of time?
This gives you three years to go through renovations, and/or replacement of equipment deemed necessary to have a visually attractive practice. Typically, you finance the renovations and new equipment with a 5 year lease, in the years 5,4,3,2,1, you pay off your lease as it is quite disconcerting to have to take proceeds of the sale of your practice to pay off the leases, which could be substantial. You get to do the last years of practicing with new equipment, fewer repairs and it makes you feel good. The leases are written off against income and typically the tax savings are 50% of the cost of the improvements. The practice looks more contemporary - a "turn key operation" - and the purchaser would not have to lay out big dollars to make the practice feel comfortable. Your excellent patient base with contemporary equipment is worth more and sells easier as purchasers seldom have the vision of "what could be."
What happens if I don’t have 8 years lead-time to the date that I see myself selling the practice?
If you do not have a clear 5 years, I would suggest you do either nothing or review the high points such as x-rays and sterilization or replace older equipment with good used equipment depending on what you have. Be aware that your current 22-year-old equipment will be 30 years old in 8 years and what does 30-year-old equipment look like now!
If I put too much value in new leasehold improvements and equipment won’t that reduce my goodwill value?
It is possible to have too much value in leaseholds and equipment. There is a balance between leaseholds, equipment and supplies as they relate to your patient base and your professional fees. The value of a practice is mainly driven by the normalized net income and the patient base. This however, is not a simple relationship and I would recommend a comprehensive practice valuation to start the planning of the sale, which may well be 5 to 8 years off. Our VIP Program (Valuation in Place) would update your valuation annually and you would not have to have another valuation done when it becomes time to sell your practice. That however, is a subject for future articles in this same publication.
The Professional Advisory
- One Year Later
- Dealing with Unsolicited Offers
- Covid-19 Practice Sales Update
- When is the Right Time to Sell Your Practice and Why?
- Partnership Pitfalls
- The Real Cost of a Dental Practice Set-up
- Smaller Practice Realities
- Dental Market Update - 2019
- Creating Your Own Most Valuable Practice (MVP)
- Small Practice Economics
- The Market is Very Efficient
- How Can Dental Practice Values be Rising and Declining?
- Hygiene as a Value Driver
- The Value of a Good Team
- Is it Time to Move?
- Staging A Dental Practice
- The High Cost of Dying
- Patients - Attract and Retain
- Should I Stay or Should I Go?
- Is There a Buyer for Every Practice?
- Good, Better, Best - The Market has Spoken
- Buying Time
- Patients, Patience, Patients
- A Real Patient
- Why Do a Practice Valuation? I'm not Selling
- Irrational Exuberance or The New Normal?
- Do dental equipment and dental technology affect a practice value?
- Finding and Being a Mentor
- Bigger is Better
- Dave's Top Ten List for Buyers (Vendors should read this too!)
- How Well Do You Know Your Practice?
- Dave's Top Ten List for Vendors
- What will happen to dental practice Values in the next 10 years?
- Your Premises Lease is an Important Asset
- What are Associates Thinking?
- There is Life Outside the GTA
- When Is the Right Time to Sell My Dental Practice?
- Mergers are a Viable Option
- Is Your Associate an Asset or a Liability?
- Has your Practice Facility Kept Up With Your Billings?
- The 100 per cent of Gross Myth
- The Past, The Present and The Future
- Caveat Emptor
- Overpaid Long Term Staff
- Selling your Practice in Stages
- A Potential Pitfall of Selling Shares
- Value in Your Practice Through Balance
- Only Trusted Staff Can Defraud You
- To Own or Not to Own Practice Real Estate? That is the Question.
- Coping With A Large Patient Base
- Successful Dental Practice Transitions
- Taking Care of Business
- The Investing Dentist Phenomenon
- Two areas to focus upon that could negatively impact the value of your practice
- Organize your Debt in Order to Sell your Practice
- Having a Better Team
- How Do I Prepare My Practice For Sale
- How Do I Prepare My Practice For Sale? Part 3
- How Do I Prepare My Practice For Sale? Part 2
- How Do I Prepare My Practice For Sale? Part 1
- Advice to My Son or Daughter Graduating from Dental School
- Transition - What to Expect
- Discussion on Digital X-Rays
- Partnerships and Shotguns
- Strategic Planning - How to Get Started
- Calling All Vendors - Practices have Gone Up in Value
- Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
- Matrimonial Practice Valuations
- Purchaser's Guide to Affording a Practice
- Location Improvements Throughout Your Career
- Small Practice Valuations
- Partnerships – The Best and The Worst
- Changing Location When the Opportunity Comes Along
- Visual Presentation of Your Practice
- Presentation of Charts
- Your Premises Lease Can Be Your Worst Enemy
- How to Select an Appraiser for Your Practice
- How Are Your Billing Ratios?
- It Pays to Invest in Your Tangible Assets
- The Importance of Separate Financial Statements
- Five Time Frame Levels to Sell a Practice
- 12 Suggestions to Safeguard Computer Data
- How to Buy a Visible Practice
- Why is there a shortage of good practices today?
- The Importance of Equipment in the Purchase of a Practice
- The Balanced Practice
- Will My Practice Be Saleable in The Future?
- Buyer Be Aware
- Excess Profit - The Second Key
- Patients and Profits are the Keys
- Plan Ahead