Volume 1: Plan Ahead

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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

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead