Volume 30: Transition - What to Expect

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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.

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