Transitions Roundtable

We ask two experts the same question to give you two different answers on a complex issue

QUESTION

"I plan on selling my practice this year. However, about 15% of my clinical production consists of orthodontics. I was told that my practice may be sold at a discount. Is this true?"

By Tom Snyder, DMD, MBA

Yes, this is true, especially if the purchaser who is interested in buying your practice has no interest in providing orthodontic services. Conversely, if the candidate is proficient in providing orthodontic services, then you should receive full market value. We've run across this situation numerous times and suffice it to say, a discount will be made on the market value of your practice if your practice appraiser has not factored in the proportion of orthodontic services in their valuation calculation. If, in fact, this valuation adjustment has not been made, you can expect approximately a 15% reduction in the market value.

Of greater importance, beyond your practice value is the clinical aspect of your pending sale. If you are planning on selling your practice within the next 12 months, hopefully you have not started any new cases recently. How many of your active cases are not more than 50% completed? You'll have to make arrangements with a specialist or another general dentist proficient in orthodontics to continue patient care for incomplete cases, if your plan is to retire. However, you can remain to complete cases if your buyer does not want to provide ortho services. If you do not plan to remain after the sale, you will have to make financial arrangements for the doctor who will be completing your ortho cases. Obviously, your life can be simpler if you can remain to finish outstanding cases.

Tom Snyder, DMD, MBA, is the director of transition services for Henry Schein Professional Practice Transitions. He can be reached at (800) 988-5674 or [email protected].

By Gary Schaub

With the advent of orthodontic procedure systems in the past few years, it is becoming more prevalent to find general dentists who are doing some orthodontic production. In my experience, about 5% to 10% of general dentists may be doing some ortho. However, since most buyers are in the early stages of their dental careers, very few are ready to jump into doing orthodontic procedures.

This presents a dilemma when selling a practice. If orthodontic patients are a very small part of the practice, for example less than 1% of total production, then I don't usually adjust the practice value for this. However, if the percentage is more significant, such as greater than 5% of production, then two things need to happen. First, the orthodontic production should be eliminated from the practice financials, so that no value is placed on these patients. Second, either the seller needs to finish orthodontic patients after the sale, or farm these patients out to an orthodontist or another general dentist.

If the seller is finishing treatment after the sale, then negotiations may be needed to compensate the buyer for the staff time and supplies the seller may need to work in the office. If the patients are transferred to another dentist, then the treatment status of each patient needs to be analyzed vs. remaining costs and time to complete treatment. For example, if the patient has prepaid for treatment, the seller will have to compensate the new dentist in order to complete treatment.

However, if the buyer wants to do ortho, then a separate value should be placed on the orthodontic component of the practice. This value would then be added to the sale price.

Gary Schaub is the founder of HELP Appraisals & Sales Inc., a dental and medical appraisal and brokerage firm in Portland, Ore. He is a member of American Dental Sales and can be reached at (503) 223-4357 or (855) 463-0101.