The top three risky behaviors for dentists to avoid are indecision, procrastination, and letting emotions drive a deal. These can cost you financially and rob you of your peace of mind. The smoothest practice transitions involve careful planning and excellent communication between the parties. I can't emphasize planning enough! The most successful practitioners regularly make planning a priority. I've seen hundreds of doctors succeed in their practices by using the habit of planning regularly. Let's face it . . . if you don't have a plan, you'll get stuck!
Being proactive is a surefire way to achieve the best possible outcome. For all buyers planning to acquire a practice, it is essential to get a handle on how much debt-service tolerance you have. Translation: determine how much of a practice you can afford and work from there. Before you enter the fray of being a serious buyer, we strongly recommend that you get prequalified for practice financing so you know what you can afford, and structure your practice search from that critical springboard. Most banks will gladly offer you this complimentary service. Once you're prequalified, the fun can begin and you'll be able to confidently search for a practice and be taken seriously by sellers.
Before sellers will release any confidential practice details or even show a prospective buyer their practices, they will want some reassurance that their information is kept private. As a broker, we require that all buyers who are interested in looking at the practices we represent sign confidentiality agreements, submit their curricula vitae to us, and provide proof of financial capability.
Practice owners will frequently have their practices professionally appraised to determine the fair market value. Some insight here: An appraisal is proof of commitment by a seller who is serious about the process of transitioning and who is not going to waste precious time, theirs or yours. Further, if they are listing their practice with an experienced broker, they are committed to having the practice professionally marketed and the transition organized in an orderly fashion.
The million-dollar mistake, also known as the cost of lost opportunity and lost economic ground, is indecision. For buyers, it is not starting the search for a practice to buy early in their career, or not investigating taking an equity stake in a practice when their production capacity reaches a respectable level. This should be done within the first two to three years of private practice experience. The price of procrastination or waiting for conditions to be perfect is financially damaging.
When looking at a practice opportunity, assess it in these three areas: location, cash flow, and resell factors. Try visualizing yourself as the owner of a particular practice. Be introspective. Is the location satisfactory? Is the practice cash flow generating enough to live on and to meet your lifestyle goals? If your life landscape changes, is the practice a gem and readily transferrable to a new owner? If all three seem reasonable, but not necessarily perfect, the practice opportunity may be well worth investigating further.
Be prepared for the emotional aspects of the sale. Many practice sellers faced with the prospect of retirement find it emotionally draining. Telling the staff of their plans is one of the most difficult conversations they can have. It's common for them to have feelings of grief, fear, betrayal, or loneliness. Recognizing one's level of attachment to the daily rhythm of patient interaction and practice activity is key to whether one is ready to move forward with a practice transition. What activities, dreams, and desires will fill the void? Buyers should be cognizant of this aspect and realize the practice transition is not all about them. Awareness of the seller's emotional struggles is helpful in understanding the source of conversations or unusual behavior.
Sellers should recognize that often a buyer is making one of the single most important purchases of their life. This is not a purchase one should take lightly by any means. A lot of clinical, mental, and emotional preparation segues into ownership. It is not uncommon for buyers to experience a temporary phase of buyer's remorse.
Wherever you are in the life landscape of a practice transition, I wish you good health and peace of mind!
Sarah Lynch is a partner in Jim Kasper Associates LLC, a practice brokerage and transition firm serving dentists in the Northeast since 1981. She is coauthor of Profitable Practice, and lectures nationally on practice transitions, and speaks frequently for state and local dental associations. Sarah can be reached at [email protected] or (612) 910-5610.