We ask two experts the same question to give you two different answers on a complex issue
QUESTION"I am an oral surgeon. Will my retirement transition be any different from a general practice transition?"
Usually a retiring general dentist can turn the practice over to the buyer as soon as sale agreements are signed and money changes hands. Specialist transitions are another story. These can be like herding cats, so be prepared.
Your major role in a specialty practice transition is to make the practice referral sources comfortable with the new buyer. If these relationships are long-term and mutually satisfactory, then the transition should go smoothly.
As with a general dentist's practice, retirement planning should start two to five years before retirement. A comprehensive practice appraisal at this time is the foundation for future personal and financial planning.
Whether the buyer has been associating with you or you are planning to recruit a new buyer/partner, the following elements are essential:
- Agree on a timeframe -- A "honeymoon phase" of three to six months is typical to decide if the transition is a fit for both of you. If yes, move ahead. If not, sever the relationship.
- Complete the paperwork ahead of time -- This can include an associate agreement, letter of intent, and financing approval. When the transition is ready, complete the legal Sale Agreements and Operating Agreements (if a partnership).
- Pay attention to exit strategies and restrictive covenants -- Both you and the buyer need to find out as soon as possible if the buyer is comfortable being an owner or partner, rather than being just an employee.
Remember, there is a smaller market of buyers, and we are transitioning a pool of referral sources, not just patients. If you plan ahead, herding cats will be easy.
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.
Tom Snyder, DMD, MBA
The planning process for an oral surgeon and general dentist are essentially the same. We recommend that if you are considering selling your practice, the ideal timeframe to begin the planning process is five years and no less than two years. This will allow you ample time to confer with a financial planner to ensure that you are on the track to financial independence and can retire comfortably. Sometimes practitioners embark on a plan to sell their practice only to discover they really cannot afford to do so! Typically, financial planners can prepare calculations to determine whether or not you need the proceeds of your practice sale to comfortably retire or simply to enhance your lifestyle. In fact, having a financial plan prepared will also give you confidence as to whether or not a five-year timeframe is realistic.
The marketability of an oral surgery practice is significantly different from that of a general practice. Recent trends have shown that 90% of dental graduates desire to practice in urban and suburban areas. There is a growing trend for recent grads to practice in a group environment, so if you are a solo practitioner, your practice model is decreasing in popularity. The sale of your practice may be more challenging, hence the need for proper financial planning.
So now you have an action plan in the event that you are unable to sell your practice, you'll know what it takes to reach your retirement goal. Furthermore, if you are located in small town or rural area, the road to successful practice transition becomes more challenging!
Finally, in most instances, the price that you'll receive for your oral surgery practice can be considerably less than of what your referring general dentists can expect to receive. This is mainly attributed to transitioning a referral-based practice that is predicated by the number and age range of your existing referral base. Also, with only approximately 220 oral surgeons graduating annually from specialty programs, you have a limited pool of candidates that are available as purchasers. In the end, understanding the reality of the marketplace and having a solid financial plan with specific goals in mind will be the ingredients to your successful transition.
Tom Snyder, DMD, MBA, is the director of transition services for The Snyder Group, a division of Henry Schein Professional Practice Transitions. He can be reached at (800) 988-5674 or Tom.Snyder@henryschein.com .
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