The state of practice transitions in today's market
Many dentists have put off the sale of their practices, and with the increase of new graduates the last few years, the demand for good practices has increased beyond the supply.
by Frank J. Brown, JD, LL.M. (Taxation)
Some of the frequent statements or questions I hear from dentists these days are – "I wish I could just be a clinician and not worry about running the business," "What is the value of my practice?" "When is the right time to sell my practice?" and "What options do I have to practice after selling my practice?"
As a result of our economic downturn over the past few years, many dentists have continued to own and operate their practices to continue a revenue stream. This is more lucrative than the return from their investment and retirement accounts. We are now seeing many of the dentists that adopted this strategy begin to realize that continuing to practice and run a business is not a viable option for them. Many dentists in this situation have not put forth the effort to sustain their practices, and in many cases their collections have declined significantly and earnings have dropped. As you may expect, the practice value has also declined significantly.
Some of the primary keys to enhanced practice value are having a healthy and vibrant practice with solid revenue growth, sound overhead costs containment, new-patient growth, an appealing location, orderly financial and patient records, a well-run recall system, updated office appearance and equipment, an assignable lease with enough time on base lease and options to cover the period of a buyer's practice loan term, and well-trained and seasoned staff. These are many of the factors that contribute to higher practice values.
Many dentists who have hung on to their practices beyond when they originally thought have not worked on these critical elements, and as a result have seen their practices' value drop. In some instances, the value has dropped by hundreds of thousands of dollars.
What these dentists need to understand is where the market for practice sales is, the advantage of selling their practices now, and what their opportunities are after the sale of their practices. Many dentists have put off the sale of their practices, and with the increase of new graduates the last few years, the demand for good practices has increased beyond the supply. The market has impacted practice values, and serious consideration should be given to the timing of your practice sale.
For those who ask what opportunities exist after practice ownership, here are some interesting facts and observations. A recent study revealed the stark fact that many rural areas have major shortages of dentists, and the population is grossly underserved. The aging dental profession and the failure to replace these dentists have caused a significant depletion of dentists in rural markets. I have seen several dentists sell their practices, move to the country, and receive special concessions from local government authorities, who make attractive offers if the dentist opens the new practice or buys an affordable, scaled-back rural practice.
If it is not time for you to move and you would like to continue to practice, there are many opportunities for doing locum tenens work through placement agencies and for getting the word out in the local market. With the advent of dentists now expanding by owning multiple practice locations, there is a need for mature and well-trained dentists to work in these practices. I have not had a qualified dentist who would like to continue to practice in some capacity not find a rewarding opportunity. As a matter of fact, I have had several dentists begin working, only to be asked to expand their schedules to a full-time basis. Their response is that it was not their intention to go back to work full-time, and they decline the extra hours. The point is, opportunities are available if you want to work.
Knowing the market provides valuable answers to these questions. Knowledge brings solutions and a productive path in your transition.
Frank J. Brown, JD, LL.M., is past president of American Dental Sales. Reach him at (940) 455–2299, 888-419-5590, ext. 469, or fbrown@ADStexas.com.
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