by John M. Cahill
We live in a world of change — a world when change and the unexpected happen as often as the stock market fluctuates. Smart investors protect themselves and their families from the volatility of the stock market by planning their investments through diversification. It is equally important for dentists to plan for their families' protection if the unexpected happens to them — death or disability.
Whether you want to think in these terms or not, it is a critical issue that needs to be addressed, regardless of your age. You need to prepare — and, in order to be prepared, you need a plan.
Death and disability planning
This program, much like a patient recall system, is preventive in nature. It allows a dentist to have a plan in place so that, in the event of his or her death or permanent disability, the sale of the practice will be handled automatically.
A death and disability planning program ensures that the practice-sale process will occur within a minimal time period by having most of the process already in place. It also removes part of the initial responsibility for the sale of the practice from the spouse, for whom this would be an added burden at a most difficult time.
The critical period for the sale of a practice — especially in the case of the owner's death — is the first 30 to 45 days after the event. The practice should ideally be sold within this time frame, because after this it can rapidly begin to lose value. Typically, during the first month, the spouse understandably does little or nothing regarding the practice due to grief. Others, including the family attorney, may become involved, but normally they are not well-versed in dental practice sales, and may not give the practice a realistic value.
With a death and disability planning program in place, immediate efforts will be set in motion to initiate the sales process. This can be done because most of the necessary documentation will already be in the possession of your practice-transition broker. Prearranged authority from you to sell the practice also will be in place.
To establish a death and disability program, a dentist should take the following steps:
Establishing a death and disability program
- Set up an initial informational consultation with a practice- transition broker.
- Have a practice valuation performed.
- Write a letter of instruction for your spouse and your staff.
- Familiarize your spouse with the program and with your practice-transition broker.
- Familiarize your office staff with the program and with your practice-transition broker.
- Establish a schedule for annual recalls to update the value of your practice or, at a minimum, the information and documentation your practice broker has in his or her possession.
- Enter into an agreement with your practice-transition broker as the listing agent for the sale of the practice in the event of death or disability.
As you can see, it is critical to have your spouse, significant other, or personal representative — as well as your staff — familiarized with your plan so that they can implement the process you have put in place. And there is no one more qualified to select a practice broker to assist with your practice transition than you.
John M. Cahill, MBA, of John M. Cahill Associates has over 30 years of experience in the dental industry, including all aspects of appraisals, sales, purchases, and buy-ins in connection with dental transitions. Cahill is a member of American Dental Sales, Inc. and can be reached at (510) 844-0330 or by e-mail at email@example.com. See the classified ads for names and addresses of ADS members in your area.