One of the most important events in the life of a dentist is when he/she sells his/her dental practice. All too often, retirement is the only event for which doctors prepare. There are other events in a dentist`s life that may necessitate selling all or part of his/her practice.
Preparations for these events are equally, if not more important, than a planned retirement. What happens when a dentist becomes disabled, dies, decides to bring in an associate makes a career change or decides to merge his/her practice with another dental office? Preparation for the sale of a dental practice should start the day the practice is established.
Is your practice ready to sell?
Preparation starts with writing a list of instructions to deal with the sale of your practice in the event of your death. The instructions should include the names of your attorney, your accountant, your financial planner, your dental consultant and your broker. Instructions should be written defining the role of each individual and copies of the instructions should be sent to the appropriate parties, with a signed and dated copy placed with your legal papers. It is good to get all of the above-mentioned people together and review with them the role each is to play. These people not only can help in the event of death, but can be used as advisers when you are confronted with major decisions with regard to your practice, as well as the establishment of wealth.
A second area of preparation entails making a list of the things that need to be done to make the practice ready for a sale. This list should include:
* Keeping up-to-date information on the practice that a buyer would need. This would require:
- Keeping good records that show charges, payments, adjustments and the profit of the practice for at least the past three years.
- A list of staff people, date of hire, hours worked, salaries, benefits and job descriptions.
- OSHA records and manual.
- A monthly breakdown of procedures by ADA code showing the quantity and dollar amount of each procedure for three years.
- A current copy of the lease or information on the building if you own it.
- Your office or practice philosophy and an office policy and procedure manual.
- A list of equipment, date purchased and amount paid at time of purchase.
- A breakdown of income and expenses for the past three years.
- A current count (done annually) of the number of active patients in the practice. (An active patient could be defined as patients who have been in the office at least once in the past 12, 18 or 24 months.)
- The number of new patients the practice sees monthly.
- Marketing that you are using to attract new patients.
- Information on the geographic area where the practice is located.
* A written game plan defining the goals and objectives you want to reach. These goals should not only include specific things you want to accomplish in your practice, but also your personal financial goals. Do you want a practice that is fee-for-service or managed care? Do you want to practice as a sole proprietor or be part of a group practice? Do you want to focus your practice on crown and bridge, cosmetic dentistry, TMJ, implants, family practice, etc.? Do you want a large practice or a small practice? How much do you want to make? At what age do you want to retire? How much money will you want and need to live on? Do you have adequate insurance to deal with disability, being out of the office for extended periods of time, malpractice, liability and death?
A third area of preparation is to have your practice periodically appraised, so you have some idea of what your practice might be sold for. This is important information for your estate-planner, insurance agent and those individuals who may be put in a position of having to sell your practice in the event of your death. The key is to have someone knowledgeable with regard to the appraisal process who has sold practices in the area of your office. Location is very important. Some practices in rural areas, while they may be very nice practices, will not sell for a price even close to what a comparable practice might sell for in a desirable section of a major metropolitan area.
If you have not made your preparations for the future sale of your practice, start today. The time and effort you spend today could assure you that you will receive the best possible price for your practice.
Tom Smeed is founder and president of Healthcare Practice Management, Inc., a dental broker, appraiser and dental practice-management firm. He is one of the founding members of American Dental Sales, the largest group of dental brokers, appraisers and consultants in the United States. For details, contact the ADS member in your area (See the ADS Classified ads).