Editor’s note: We had the opportunity to sit down with our very own Amanda Curreri, a Sell-Side Advisor on our Practice Sales team. Amanda has worked in or with dental offices her whole career. After a dental consulting client was given the cold shoulder by what she thought was a reputable transitions brokerage, she decided to take her client’s practice to market herself. After doubling the offer that the other brokerage said they would get her client, she decided to shift her career into helping dentists shift out of practice ownership – with the money they need to do so!
With both doc-to-doc sales and DSO sales in her experience, here are the most common misunderstandings Amanda says she hears weekly from dentists … and how she course corrects the conversation.
When Should I Sell My Dental Practice?
MYTH #1 Everyone selling is retirement age.
FACT: The majority of my clients are in their forties.
A big misconception is that most of our clients are at retirement age. In truth, most of our clients – whether they are selling to another doctor or a DSO – are in their 40s. They are both men and women practicing dentistry and when they say, “Sell my dental practice,” they usually mean
- They want to invest the money they’ve made somewhere else
- Life has changed substantially
- They want to move somewhere else
- They don’t want to own the business anymore
Practice sales can take a lot of shapes and forms. “Sell my dental practice!” doesn’t always mean a client wants to leave practice ownership. I’m selling practices for doctors who want to take their wealth from dentistry and put it into other areas like real estate development. Once they shift their investment, they may not need their income from dentistry anymore and can either exit the profession completely or go part-time somewhere.
Another significant factor driving many of our current clients’ decision to sell is related to personal life changes, such as divorce, the death of a family member, or having children. The demands of business ownership and personal life changes are tough to balance. Again, retirement is not the catalyst.
“Sell my dental practice” can also mean they want to keep practicing, but are looking for a change of scene or are considering working for a group. Even if the next step isn’t crystal clear, they know they don’t want the responsibilities of ownership anymore.
How Can I Grow the Valuation Before I Sell My Dental Practice?
MYTH #2 There are no actionable steps I can take to increase valuation in just one year.
FACT: Maxing out your dental assistants, time blocking, and prepaid collections can all significantly increase your profit in just one year.
The greatest driver of practice valuations is profitability. To illustrate this point, consider a practice that generates $1MM in revenue each year. The doctor takes home $600,000. Now consider a practice that generates $1MM in revenue each year, but the doctor only takes home $200,000. Which practice do you think will be easier to sell?
Here is how you can increase profitability while maintaining (or growing!) revenue:
- First, consider how much profit your dental assistants are generating. Then, look at the profit of the cases you treat. Ideally, dental assistants should be maximized to do the most they can legally. Procedures such as Invisalign are great to offer patients. However, if a doctor were to perform Invisalign procedures, they’re not going to see their profit increase because of the lab fee. However, Invisalign doesn’t take a lot of chair time, so dental assistants can be trained to do these procedures while the doctor is doing more profitable procedures.
- Collections timing provides another medium to increase profitability. In reality, this is a two-part approach. First, the doctor has to increase case acceptance. This happens through education and relationship building. Then, when patients do schedule their follow-up or procedures, practices can collect the money upfront by setting a deposit for that appointment. This also ensures the patient will come in for their treatment.
- Finally, if you have a waitlist, consider time blocking when you can designate certain days for new patients, surgeries, etc.
Employee training, case acceptance, and maximizing your schedule can increase profitability within a year. You may even uncover more enjoyment of your role as a practice owner and position yourself to “leave well”, versus leaving burnt out.
Want to find out your current valuation? Use our dental valuation estimate tool.
Preparing to Sell My Dental Practice? It Can’t Take That Long…
MYTH #3 You don’t have to plan for a practice sale, you just need a good lawyer.
FACT: You should reach out to an advisor 3 to 5 years before you want to sell.
Here’s the alternative. You call a practice sales advisory when you’re exhausted and say, “I’m done. I’m burnt out. How soon can I sell my dental practice?” Note that your emotions and energy will drive your timing.
Or, a DSO reaches out and throws an incredible figure in your face.
Now: Imagine the combination of the two – a tired doctor and an incredible cash offer.
Think that’s rare? The high-performing practice owners that I work with are approached by DSOs daily. Unexpected, large sums of money are sometimes sent to owners to try and trigger an uninformed decision. Receiving a high-dollar offer may even feel like relief like the deal is already closed. However, a high-dollar offer comes with 1) a litany of terms that will make or break your future 2) and an assumption that you’ll come to the negotiating table by yourself.
You need an advisor on your team now. Advisors not only help ease these constant external forces pressuring you into selling your practice. The best ones offer an alternative – a plan, based on YOUR goals – to prepare your practice and a marketing strategy to attract qualified buyers.
So….When Should You Sell?
tl;dr – When your practice is growing and you have financial goals set with your CPA.
The “right time” to sell is one that best serves a practice owner’s financial goals and personal circumstances. While you cannot always control your circumstances, you can take the time to set financial goals.
While it is a myth that most doctors sell at retirement age, retirement goals should influence the timing of a practice sale. And a doctor should not wait until the day they want to retire to sell. This is where financial planning comes into play. While not widely recognized, a CPA and financial planner can provide the greatest professional support for doctors. They can forecast how much money you’ll need in what buckets by what year to feasibly leave the business. If you’re not burnt out on dentistry but need a break from practice ownership, a CPA will be able to factor that income into your larger plan. Then, in tandem with your adviser, you’ll make a plan for how to grow the practice until it’s ready to be put on the market.
In addition, advisors can structure your “deal” or sale in a way that specifically caters to your needs. I worked with a client who was ready to sell but couldn’t because of his financial circumstances. So, I marketed to DSOs while he focused on growing his practice. Ultimately, his sale allowed him to shed the weight of practice ownership while continuing to work and earn an income. Having a financial planner as part of the process allowed my client to understand the cash needed to get to retirement. Then, I went to market knowing what he needed to earn for his practice (though I negotiated much more than that!), setting him up to be in a secure financial position for the remainder of his work years.
If you don’t have a CPA, we have a trusted list we can share with you.
In Summary
If you’re generating over $800,000 annually and looking to sell your practice soon, there are several steps you can take that will likely increase profit in just one year. In turn, you’ll be growing your practice and positioned to maximize your practice valuation. While these clinical operations changes are paramount to preparing your practice for sale, you must also work with a CPA. You will need to decide when you want to transition to retirement or employee status, and what kind of cash flow you need to do so. This planning prevents you from succumbing to burnout or a fancy offer with lots of gotchas.
Interested in implementing one or all three of these strategies? Book a complimentary consult call with me.
