Posted on May 27, 2013
Image Credit: © Dreamstime.com
Posted on May 27, 2013
When thinking about retirement, a primary concern for the seller dentist is about when and how to sell their dental practice while ensuring that they reap the most return from the sale. The potential buyer dentist (usually another doctor who is a bit earlier on the trajectory of their career) is facing the sometimes overwhelming decision of how to get into the best practice for the long term—whether to buy the practice outright or to work as an associate in the existing practice for a few years before the sale.
I am a big proponent of the buyer dentist becoming a part of a dental practice before purchasing it. The following are advantages of this tactic for both the buyer dentist and the seller dentist:
1) Minimize Risk: First of foremost, you minimize the possibility of endangering the existing practice if the buyer dentist works as a partner in the practice with the seller dentist a few years before the dental practice transition. Two to three years provides a suitable amount of time for both the seller dentist and buyer dentist to acclimate to the sale plan. Also, if the buyer dentist is working in the practice for a few years prior to the dental practice transition, they get a chance to get to know both the staff and patients, laying the foundation for the ease of transition.
2) Continuing Education: By being involved in a practice with a more established and experienced dentist, the newer dentist can benefit from growing accustomed to the rhythm of an established practice. The seller dentist can share their “tricks of the trade,” if you will, so the buyer dentist gains another phase of education before they go out on their own.
3) Flexibility of Schedule: The seller (who is most likely entering a phase of life when they are ramping down can work fewer hours and soften the blow of retirement if they have a new dentist to pick up the slack. Since cash flow and revenue have the greatest weight during a dental practice valuation, it’s a good way for the seller dentist to keep the practice profitable even if they’re not working as many hours. A buyer dentist coming on board provides a win-win for both the seller and buyer.
4) Improve Overall Practice Valuation: Having another dentist in the mix may actually increase cash flow and revenue. It makes sense that if the buyer dentist is ultimately planning to make this their practice, they will be invested in improvements such as cultivating patients, streamlining processes, unifying staff and even upgrading equipment. Also, even if the seller dentist works fewer hours, the addition of the buyer dentist means the total hours worked may increase, thus making the practice more valuable. In this case, the fresh perspective is mutually beneficial to both the seller dentist’s and buyer dentist’s separate and shared objectives.
5) Perfect Match: Finally, working at a practice before buying it affords everyone the opportunity to assess whether the buyer dentist is an appropriate replacement for the seller dentist. It lets the buyer dentist really learn about the staff, patient demographics and style of the seller dentist. Working together gives all involved a chance to see if it’s a compatible match for what the practice is now and what it will become after the dental practice transition.
Get in touch with an NAPB dental practice broker today to learn about dental practices in your area. A dental practice transition specialist can help you as you approach a potential dental practice transition. If you’re the seller dentist, a dental broker can help set and manage expectations in the interim as you head toward the sale of your dental practice. For the buyer dentist, they can help you with what to look for when considering becoming a part of a practice that you may want to eventually purchase.