Posted on Jul 11, 2011
Image Credit: © Dreamstime.com
Posted on Jul 11, 2011
By Rod Johnston, MBA, CMA of Omni Practice Group
Every day, dental practice brokers field questions from dentists asking about their dental practice transition or their dental practice for sale. With the economy improving, we’re seeing an increase in interest from dentists thinking that retirement may now be more within reach. While our job is to facilitate the sale of dental practices, we don’t always recommend that option without considering numerous factors bout the seller’s individual situation and goals. Our job is to give existing and potential practice transition clients the best possible advice and tools to make that decision. Here are a few points to consider when thinking of a practice transition:
Consult your financial advisor or CPA – Can you afford to retire or cutback? What does your portfolio look like? What income do you need to live off of for the rest of your life? You need to go into this decision with your eyes wide open and all the facts at hand.
Get a Dental Practice Appraisal – If you’re thinking about a transition, you need to know what your practice is worth. In other words, you need an expert dental practice valuation. A rule of thumb will give you a ballpark estimate, but may not be accurate. Have an NAPB professional appraise your dental practice for sale.
Consult your Tax Accountant on the ramifications of a sale –Are you an S-Corp or a C-Corp? If you’re a C-Corp, you may want to figure out how to switch to an S-Corp. Do you have an employment agreement? You may want to terminate it. Seek good tax advice and counsel prior to a transition.
How’s your practice health? Are your numbers looking good? Still getting new patients? Technology up to date? Décor up to date, or do you still have olive green appliances in the staff room? Consider a remodel if you’re 5 years or more away from retiring. If it’s closer, consider a cheaper update like paint and carpet.
What is the capital gains outlook? Does uncertainty or any potential upcoming changes make it more attractive to sell sooner rather than later? This is another important subject to discuss with your tax accountant.
Do all “key” employees have non-compete agreements? If you have an associate, that is essential.
Clean up your accounts receivable. Do you have a lot of credit balances? Are there a lot of accounts greater than 90 days old? Clean it up now and you will reap the rewards both now and when it’s time to sell.
Do you own your building? Get an appraisal if you’re thinking of selling it as well. Or, if not, get a market rate on what the lease should be. Dental practice brokers who are immersed in this everyday will be your best ally.
Start planning with your dental practice transition consultant well ahead of time. An NAPB dental practice broker can help get things in place prior to your transition. Providing you access to our nationwide Dental Practice Listings.
By doing a little homework now and getting the answers to these questions will position you for a successful practice transition, whether selling a dental practice or looking to buy a dental practice. You’ll not only eliminate stress and anxiety, but have a more successful outcome when you do decide to do a practice transition or practice sale and seek retirement.