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5 Types of Dental Practice Buyers

When looking to sell your practice, it’s helpful to know who your potential buyers are. In any case, Professional Transition Strategies recommends buying an established practice rather than starting from the ground up due to a higher return on investment. Read on to figure out who would be a good fit for your practice.

Dental school graduate

Though highly unlikely since the average dental school graduate leaves with $500,000 in student loan debt, it is not unheard of for an aspiring professional to look to purchase his or her own practice straight out of school. In this case, it is more likely that a graduate would look to purchase an established practice rather than starting from scratch because of the existing staff and client base, not to mention the average $500,000 in start-up costs.

Corporate dentist

More often than not, a dentist’s first job out of school will be working in a corporate environment, such as a dental service organization. These highly reputable establishments allow dentists to focus on patient care while contributing no ancillary costs toward the practice, therefore being able to save to buy his or her own practice in the future.

Dental service organization

A DSO is a likely buyer when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation or anyone who is looking to maintain a work-life balance. Selling to a DSO allows you to focus on the clinical side and patient care without contributing time and money associated with running a business.

Associate

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business.

Previous practice owner

A buyer isn’t always necessarily going to be a first-time buyer. A dentist who once owned his or her own practice could have sold to change specialties, geographic regions, or was simply looking for a new opportunity and a fresh start, making this new owner one who is already versed in running a business.

What’s next?

Read more about the different types of buyers and the buying process in the e-book “Transitions: Your Next Adventure Awaits,” then contact the experts at Professional Transition Strategies to start the conversation.

How to Choose a Lender

Obtaining a loan to finance a dental practice, whether to acquire or grow a business, is only made possible with the help of the right bank. As with all major life decisions, you’ll want to work with whom you feel most comfortable, not necessarily who offers the lowest price for their services. Here, we lay out your options.

Local

The obvious reason to choose a local bank is that your lender is more likely to know the local market and is known to have a better relationship with its borrowers. In fact, your business relationship could cross over, and the banker could become a patient of yours. A local banker can also make faster decisions on funding with fewer obstacles to face.

Regional/National

A larger company has the potential to become a long-term strategic partner, especially if relocation is an option since the bank is likely to have a large presence in many states with multiple branches. A higher number of transactions means the process is more streamlined than at a smaller bank, and a larger bank can typically offer lower interest rates because of the high volume of loans in the organization.

Dental-specific bankers

No one knows your needs more than a bank with a division specific to dental loans. They’re guaranteed to have the best rates and terms for this reason. These rates are only available to dental and medical professionals since the bank knows the loan will be paid due to the nature of the business. They also typically have the fastest underwriting process, ask for very little collateral, and offer 100 percent financing, all without having to deal with the Small Business Administration.

Small Business Administration

The SBA originated with the intent of allowing banks the leverage and ability to finance businesses and practices that would normally be turned down for a loan. Federal insurance, however, means there are fees associated with this type of loan. While the underwriting process can typically take longer, it is a great option for those also looking to secure real estate.

Equipment loan

This is the equivalent of getting a home equity loan with your mortgage to make improvements on your house. The bank incentivizes you to purchase the equipment with exceptional rates, similar to the process of leasing a car. The only collateral given is the equipment being purchased, and terms are typically done with five years.

What’s next?

Read more about assembling your advisory team in our e-book for recent graduates, learn more about the top banks for dental practice loans, then contact the experts at Professional Transition Strategies for referrals and recommendations.

Why Sell to a DSO?

Dental service organizations have gotten a negative reputation because of their seeming corporate interest. Most dentists open their own practices to focus on the clinical side and patient care, which is why, in fact, a DSO might be a good fit. Here, we break down why this might be the case and who might benefit from selling to a DSO.

What is a DSO?

A dental service organization is an independent business support center that contracts with individual dental practices to manage the non-clinical operations. Simply put, that means you get to focus on your patients and the clinical side of your practice with a professional office management to handle the human resources, billing, staffing, and all the other aspects that come along with owning a business.

Types of DSOs

DSOs can acquire as few as five practices in their group or as many as 45. So, depending on the burdens of the practice you are willing to let go of, there’s a DSO that will pick up those tasks. Say you still want full control of all clinical decisions related to your practice of dentistry but don’t want to deal with payroll—there’s a DSO for that.

Who should sell to a DSO?

DSOs fit the dentist who craves a work-life balance. Working 32 clinical hours instead of six days a week with early mornings is appealing to both the younger and older generation. Plus, the money made doesn’t go toward various expenses like when owning your own business. In fact, with multiple practices under one roof, equipment and supplies are usually sold for a better deal. For those looking to ease into retirement, working for a DSO can offer an abbreviated schedule rather than the added stress of a transition to another dentist.

Valuation of a DSO

Typically, a DSO’s valuation of a practice comes out higher than an individual’s. Not only will your practice value for more if selling to a DSO, but you also have the option to stay on and earn a salary, unlike with a straight buy-out. Not to mention, DSOs already have financial backing versus the unknown of the underwriting process when an individual buyer is being financed through a bank.

The future of DSOs

Currently, the American Dental Association estimates that 7.8 percent of dentists now belong to a DSO. DSOs have gained momentum over the last decade thanks to a new generation of dentists, and it is believed that DSO penetration can reach 30 percent of the dental market by 2021.

What’s next?

Contact the experts at Professional Transition Strategies, or learn more at the ADSO Summit 2018 April 18 through 21 in Austin, Texas.

Associateship, Partnership, or Buy-Out: Which Is Right for You?

There comes a time in the life of a dentist’s practice when a second set of hands would be helpful to grow or to pass the torch to another professional. A natural first thought is to bring on an associate with plans to buy out at a later date, but the numbers prove otherwise. Here, we break down the nuances of an associateship, partnership, and buy-out to help point you in the right direction.

Associateship

When selling to a partner with whom you’ve never worked with an arrangement to buy in at a later date, the results are predictable—a 20 percent success rate, in fact. Not to mention, after the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

Partnership

With a 60 percent success rate, a partnership offers flexibility in transitioning for a seller who is not ready to retire. Increasing costs of regulations and decreasing reimbursements from PPO plans make financial sense for taking on a partner. Planned well, and a partner could expand the offerings of your practice, adding to its value when the time comes to sell. For those working toward retirement, selling a fraction upfront could help to reduce hours and shift responsibility, eventually leading to a 100 percent buy-out. And with the growing number of dental graduates every year in an ever-stable industry, a compatible partner is likely easy to come by.

Buy-out

A full sale or purchase is the most common way to transition in or out of a practice, and for good reason—a 99 percent success rate is a good bet for both the buyer and the seller. The transition is quick, with one buyer and one transaction, so a good option for a retiree. However, most dentists struggle with the thought of quitting so abruptly and opt to ease the transition when given the choice. The emotional investment in the company is hard to deny, no matter your age.

What’s next?

Read more about associateships, partnerships, and buy-outs in our e-book “Strategies for Transition,” then talk to the experts at Professional Transition Strategies to figure out which option is best for you.

7 Types of Dental Practice Transitions

By now, you’ve probably already decided that selling your practice is the best option, whether it’s for retirement or managerial purposes. But maybe you don’t know or haven’t started exploring all your options yet. Here, we break down the types of dental practice transitions in an effort to help you figure out which is best for you and your business.

Buy-out

A buy-out is exactly what it sounds like: when a purchaser buys your practice for a negotiated price. A relatively short transition period that typically only lasts three months is ideal for a prospective retiree. The seller may agree to stay on part-time to help ease the transition for the buyer, employees, and patients.

Buy-in

The opposite of a buy-out in which a specific buyer purchases a defined portion of the practice for a negotiated amount determined at the outset. In this case, PTS will also perform a personality profile to ensure compatibility, in addition to a practice analysis.

Associate to buy-in

Here, a potential buyer is courted from a group of associates to buy-in over a defined period of time, road-mapping the ease of transition. Rather than making decisions about the future of the practice upfront, this allows time to assess compatibility; however, the division of power is the biggest consideration to make.

Associateship

A good idea in theory because associates are easy to find, and this route allows you to maintain full control over the transition. However, associateships are typically only 20 percent effective due to not everything being agreed upon from the outset and different expectations not being met by both parties.

Merger

Combining two dental practices to become one entity with equal partnership remains a tried-and-true method as long as compatibility is established upfront and responsibilities and income are equally divided and agreed upon.

Roll-up

This option is one that pays off in the future under the economies-of-scale principle: Multiple dental practices are purchased over a period of time to combine into one entity, which will then sell for a higher value at a later date.

Affiliation

The slowest of the transition options, this hands over the majority of the practice to a larger entity, typically a DSO or a group, with the purpose of slowly transitioning out of your practice to and giving up clinical control to the buyer.

What’s next?

Read more about your options in our e-book “Strategies for Transition,” then reach out to the experts at Professional Transition Strategies to figure out which makes the most sense for you and the future of your practice.

8 Ways to Increase the Value of Your Practice Before You Sell

Just like you would make curb appeal or structural updates to your house before putting it on the market, you might want to consider the same for your dental practice before selling. Not only will necessary updates make it more appealing to a potential buyer, but all these pieces will also help increase your value and practice appraisal for the bank. Here are our top suggestions.

Expanded services

Depending on your timeframe, an obvious first choice might be to offer different types of services to patients. Consider doing implant work, orthodontic treatment, or extractions to make your practice more desirable to both patients and potential buyers.

Update equipment

If your equipment hasn’t been updated since you opened your practice decades ago, it’s time to consider an upgrade. While this isn’t a dollar-for-dollar method, you may get better or more offers from someone who is looking for a turnkey operation.

Cosmetic changes

Don’t underestimate the power of a fresh coat of paint. Everything down to your waiting room chairs and overhead lighting is up for scrutiny when a potential buyer is assessing your practice. Small updates may make a big impact in the long run.

Office location

The old real-estate adage of “location, location, location” holds true for any business, as well. If your office isn’t in a prime spot, it wouldn’t hurt to consider a move before putting your practice on the market. Think ease of traffic and off-street parking when looking to relocate.

Increase top-line revenue

Paid advertising, guerilla marketing, associates to network with, and other marketing opportunities will all add exposure to your practice before putting it on the market. Spending a dollar to make a dollar will hopefully pay off at the end of the day. Just make sure to track your records over multiple years to show a potential buyer and your bank.

Lower expenses

A potential buyer will want to know the cost associated with running your business, so now is the time to assess where cuts can be made. Electric bills and any staffing changes are all fair game, as long as they don’t affect your top-line revenue or your patients.

Acquire or merge

Strength in numbers lies in the economies of scale. Consider selling to, acquiring, or merging with another practice to grow your bottom line exponentially, whether or not you’re considering staying on with the combined practice.

Goodwill

Don’t discount the value of the non-material things associated with your practice. Your status within the community, practice name, staff loyalty and longevity, and brand awareness and marketing will all be the icing on the proverbial cake to a potential buyer who could possibly be starting from the ground up. Not to mention, the more a seller allocates toward goodwill, the fewer taxes will need to be paid at the close of the transaction.

What’s next?

Learn more about your options in our “Strategies for Transition” e-book, then contact the experts at Professional Transition Strategies to figure out what makes sense for your practice.

Top 3 Reasons to Sell Your Dental Practice

Whether your biological clock is ticking or owning your own business isn’t what you dreamed it would be, there are plenty of reasons to consider selling your dental practice. Each situation warrants its own considerations and end results. Let the professionals at PTS walk you through your options.

Retirement

Retirement is a natural time to consider selling your dental practice. The key here is timing it right and finding the best fit for a buyer for a smooth transition for both your employees and your patients. If time allows, consider staying on part-time until the new owner is ready to fully take on the reins.

Minimize management

You don’t have to wait for retirement to be burned out from dealing with the day-to-day managerial aspect. Bookkeeping, billing, and HR can all take away from your primary focus, which is interacting with your clients. Leave the budget balancing to the pros, and consider selling to a DSO.

Share the responsibilities

If you thrive in a private practice setting but are getting overwhelmed with all the parts that make it run, it might be time to enlist a little help. A merger with a like-minded partner will help alleviate some of those tasks, while a buy-in will set you up with a buyer whose personality is compatible.

What’s next?

Ready for a change? Figure out the next steps for you and your practice by contacting the professionals at PTS. You’ll begin your transition strategy with an overall practice analysis, then set a realistic time frame for a transitionary period.

Are You Ready to Sell Your Dental Practice?

You don’t need to be of the retiree age to consider selling your dental practice. But before you decide if you’re ready to pass the reins to a potential buyer, like with any major life decision, there is a number of questions you should ask yourself and factors to consider.

Am I ready for a change?

This might seem like a logical first question to ask, but going from your own boss to retirement or potentially working for someone else is a big shift in emotional change, as well as financial. A likely first step will be to talk with your financial advisor or CPA to help you determine if you can afford your next move by having a realistic expectation of what your practice is worth. Then, you’ll want to consider whether or not your change—whether it be retirement or working for someone else—will suit the lifestyle you envision for yourself. Acknowledging any risk upfront will help save a lot of time, money, and heartache in the end.

What is my timeframe?

Especially if retirement age is looming, setting a timeline for when you’d like your deal to be signed on the dotted line will help keep you on track. Expect a sale to take anywhere from one to five years, depending on the type of transition you choose. There’s a sweet spot between selling too early and selling too late when it comes to profits and employee satisfaction. If time allows, consider making updates to your office and its equipment, even perhaps expanding your services, to make it more desirable to a potential buyer.

How will this affect my employees and clients?

Part of getting into the dental industry is the customer (and even coworker) service. It’s natural to grow attached to those who have been loyal to you on both sides of the front desk. A retirement may not come as a surprise to most, but any other reason to sell will need to be communicated clearly to both your clients and employees as there’s a chance you’ll still have a relationship with them post-sale, depending on the type of transition you choose. If your timeline allows, staying on part-time after the sale will help ensure a smooth transition and put your clients, former coworkers, and the new owner at ease.

What’s next?

Read up on your options, then reach out to the professionals at Professional Transition Strategies to help make your next move.

Who can Buy a Dental Practice?

Who can buy a dental practice?

Whether or not you can buy a dental practice depends on which state you live in. At a point in time, most states prohibited corporations from owning dental or medical practices. This came from the idea that only a person who is licensed to practice dentistry or medicine could own a practice. But as time changed, many states moved away from this law. According to this article, “these changes often came at the request of physicians and dentists who wanted to obtain the tax and liability benefits of corporate status for their practices.”

So, if you are wondering who can buy a dental practice, first check to see if non-dentists can own a practice in your state.

Here is more information related to buying a dental practice:

Whether you are graduating dental school, looking for a lucrative investment, or leaving a corporate environment, buying a dental practice is an intricate process. While every situation is unique, many buyers have similar concerns. That’s where we come in! Professional Transition Strategies is here to help you navigate through the process because we have been there and know how to conduct a smooth transition. Now that you know who can buy a dental practice, here are some common concerns of buying a dental practice.

Your current situation

There are many life factors that play a part when deciding to buy a dental practice. Some of the most common situations that buyers consider are the cash flow necessary to match their current lifestyle, student loans, where the practice is located, and how far it is from their current/desired residence. It is also important to consider the gross production of the office, overhead, collections, and patient charts and reports. All of these components are important and will affect when and where a practice is purchased.

PTS provides buyers with a convenient outline of each practices that is on our Dental Practices For Sale page. We provide information like size, location, the cost of the practice, as well as the technology included in the sale. We also provide potential buyers with insider knowledge of dental competition and patient demographics in and near the practice for sale.

Patients

Without a doubt, patients are the future of any dental practice. It is extremely important to look at the current patient load, retention rate, and the longevity of patient commitment.

Cost vs. Return

PTS provides you with the information you need to determine if the return of the practice will suit your lifestyle. Our services include expertise in practice appraisals to determine fair market values. Furthermore, we provide financial assistance for purchase and practice upgrades. Whatever your financial goals are, we will try to find a practice that best fits those goals.

If you have any unanswered questions about who can buy a dental practice, please contact us at any time.

Step By Step Guide To Dental Practice Transitions in TX

If you are thinking about selling your Texas dental practice, you are probably feeling a little overwhelmed by where to start. Well, fear not — Professional Transition Strategies (PTS) is here to help! We have an experienced team of brokers whose knowledge has helped hundreds of dentists through successful transitions. Today we are going to look at a step by step guide to dental practice transitions in TX.

Be ready to transition

Your first step is to determine your goals for the sale and what is most important to you. Start by answering the following questions: Why are you considering selling your dental practice? Would it be enough money to retire? Do you need to sell by a specific date? Is it important to maximize your financial return? Or is the most important thing to find a buyer who will keep your staff? Ultimately, your transition goal(s) will steer the transition plan, so identifying the goals of the future sale will help you structure a clear defined transition path.

Find a consultant

A considerable amount of time and thought needs to be put into dental practice transactions. We have talked to numerous dentists who “read a couple of articles and have a good understanding of the process” and want to do the sale on their own to save money. While we can understand that, there are experts in the industry for a reason. It is important to get advice from experienced transition brokers and loop them in all of your decisions and discussions pertaining to the sale. Not only can they help you increase the probability of a lucrative transaction, it’s just nice to have experts on your side to guide you through the process.

Obtain a Professional Practice Valuation

Now that you have transition experts to work with and a goal and transition plan, it is time to determine what your practice is worth. The valuation you obtain should be completed by a broker, CPA, or accountant that understands dentistry and understands the current marketplace for dental practice sales.

At PTS, we use the most effective way of calculating the value of your practice by looking at factors like the location, growth potential, and long-term growth trends. In the meantime, you can determine the estimated value of your practice with our simple calculation tool.

Structure your ideal transaction

By obtaining the valuation of your practice, you can now determine if you are happy with the value placed on your office or unhappy with it. If you are unhappy with it, one option is to work a couple more years to make up the difference. If you are happy with the value, you need to figure out if you want to leave as soon as the practice is sold or if you would like to work as an associate post-sale. But, note that these aren’t your only options. We recommend talking with your transaction broker to find the best fit for your situation.

Market the practice

Once you have your valuation, plan and structure in place, you need to get people looking at your practice. Just like anything, the more people hear about your practice, the better chance you have at selling it. This is where your broker comes in. Practice brokers usually have a great pipeline to sell!

Show the practice to potential buyers

Once you have people interested in buying your practice, you need to get those potential buyers to the bank to see if they qualify for a loan. This way, you aren’t wasting your time and effort showing your office to individuals that can’t get a loan.

Receive offers and negotiations

Once you get an offer, you have three options. You can accept the terms, counter offer and begin negotiations, or decline the offer. Each option has different consequences and messages that you and your transaction team will have to think through. This is a decision that needs to be thought through in detail before making any quick decisions.

While this is just a quick step by step guide to dental practice transitions in TX, we hope it helps! If you would like more information, take a look at our complimentary eBook. It covers topics like ways to make your practice more valuable, transitional periods, and types of transactions. If you still have questions on dental practice transitions in TX, please don’t hesitate to contact us!  



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