August 27, 2018
5 Steps to a Pre-Retirement Plan
Any business owner will tell you retirement doesn’t happen overnight. A well-planned retirement from your dental practice can start as early as five years out. Here are some suggestions to help grease the wheels in the meantime.
You don’t need to wait until you’re ready to sell to start the valuation process. Valuating your dental practice before retirement is on the horizon will give you an idea of how much it’s worth and what you need to increase (production, collections or otherwise) to pay off your loan, if you have one.
If you’re looking to cut back leading up to retirement but can’t stop collecting or increasing services for financial reasons, consider hiring a dentist to moonlight or even taking on a partner, depending on the size and value of your practice (above or below the $1.2 million mark).
To get more flexibility by releasing the office management and human resources of your practice, consider affiliating with a dental service organization (DSO) at the peak of your production. While this isn’t an option for everyone since each DSO has its own practice profile or practice requirements (including collections, earnings before interest, taxes, depreciation and amortization (EBITDA), number of ops, location, and type of dentistry), you’ll get a higher valuation and be able to completely retire in a couple of years when the time comes.
Not every dentist will make money when looking to retire from the business. Smaller practices might benefit from reselling equipment and charts separately rather than as a whole entity. Selling patient records is often recommended when a dentist wants to increase production in a short amount of time.
Hiring a real estate professional through Professional Transition Strategies (PTS) will help you evaluate the time remaining on your lease to renegotiate lease terms or sale of the building and advise on any upgrades or other improvements that would add to the value of the practice.
It may seem counterintuitive to replace equipment when thinking about selling your practice, but upgrading or overhauling large equipment if you’re more than five years out from retirement will help get your money’s worth out of it. Similarly, equipment with technology (X-ray, intraoral cameras, etcetera) can be upgraded within three to five years before it becomes obsolete.
Start thinking more about retirement with the e-book “Strategies for Transition,” then contact the experts at PTS to begin the valuation process.