Professional Transition Strategies Frequently Asked Questions
Should I sell my practice or not?
There are many factors involved in this question, but one truth remains – every doctor that owns a practice should eventually plan on selling it. With proper planning and assistance, many will get paid well for their life’s work. Others will miss opportunities because of fear or misinformation, and net only a fraction of the worth of their practice.
Don’t count on the sale of your practice to fund your retirement plan, but make sure you also don’t walk away from a valuable asset!
When is the right time to consider selling my practice?
As dentists and doctors grow older, their needs and circumstances will inevitably change. Their capabilities and stamina also change as the years tick upward. Change can be stimulated by disability, divorce, IRS judgments, or just being burned out and ready for something different. However, even with these factors, you should try to set the sale of your practice as a carefully planned event.
If a personal crisis dictates your clinic’s sale, the sale becomes more difficult with a greater risk of lost revenue. For best results, plan early so that you can control the outcome and have a plan in place for whenever you decide to sell. The longer you wait to create a strategy, the less control you may have over your sale when it inescapably happens.
What are some key indicators to look at?
There are so many indicators that we have seen over the years, but here are a few common ones.
- Has your practice gross flattened out or started to decline?
- Is your body in the office, but your mind is on the golf course or traveling?
- Do you want to cut back due to stress or fatigue?
- Is your body starting to feel the effects of practicing?
- Are you tired of managing and motivating your staff?
- Do you want to take quality time off without worrying about overhead?
- Do you want to broaden your interests outside of medicine or dentistry?
- Do you want to convert the equity in your practice to an interest-bearing investment, and still maintain control of the practice and your future?
- Are you tired of uncommitted associates that take advantage of you?
What are my transition options?
Selling 100% of a practice or clinic is usually easier and less complicated than selling part of one. However, some doctors and dentists are very busy and not yet of retirement age, so selling part of their practice now and the rest later when they are closer to retirement makes more sense. Some may feel that bringing in an equity partner is preferable to the revolving door that associateships often bring. And still, other doctors would rather sell and stay on as an associate themselves, as this allows them to work the days they want on the patients they want without the hassle of office and staff management. Plus, it immediately gets the value of their practice into their hands to invest in the future while they are still earning an income.
Each of these options have advantages and disadvantages, and Professional Transition Strategies can assist you in deciding which works best for you, your practice, and your family.
Why can’t I wait a few more years to think about selling?
You certainly can, but if I do, that timing might not be best, and you may be losing out on profits you could have gained if you had sold earlier. The market is fickle, as is life, and none of us can be sure we have a few more years to practice at our current level. If during the next few years, you are forced to cut back for whatever reason, the value of your practice will drop dramatically. And selling out of necessity takes you out of the driver’s seat. The best time to sell is when things are going well and you have a strategy in place. Because no one wants to buy a practice that is on the decline.
Why not bring in an associate and have them buy the practice at a later date?
We know from experience that in the medical and dental world, the odds against an associate buying into a practice are overwhelming. Over 90% of associateships fail. If you hire an associate without requiring an immediate equity investment, plan on him or her leaving eventually. Associates are not equally committed doctors and that is why they leave. Talk with us about if and when an associate is beneficial, and how to get the most out of the relationship.
How long will it take to sell my practice?
For a practice in a major metro area, it will normally take anywhere from 6-12 months. But it may take as long as 3 years in smaller rural communities. And specialty practices may take longer or shorter depending on the practice and its location. Profits and size come into play, along with the market and economy.
What should I tell my staff?
It is better in the early stages of the process to not get staff and patients nervous about the potential transaction or leadership change. However, once appraisals and potential buyers are identified, it can be a good time to inform your staff of the future changes.
What do I do if I own my own building?
Some purchasers will not want to add the cost of purchasing a building and this may increase your sales timeline. When real estate and professional practices are combined into a single transaction, the values of both are usually compromised. Many doctors will retain their ownership in the building, set a long-term lease, and enjoy the additional passive income from the rent. Talk with your PTS partner about our real estate services.
Should I try to get all cash or finance a portion of the sale?
Many finance companies specialize in medical and dental practice transactions, and therefore more doctors in the last 10-15 years are receiving cash at closing. This eliminates risk to the seller in regards to late payments or defaults. However, the downside comes when the seller does not manage their money properly and takes unwise risks. Your accountants and attorneys should always be consulted in these situations.
What should I do to prepare?
To prepare, you should have a comprehensive Practice Appraisal conducted to determine ways to make your practice more profitable and valuable is a great start before putting it on the market. Take the time to get your practice and facility in the best financial and operational shape possible in order to receive top-dollar. And since it is a buyer’s market, only the best practices will sell, and the great ones will sell at a premium – make sure you are one of them with the help of PTS.