Tag: buy-in

January 30, 2019

Buy-In versus Buy-Out: Which Is Right for You?

dentist working on patient

When looking to transition into a dental practice, the options are not often mutually exclusive. In fact, one type of transition can lead to another, as in the case of a buy-in to buy-out when the senior doctor is looking to hang up their proverbial hat. It’s helpful to know how each works upfront, though. Here are the similarities, differences and overlaps of a buy-in to buy-out.

Agreements

A buy-in typically refers to an associate becoming a partner (which covers more than 100 points in the agreement), while the selling doctor can stay on board as a long-term associate with a buy-out, allowing the doctor to give up autonomy but not employment (who can, in turn, be terminated). In addition to noting if the practice will be structured as a single corporation with all doctors as co-shareholders or if it would be a partnership or limited liability corporation (LLC) with the dentists as partners, the following agreements should be put into place:

Income allocation

Will revenue be allocated to the dentist who did the work, or will all or some of it be split based on ownership, fixed percentages, or a hybrid model in which doctors are paid as employees based on the percent of procedures complete and net income split on a prorata share of ownership?

Expenses

Expenses that are personal should be outlined, broken down and paid by the doctor who incurred the expense, such as meals, auto, travel and education.

Buy-sell

Agreements should be included to address what will happen if one dentist leaves the practice, including insurance policies that will help with the decision. Is it mandatory for the other doctor to buy out the departing doctor, or will they simply get the first right of refusal?

Real estate

Does the senior dentist own the real estate? If so, will the junior partner have a rental rate, or will they have the option to buy in to the real estate, as well?

Valuation

The best way to value a buy-in is to appraise the practice from day one so everyone understands the starting value and reappraising the day of the transition, then averaging the two. That way, the seller takes advantage of the risk of an associate, and the buyer doesn’t have to pay double for the growth of the practice in the interim.

Timeline

Each transition strategy comes with its own timeline. A buy-in takes place over a long period of time since the partnership isn’t set up for a year, but a buy-out can happen essentially immediately with the sale of a practice.

Success rate

While both strategies work, it’s important to note that a buy-out has a 100% success rate since there is a guaranteed sale. Even if your future isn’t guaranteed since control of the practice has been given up, you gain more flexibility by becoming an employee rather than the owner. What’s more, dental service organizations (DSOs) use this strategy to attract dentists to their groups.

Endgame

The bottom line is the best partnerships have to be built on communication to be successful, so ask yourself if the practice is big enough to have two happy partners so as to not set yourself up for failure. However, while most dentists want long-term associates to lead to buy-ins, many theories say otherwise, including one from the book “Blink” by Malcolm Gladwell, which makes the comparison that arranged marriages have a better success rate than traditional marriages. Most decisions can be made extremely quickly, and initial impressions won’t change after additional thought or data is given.

What’s next?

Read up on more buying options in the e-book “Transitions: Your Next Adventure Awaits,” then contact the experts at Professional Transition Strategies to start the conversation.

January 25, 2019

6 Perks of Buying a Rural Dental Practice

Colorado landscape

When buying or starting a dental practice, it’s easy to be drawn toward big-city or metropolitan areas. After all, more people equals more money, right? Not necessarily. One in 10 dentists practices outside of a 30-minute radius from a large city, and for good reason. Here are some perks worth considering if you’re in the market.

More complex cases

For better or worse, rural towns tend to have more complex cases. That is, dentists trend toward seeing more restorative work versus preventative treatment, similar dental procedures to that of urban practices, such as dentures, crowns, bridges, onlays, inlays and dental implants.

More patient demand

Statistically, less competition as fewer dentists are gravitating toward major cities and suburban areas means more patient demand, which equates to a better financial outcome in the long run for the practicing dentist.

More economic and buy-in opportunities

Established practices in rural areas offer more economic and buy-in opportunities simply because existing clinicians are doing well financially and, therefore, don’t have to put off retirement. Similarly, while many young graduates are having a harder time finding associate-to-buy-in opportunities, less competition means more economic opportunities.

Accelerated loan forgiveness

In areas with dental shortages, some states offer accelerated loan forgiveness based on the number of years a doctor practices in a shortage area. What’s more, in reducing your debt, you’ll be able to purchase a practice in a less-competitive market at a competitive price, resulting in a better return on your investment.

Lower overhead, higher net profit

Lower cost of labor, lower occupancy costs, lower rent and office costs, lower housing, and comparable dentistry fees to urban areas all contribute to lower overhead costs, which, in turn, results in a higher net profit for the practicing dentist. And, contrary to popular belief, most rural or small-town practices have updated facilities and high-end equipment.

Better goodwill

It’s no surprise that smaller towns come with a slower pace, allowing you to build a stronger connection with your patients that then translates into goodwill for your practice in the community while also significantly increasing your level of job satisfaction.

What’s next?

Read more about the buying process in the e-book “Transitions: Your Next Adventure Awaits,” then contact the experts at Professional Transition Strategies to find a rural dental practice for sale in your area.

November 6, 2018

Dental Practice Transitions, by the Numbers

balloons with smiley faces

You’ve kept up with the “Insights” blog; you’ve taken the dental practice transition quiz. Now it’s time to learn even more about the process by way of a cheat sheet broken down by the numbers.

1,500

Number of active patients considered full capacity for a single dentist. Any more, and it may be time to consider taking on an associate or partner.

680 

Credit score that is favorable to getting a better business loan.

80

Percent of goodwill that contributes toward the overall value of your practice.

150 

Hours it takes to sell a dental practice, which is one of many reasons to hire a professional broker.

15

Minimum number of days patients and staff should be notified about the sale of a dental practice.

30

Percent of dental practices that will belong to a dental service organization (DSO) by 2021, as predicted by the American Dental Association.

5

Years out you should start thinking about a retirement plan.

20

Pages that make up a prospectus, broken down into different categories of interest to the buyer identifying the areas that potentially need attention.

99

Percent success rate of a buy-out, versus 60 percent for a partnership and 20 percent for an associateship.

What’s next?

Read the e-book “Strategies for Transition” to learn more about the different dental practice transition options, then contact the experts at Professional Transition Strategies to learn more.

May 11, 2018

5 Options for Dental School Graduates

You’ve studied for the past eight years and now finally have that much-coveted dental degree in hand. Now what? Even if your dreams are to own your own practice, there are other options to consider and a few steps you might want to take first.

Associateship

While taking on an associate is risky from an owner’s perspective, it makes sense for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a dental service organization (DSO) as an employee without an ownership benefit or management responsibility. This allows you to relocate or move among practices with ease and little stress since there is no real commitment on your end.

Military, school or government

Working for the military, a school or the government won’t give you the option of buying in to a practice. It will, however, earn you the notoriety to perhaps one day publish scientific work, if that’s what your goals include. This low-risk opportunity affords a relaxed schedule, long-term potential and the option to pursue a passion that the private sector might not offer.

Buy-in

The next best thing to owning your own practice, a buy-in grants you an ownership stake in the practice with the potential to become a partner. While not typically obtained right out of dental school, a buy-in is achievable within three to five years, making it a reasonable and beneficial long-term option, whether with a single practitioner, group practice or corporate environment.

Buy-out

With a buy-out, you gain 100% interest within an existing practice while having the sole freedom to practice exclusively. Not to mention, purchasing an existing practice outright holds a 99.7% success rate for the completion of the note. Compared with a startup, an existing practice comes with its own staff, location, equipment and patient base.

Startup

Rather than taking on an existing client base, you would start your own practice from the ground up. Although the ultimate dream for most, it’s worth mentioning that between dental school and bank loans, you have the potential to be $1 million in debt before seeing your first patient, which may not be an issue for you since the success rate for a dental practice is so high.

What’s next?

Read up on our e-book for dental graduates, then contact the experts at Professional Transition Strategies to start the conversation.

April 6, 2018

7 Types of Dental Practice Transitions

dental mold

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

A buy-in is 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, a professional dental practice broker 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 by 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% 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 option hands over the majority of the practice to a larger entity, typically a dental service organization (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.

March 23, 2018

3 Reasons to Sell Your Dental Practice

dental patient

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 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 human resources 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 dental service organization (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 Professional Transition Strategies. You’ll begin your transition strategy with an overall practice analysis, then set a realistic time frame for a transitionary period.

January 15, 2018

How Do I Sell My Colorado Dental Practice?

Colorado landscape

Whether you are ready to sell for a personal reason or you want to transition the practice to a partner, you are probably feeling a little overwhelmed by the thought of selling your Colorado dental practice. After all, this is arguably one of the most important financial decisions of your life. Here is a list of steps involved in the process and some helpful tips to get you started on the path to a dental practice transition. 

Identify your goal

First, you must identify what you are trying to achieve and what is most important to you. Do you need to sell by a specific date? Is your ultimate goal to maximize your financial return? Or is the most important thing finding a buyer who will retain your staff? While sometimes you will need to compromise, it’s important to know what you won’t negotiate on.

Talk to experts

A considerable amount of thought needs to be put into your efforts of selling your dental practice. Fortunately, you don’t have to take on the challenge alone. The best way to sell a dental practice is to work with an experienced transition broker. Not only can they help increase the probability of a lucrative transition, but they will also decrease the possibility of post-transfer litigation. At the end of the day, an expert will be on your side to address your specific concerns and guide you through the process.

Determine the value of your practice

One of the first things you will do with your transaction broker is conduct a comprehensive practice appraisal. This will determine what your practice is worth and tell you how to maintain its value until you are ready to sell. At Professional Transition Strategies (PTS), we use the most effective way of calculating your practice’s worth by looking at certain factors and their impact on the business. Some of these factors include the location of the practice, growth potential, long-term trends and reason for sale. 

Review your options

There are several types of dental practice transitions. Here are just a couple of your options:

  • Buy-out: This is when the purchaser buys your dental practice for a negotiated price with a relatively short transitionary period. This is the quickest and easiest transition type.
  • Buy-in: This is when a specific buyer purchases a defined portion of the practice for a negotiated amount from day one. In addition to a practice analysis, PTS will perform a personality profile to ensure compatibility. It’s a long-term approach that can expand your practice’s value.
  • Merger: This is when two existing dental practices combine to become one entity and operate normally as equal partners moving forward. This is an option that allows net income to stay the same or even improve because there is no loss of business.

What’s next?

If you are still wondering “How do I sell my Colorado dental practice?” contact us today.  

July 10, 2017

Should I Sell My Dental Practice?

dental practice chairs

“Should I sell my dental practice?” This is a question most practice owners come across at some point in their careers. Considering selling your practice can be stressful, especially if you don’t have all of the information you need. At Professional Transition Strategies (PTS), we are here to provide you with that information and guide you through your transition. Here are some common questions asked and answered. Continue reading “Should I Sell My Dental Practice?”

June 20, 2017

What You Need to Know About Dental Practice Transitions

dentist chair

Transitioning a dental practice is an intricate process and can seem overwhelming if you are approaching or going through the process. Not only does transitioning a dental practice include financial challenges, but emotional and relational ones, as well. We at Professional Transition Strategies (PTS) can help you navigate this process because we have been through it before. We realize every situation is unique, but we also recognize there are many steps to go through to successfully transition a practice. Here’s an outline to get you started. Continue reading “What You Need to Know About Dental Practice Transitions”