September 11, 2018

10 Essential Steps to Successfully Buying a Dental Practice

You’re ready to start the dental practice buying process. But how? Before getting the keys turned over to you, there are a few steps you’ll need to follow first. Here’s what you can expect from the transition process.

Get pre-qualified

Providing your net income, stress and how much debt you can handle to your bank will help gauge your debt-to-equity ratio, debt-to-income ratio and credit score.

Make an offer

While approval by the bank will be dependent upon the type of practice you are considering, getting pre-qualified before making an offer will give you a ballpark for what you can be backed for financially.

Perform a practice analysis

Allowing adequate time for a practice analysis — sometimes as long as a year — can lead to a better understanding of the type of fit for your qualifications, both personal and financial.

Work with a broker

A good broker should be a part of your transition dream team, making sure all the agreements are in place and identifying ahead of time any issues that may arise.

Present letter of intent

The official offer letter is not actually a legally binding document but rather expresses your intent to follow through with the transaction.

Negotiate

As with any private sale, price, terms and closing date are all on the table between the two parties.

Initiate due-diligence process

Getting all your advisers in one place to review the financials and various aspects of the transition will leave little room for error in the long run.

Outline asset purchase agreement

In a straight buy-out, it’s important to outline what assets are included in a practice — most notably, the equipment.

Assess operating agreement

In the case of a partnership or merger, it’s important to determine who is going to pay for marketing, any staffing conflicts, and whether the doctors will be paid based on collections or a percentage of the practice.

Complete practice loan

This is all the terms and conditions that need to happen for the purchase and sale to go through, including the timeframe of sale and final asking price.

What’s next?

Read more about the steps of a transition in the e-book “Transitions: Your Next Adventure Awaits,” then contact the experts at Professional Transition Strategies to streamline the buying process.

August 27, 2018

5 Essential Pre-Retirement Steps for Dental Practice Owners

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.

Valuation

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.

Scale back

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).

DSO affiliation

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.

Resale

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.

Improvements

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.

Equipment

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.

What’s next?

Start thinking more about retirement with the e-book “Strategies for Transition,” then contact the experts at PTS to begin the valuation process.

July 17, 2018

Understanding the 6 Essential Dental Practice Agreement Types

A purchase agreement is just one of the many contracts you’ll enter when buying a dental practice. While the amount of paperwork may seem daunting, it’s important to make sure all aspects are covered so there are no surprises after signing on the dotted line. Here are six types of agreements (and their subsections) you can expect.

Purchase agreement

Asset purchase agreement

In a straight buy-out, it’s important to outline what assets are included in a practice — most notably, the equipment — just like you would when purchasing a house with or without the kitchen appliances.

Stock purchase agreement

When entering into a partnership, all terms and conditions related to the purchase and sale of a company will need to be finalized to protect both the buyer and seller to determine what’s included and what’s not, such as the name of the practice.

Real estate agreement

Upfront purchase

Opening a new practice may mean purchasing a property from the beginning, for which the rights, obligations and liabilities are outlined by both the buyer and seller, including defining the property that is being purchased or sold.

First right of refusal

A real estate agreement upfront will give the first right of refusal to a partner when selling the practice should the doctor decide to sell the building so the buyer is not a tenant.

Lease agreement

If not purchasing the property, a lease agreement will outline the term and scope in regard to whether the buyer will get everything for a flat rate or have to pay for upgrades, such as cosmetic updates, like wood floors.

Employment

When not a straight buy-out, an employment agreement will outline the terms of an associateship before and after the transition, such as how long the seller stays on to work, the terms of payment (day rate, per diem or percentage of collection), and if the practice value is determined before or after the sale.

Operating

In the case of a partnership or merger, laying out how the practice will operate will help determine all the logistics, like who is going to pay for marketing, any staffing conflicts, and whether the doctors will be paid based on collections or a percentage of the practice.

Promissory note

Simply put, this is, in essence, an IOU to determine the terms of which a loan of a certain amount will be paid back, including how much and by when. A promissory note can be held by either or both the buyer and seller, depending on the type of agreement.

Closing statement

This is where both the buyer and seller will dot their I’s and cross their T’s, breaking down all the terms and conditions that need to happen for the purchase and sale to go through, including the timeframe of sale and final asking price.

What’s next?

Contact the experts at Professional Transition Strategies, who will help walk you through the paperwork process.

May 30, 2018

6 Considerations when Starting a Multispecialist Dental Practice

One of the most efficient and profitable ways to grow your general practice is to bring on a specialist or multiple specialists. But before you call every periodontist, orthodontist and pediatric dentist in the phone book, you’ll want to consider the following.

Patient care

With every decision a general practitioner makes, patient care should always be at the top of the list. After all, it’s the reason you got into dentistry and how your business continues to thrive. As the industry continues to move away from solo private-practice specialty providers toward collaborative multispecialist practices, ask yourself: Does this one-stop shop model benefit my patients as much as my staff in terms of need and affordability? While the ability for a patient to get a referral and set up an appointment is certainly convenient, there’s no one-size-fits-all answer.

Patient need

Before merging with a specialist full time, make sure the need is there first in terms of patient load. If not, there are other options. Consider bringing on a specialist a few days a week or month, one who has his or her own practice location or multiple similar arrangements, using your practice as a satellite office while splitting time between multiple practices.

Office space

Does your current practice offer the space necessary to house a specialist and the accompanying equipment, or will expanding warrant a move? Each new specialist has the potential to come with their own assistant and staff, not to mention the need for space to accommodate different equipment and setup. If a move is in the plans for expansion, consider an area that makes geographic sense for all the dentists under the same roof.

Compatibility

As with any partnership, it’s important to seek out specialists who have the same practice philosophy so as to not recommend competing procedures that could potentially confuse the patient. Additionally, you’ll want to ensure there’s no overlap between specialists, perhaps between an oral surgeon and periodontist. It benefits the team when the general practitioner is versed in the different specialties being offered but does not take control of the procedures and recommendations. For example, while most general dentists are knowledgeable in endodontics, taking on an endodontist will allow the primary dentist to focus on general dentistry.

Collaboration

There’s much more to share than square footage in a collaborative practice model. Think shared teams, facility overhead and peer collaboration that all help improve efficiency and productivity. An increase in production and decrease in overhead will result in optimal profitability and better clinical outcomes for all parties involved. A common collaboration is for a recent graduate to become an in-practice specialist at a dental service organization (DSO) where there’s already a full patient load and the ability to work from the ground up. Additionally, choose partners who complement the work currently being offered, like a general practice with a periodontist or an orthodontist with a pediatric practice.

Creativity

The decision to go into a multispecialist practice doesn’t have to be cut and dry. The specialist can bring his or her own equipment, buy new or even consider a contractual arrangement in which equipment is shared in exchange for services. The owner dentist could supply all bookkeeping, charting materials and reception scheduling, while the specialist could cover the cost of any treatment incidentals, supplies such as instruments, lab procedures and even cotton balls.

What’s next?

No matter the situation you arrive at, you’ll need to inform your malpractice insurance company of the addition of any specialists, consult state regulations on how to categorize a specialist and make sure all arrangements — including a non-compete agreement, percentage of payment based on collections rather than production and what the specialist is expected to provide — are contractually agreed upon. Let the experts at Professional Transition Strategies help guide you.

May 16, 2018

Partnerships versus Mergers: Which Is Right For You?

When looking to combine practices, the million-dollar question (literally) is whether to go with a partnership or merger. The answer lies in what you’re working toward: retirement or expansion. Here, we break down the two options.

Partnerships

While partnerships have a 60% success rate, it only makes financial sense if the practice is collecting $1.2 million annually. If the practice is collecting less, each doctor wouldn’t bring home enough at the end of the day to make a stable living. A partnership could eventually lead toward retirement, but a more lucrative option is to take on a partner who could expand the offerings of the practice, adding to its value and client base.

Mergers

Though not as common, combining two existing practices into one proves to be successful in terms of equality of responsibilities and income, especially when combining a general practice with a specialty partner. The next step when working toward retirement is to then sell after five years or so to a dental service organization (DSO). Though staying on to work a reduced schedule is an option, selling a merged practice to a DSO will yield higher profits. And ultimately, the process to sell is more seamless since DSOs already have financial backing.

What’s next?

Read up more on your options to sell in our e-book “Strategies for Transition,” then reach out to the experts at Professional Transition Strategies to get the ball rolling.

April 13, 2018

Choosing Your Path: Dental Associateship, Partnership or Buyout

There comes a time in the life of a dentist’s practice when a second set of hands would be helpful to grow or 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% 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% 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% 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% 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.

March 23, 2018

3 Compelling Reasons It’s Time 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 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.

June 20, 2017

The 7 Essential Dental Practice Transitions Explained

If you’ve decided you are ready for the next step of your life and dental practice, it may be time to consider retirement. There are many different kinds of transitions, so regardless of whether you are ready to completely stop working, we can help you find a transition that works best for you and your dental practice. Here are a few different transition options.
Continue reading “The 7 Essential Dental Practice Transitions Explained”

June 20, 2017

What You Need to Know About Dental Practice Transitions

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”

June 7, 2017

How Do I Know the Value of My Dental Practice?

Understanding the value of your dental practice can be an asset, regardless of whether you are in the process of selling your practice. At Professional Transition Strategies (PTS), we understand that selling or merging a dental practice is an intricate process, and we are here to guide you through it. The first step is understanding and maximizing the value of your practice. Here’s how. Continue reading “How Do I Know the Value of My Dental Practice?”