If you are the owner of a dental practice, you inevitably have to consider the long-term vision of your business. This can include self-evaluations of your practice, whether you want to sell and when, as well as the impacts each of these decisions might have on your finances. As these can be life-altering choices for your future and retirement, you should consider a number of thoughts along the way.
There are many ways to figure out whether it is the right time to sell your practice. One of the most practical benchmarks is when you have fully funded your pension. After you decide to retire and sell your practice, your pension will help you fund your lifestyle moving forward. As a result, taking a look at your lifestyle wants and needs for the future may help you decide when it is the right time to leave your practice. In addition to your wants and needs, you should also be thinking about your personal impressions of your practice. For example, are you tired of practicing dentistry? Does managing your practice cause you stress and anxiety that you may be tiring of? If the answer to either of these questions is yes, it might be the right time for you to think about selling. At the end of the day, the decision is up to you and what it is that you want to do.
Another consideration for your exit strategy is maximizing your practice’s value. This is an action that can be taken even years in advance of the sale of your practice. For example, when you are eventually looking to sell, you will want your practice to be evaluated at its highest price. One way to aid in this is by reducing the amount of deductions that you take on a yearly basis, as this will increase the profitability of your practice so you can sell it at a higher price. Other ways to increase your practice’s value include lowering the overhead of your practice, making sure your technology and equipment are up to date, as well as updating the look of your office. When you intentionally take the time to maximize your practice’s value prior to a sale, you can be certain that you are getting the best price for your business.
Once you think you are ready to sell your practice, you will also need to consider the transitional timing of that sale. This really depends on what type of transaction that you will be participating in. For instance, if you intend to transfer your practice to one of your associates, that timeline might look different than if you want to plan a broker sale which could take significantly longer. In addition, you will need to consider any lease obligations, internal staffing contracts, and other obligations because the timing of your existing contracts may not always line up with the potential sale of your business. If you choose to sell at the wrong time and without considering all of the transitional needs that you will have to manage, you could be setting yourself up for failure.
Taking a holistic look at your finances will also help you work out your plan for the future in the best way possible. A good place to start is by examining the state of both your personal and dental practice finances. When looking at your personal finances, you will want to make sure that you have enough money stored away for the future, taking into consideration any planned events or unplanned emergencies that you might encounter along the way. When looking at your dental practice’s finances, you will want to make sure that your profits are high and your losses are low; you will also want to make sure that your practice is running in a fiscally responsible manner. If you do not thoroughly understand the state of where your finances are and where you want them to be, you will have a tough time with the potential sale of your practice.
If you have not considered it already, you need to be planning for your retirement well before you seek to sell your dental practice. Planning involves examining any and all sources of money that you maintain, including your pension, savings, annuities, Social Security benefits, or other investments. You will also need to take a good look at your current lifestyle and see how much it might cost to maintain that after retirement. For some, this might mean that the sale of your dental practice will need to meet a minimum dollar threshold. For others, this might mean maintaining ownership of the building or property and leasing space to the new owner of your dental practice. This rental income could bring in another stream of wealth for you as you continue to put away into your retirement savings. Regardless of whether you plan to sell your dental practice and property in its entirety or just part of the business, planning for your retirement ahead of time is absolutely paramount.
When it comes time to selling your dental practice, you will need to thoroughly understand the sale process from a legal standpoint. This involves building a team with the expertise you will need to protect yourself throughout the sale. A team that consists of a certified public accountant (CPA), dental attorney, practice consultant, and wealth management advisor can assist in helping you evaluate all aspects of selling your practice. A CPA can help you get a handle on both your personal finances and your practice’s finances, while a dental attorney can help you understand more narrow legal questions about the sale. Further, your practice consultant should be able to tell you how to keep your practice running smoothly on a day-by-day basis during the transaction process, while your wealth management advisor can help you maintain a plan for the new finances which you will gain from the sale. By arming yourself with a team that can help you, you can be assured that you are well-prepared for any questions or issues that might come along the way.
If you are thinking about selling your practice, you will want to sufficiently prepare yourself before a transaction occurs. By reviewing the information above, you can be well on your way to creating an exit strategy that will keep your best interests in mind and help you envision long-term outcomes.
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