Transitioning out of your dental practice can be tough if you don’t have a solid plan. This major milestone can often be stressful given the financial and professional importance. Whether the decision to transition is due to an emergency exit, a planned exit or just ongoing preparedness, it’s never too early to put a plan in place. With adequate planning and proper prioritizing of professional and economic goals, your journey of transitioning can be a smooth one.
Here are a few questions to ask yourself to get a gauge of where you are along the way:
– How many more years do you plan to practice before retirement?
– Do you have an exit strategy in place?
– Do you currently have a financial advisor?
– Have you ever met with anyone to plan the transition of your practice?
– Is everything in your practice documented and easily accessible to someone other than you?
– How often do you evaluate your practice overhead?
There are no right or wrong answers. If you have answered “Yes” to the majority of the questions, good for you! You’re on the right path and with the advisement of a practice broker, your transition process will go smoothly. If you’ve mainly answered “No” to the questions, there are a few steps you need to take to become more prepared.
The first step is to partner with a trusted team of advisors who will work with you to formulate a plan and develop strategies to avoid potential pitfalls. Your team should include a broker, attorney, and CPA. Having a team of professionals is crucial to ensure that you receive the maximum value for your investment and the buyer purchases a stable long-term practice.
Understanding the value of your practice is the second step in the transition process. In order to know the market value of your practice, the following is taken into consideration. Your direct and indirect costs, cash flow, overhead percentages, and other financial information on your practice. Your tax returns and P&L’s are broken down as part of the assessment of your practice.
The third step is creating a practice operation manual. Your manual will not only help to train and retain good employees and increase overall office productivity, but it will also serve as an important resource for your staff and/or family to access should an emergency arise and you can no longer practice. Your manual should include a list of important contacts such as your attorney, insurance company representative, financial advisor, and CPA. Once you’ve created your operations manual, the next step is to maximize your practice value. Key areas that can make a difference in your practice value include overhead control, low accounts receivable, updated technology, fees, and procedures. For more details on other areas important in assessing the value of your practice, feel free to contact me.
These simple steps will get you started on the right path to a successful and smooth transition out of your practice. In addition, take a look at these articles for tips on maximizing your chances of selling your dental practice. For questions or more information on transition planning, please call 410-616-2042 or email edorner@nltransitions.com .