Preparing For Your Dental Transition: How’s Your Curb Appeal?
If you’ve ever sold a home, you know it takes a bit of preparation to get your house ready for market. It is especially challenging if you’ve lived in that house for an extended period of time. You may have to spend a little money to improve the curb appeal of your home. This can include a new coat of paint, new carpet, or a new kitchen counter top. At the very least, it involves making any necessary repairs. You also will want to be armed with records of anything a potential buyer might ask for, such as utility bills, HOA statements, and appliance warranties.
There are definitely a few things to consider.
It’s the same way when you’re thinking about selling your dental practice. As with selling a home, you need to be proactive. The following are key items we share with clients who are preparing for a future dental transition:
- Do not incur any additional practice-related debt. Your practice value consists of primarily in your cash flow and patient relationships, not your equipment. The only exception to this rule is if you need to digitally convert your x-rays and charts. This will increase the value of your practice.
- Objectively evaluate your staff. Conduct a performance analysis and see what can be done to make your team more effective. Buyers will want a staff that will likely stay on during—and after—the transition. If the seller’s spouse works there, they should start phasing him/her out.
- Review your last tax return. Trim out your “discretionary” expenses. Is that Caribbean CE trip or your automobile expense really business related? Most lenders and banks won’t add them back in the cash flow analysis. Also, make sure you’re reporting all your income. If it’s not on your tax return, it doesn’t count!
- Increase new patient flow and practice collections. Don’t hold off on treatment plans—even implants and orthodontia. As well-meaning as it may seem to leave un-presented treatment plans in the patient files, buyers don’t care nearly as much about what’s on the future schedule as they do about collections.
- Don’t cancel participation in any PPO plans. This will result in decreased new patient flow and may be perceived as a negative pattern of patient attrition.
- Consider an office makeover. Just like getting your home ready for sale, a little fresh paint or new carpet can give your office space an updated new look. You may also want to take a look at your dental chairs to see if they could use some new upholstery. Wear and tear on your office’s appearance can be a reflection of how you run your business. If you’re not sure about how to give your office a facelift, ask for professional advice.
- Keep clean records. Buyers and their advisors will be picking over your information. Your practice books and records should be neat, easy to read, and readily accessible.
- Track your referrals. At least one year prior to sale, begin tracking the procedures you refer out every day. Be prepared to provide your broker with good, detailed, and accurate information for your prospective buyers.
- Clean up your Accounts Receivable. This should be done well before you plan on selling. Ballooning A/R can be an indication to potential buyers that your patients have bad payment habits, your staff isn’t performing, and/or you don’t have good systems in place.
- Cultivate your patient demographics. Aim for at least 20 new patients each month and keep a good patient mix with higher incomes. Don’t let your typical patient’s profile grow old with the practice.
- Don’t coast to the finish line! Taking vacations and reducing your workdays will lead to lower collections. No matter what the reasonable explanation for decreased revenue, buyers will be concerned and, typically, banks or lenders will require partial financing in the form of a seller carryback.
As you look ahead to your dental practice transition, there is no need to add stress to the equation. All it takes is putting together a plan and then working that plan as you move forward to your days of retirement. As you implement each of the items on the above list, you will be able to avoid the pitfalls that can come along with the typical practice sale. Our team at Menlo Dental Transitions is here to make sure you can move forward and enjoy the fruits of your career.