You can never begin to early when selling your dental practice. Consider the next series of tips to improve your existing practice.
1. Control your fees. Your practice fees should be reviewed and adjusted each year. There are a number of resources available to you for reporting fees by zip code. This is an extremely important and valuable task, as proper management of practice fees can add significant value.
2. Do a cash-flow analysis. The total value of the practice cannot exceed the ability of the practice to generate enough cash flow to make payments on the debt required to obtain the practice and provide a reasonable profit to the purchasing dentist. The net income of the practice is adjusted to add back all income to the dentist/owner and benefits paid on his or her behalf. Owner benefits include deductions for expenses not necessarily related to the operation of the practice, but which were paid out on behalf of the selling dentist.
3. Don't slack off on your production! It is common for dentists to reduce their workload and slow-down. This causes a large decline in practice value and lowers profits. It is critical that the historic growth rate of the business be met.
4. Continue to increase new patient numbers. Dental practice purchasers focus on this number and consider it the number 1 indication of practice vitality.
5. Get your financial records in order. Typica dental practice profit and loss and income statements fail to give a true practice overhead and profit picture. Ask your accountant to group related expenses together for the purpose of determining true profit. If you own two practices, avoid a co-mingled tax statement.
6. Reinvigorate your recall system. Hygiene income often totals 22 to 25 percent of the total net income in a typical dental practice. This percentage can climb to thirty percent or more in practices aggressively utilizing soft-tissue management. The higher the hygiene percentage, the better ... unless a situation occurs where the doctor is underperforming, which articially raises the hygiene percentage
7. Review the condition of the dental patient records. Through due diligence process, a purchaser usually will review a representative sample of the patient records. The practice owner should maintain les with total treatment logs, current patient data, and easily understood treatment plans.
8. Clean up clutter and upgrade the office decor. A typical prospective dental purchaser will be reviewing multiple practices. Every attempt should be made to make your dental office stand out in this environment.
9. Tune up the dental office equipment. Most purchasers expect to see modern equipment in the office. If they purchase a practice completely absent of modern equipment, they may adjust their offer to account for replacement of outdated equipment. The practice owner should keep equipment updated, both functionally and esthetically. Beware of substantial replacement of the equipment just for the purpose of selling the practice. This rarely warrants the investment.
10. Do not let the lease lapse. If you expect to sell your practice using third-party financing, be aware that the lender will require the purchaser to acquire a lease (inclusive of renewal options) for at least the length of the note (typically 72 to 84 months). Talk with a lease broker whenever you renew your lease to help you negotiate terms allowing you to transfer the lease without unreasonably locking you in.
11. Examine your dental treatment mix.
12. Emphasize the fee-for-service aspect of your business. Practice owners should try to retain the majority of their practice as fee-for-service and very carefully consider the insurance plans they accept. Make sure these plans may be transferred to another provider following a sale.
13. Check with your financial and business advisors. Talk with your dental practice transition consultant about a draft dental practice evaluation.
1. Control your fees. Your practice fees should be reviewed and adjusted each year. There are a number of resources available to you for reporting fees by zip code. This is an extremely important and valuable task, as proper management of practice fees can add significant value.
2. Do a cash-flow analysis. The total value of the practice cannot exceed the ability of the practice to generate enough cash flow to make payments on the debt required to obtain the practice and provide a reasonable profit to the purchasing dentist. The net income of the practice is adjusted to add back all income to the dentist/owner and benefits paid on his or her behalf. Owner benefits include deductions for expenses not necessarily related to the operation of the practice, but which were paid out on behalf of the selling dentist.
3. Don't slack off on your production! It is common for dentists to reduce their workload and slow-down. This causes a large decline in practice value and lowers profits. It is critical that the historic growth rate of the business be met.
4. Continue to increase new patient numbers. Dental practice purchasers focus on this number and consider it the number 1 indication of practice vitality.
5. Get your financial records in order. Typica dental practice profit and loss and income statements fail to give a true practice overhead and profit picture. Ask your accountant to group related expenses together for the purpose of determining true profit. If you own two practices, avoid a co-mingled tax statement.
6. Reinvigorate your recall system. Hygiene income often totals 22 to 25 percent of the total net income in a typical dental practice. This percentage can climb to thirty percent or more in practices aggressively utilizing soft-tissue management. The higher the hygiene percentage, the better ... unless a situation occurs where the doctor is underperforming, which articially raises the hygiene percentage
7. Review the condition of the dental patient records. Through due diligence process, a purchaser usually will review a representative sample of the patient records. The practice owner should maintain les with total treatment logs, current patient data, and easily understood treatment plans.
8. Clean up clutter and upgrade the office decor. A typical prospective dental purchaser will be reviewing multiple practices. Every attempt should be made to make your dental office stand out in this environment.
9. Tune up the dental office equipment. Most purchasers expect to see modern equipment in the office. If they purchase a practice completely absent of modern equipment, they may adjust their offer to account for replacement of outdated equipment. The practice owner should keep equipment updated, both functionally and esthetically. Beware of substantial replacement of the equipment just for the purpose of selling the practice. This rarely warrants the investment.
10. Do not let the lease lapse. If you expect to sell your practice using third-party financing, be aware that the lender will require the purchaser to acquire a lease (inclusive of renewal options) for at least the length of the note (typically 72 to 84 months). Talk with a lease broker whenever you renew your lease to help you negotiate terms allowing you to transfer the lease without unreasonably locking you in.
11. Examine your dental treatment mix.
12. Emphasize the fee-for-service aspect of your business. Practice owners should try to retain the majority of their practice as fee-for-service and very carefully consider the insurance plans they accept. Make sure these plans may be transferred to another provider following a sale.
13. Check with your financial and business advisors. Talk with your dental practice transition consultant about a draft dental practice evaluation.
About the Author:
Terry D. Watson, DDS, and Frank Brown, JD, LLM, are with Watson, Brown & Associates, Inc., a dental practice transition consulting and brokerage firm in Dallas, Texas. They are members of American Dental Sales, ADS Texas and can be reached at (940) 455-2299 or by e-mail at fbrown@wb-associates. Dental Practice For Sale Texas
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