How to identify if an Associate Doctor (or Buyer) is the right fit for your practice

Most dentists will, at some point in their career, either work as an associate or hire an associate. Consequently, it is a transaction type we deal with often, and one of the most common questions we field on the subject is, “how do we know if the there is going to a good fit between the host dentist and the associate dentist?” It is an excellent question. So let’s discuss some of the signs to look for and the right questions to ask to determine “the right fit.”

Part 2 of 2: Negotiating Dental Practice Contracts & Agreements

Although it may not be found in any mainstream business management textbook, we often counsel clients to check their “gut feeling” on an issue. If it does not “feel” right, then they should seek greater understanding and obtain additional information until it does. And if they still feel uncertain about it, they should either ask for revisions to the agreement or no longer pursue the transaction.

Part 1: "Drivers" vs. "Cruisers": The Search for Fulfillment as a Dental Practice Owner

Doctors are natural born achievers, very goal-oriented people. Pursuing these goals gives meaning to their lives, something to live for. As a goal-oriented person, you’ve probably spent much of your life focusing on certain professional goals. Early in your career, the responsibilities tied to these goals seem secondary. Once the essential goals have been reached, the responsibility to maintain them becomes the heavier focus, and as more goals are achieved, more responsibilities are incurred.

Part 3: Keys to maximizing your practice value: equipment & decor

Most buyers prefer to utilize newer equipment and digital technologies in their practices. Therefore, practices that have digital radiography and chair-side computers tend to sell quicker and at a higher price than their counterparts.

Also, first impressions are important, so practices that do not have a positive “curb appeal” when buyers walk in the door for the first time can lose value and take longer to sell. It is imperative to have a long-term plan for keeping your equipment and facility up-to-date.

The more time you have until the practice sale, the easier it will be to garner a sufficient return on investment from purchasing new equipment and updating office decor.  

We recommend that you upgrade your equipment and décor no less than three years prior to selling your practice in order to assure that you will recover your costs of updating. Keep in mind that you don’t have to do a complete overhaul of the office but simply make investments in the practice to keep it up to date.

Is it difficult to sell my practice and the real estate together?

It depends. From a tax perspective, lease payments are deductible, whereas the cost to purchase is deductible over 39-1/2 years. However, with the cost of interest on the loan during the early years being high, the majority of the annual payment will be deductible. With that as a background, the initial decision of whether to lease to buy is going to be based upon the buyer's vision.

Does the current space provide for ample growth opportunity? If the buyer feels that the space and location will serve him or her over the long term, they will then move on to the decision to evaluate purchase versus lease. The final decision to purchase versus lease will be based upon the cost to own
as compared to the cost to lease. If the cost to own is double on a monthly basis (monthly principle and interest loan payment plus real estate taxes) what the rent is under the lease, the buyer will likely not
desire to purchase the real estate at this time.  

The more reasonable the sale price, the more likely the cost to own will be closer to the cost to lease and then it is an easy decision for the buyer.
 

Do I need to upgrade my technology if I am thinking of selling?

Most buyers prefer to utilize new equipment and digital technologies in their practices, as well as chair-side computers.  The more time you have until the practice sale, the easier it will be to garner a sufficient return on your investment in newer technology and updates on your facility.   
 
Although I don't recommend a complete overhaul of your office from an investment perspective, 'curb appeal' is important and can make the difference between a higher price and a quicker sale.  You should have the basic for technology in your practice and your office décor should flow.  It shouldn't look like each room was added on with different textures and colors.  
 
Remove  the clutter, discard outdated and old carts, shelving and unmatched furniture.  Giving the office and the wood molding a fresh coat of paint and selecting a color that is in the current palate of choices will go a long way in creating a good impression.  Look at your ceiling tile, remove and replace stained ceiling tiles.  Make sure your lights are all working and replace light bulbs.   
 
Have any ripped chairs re-upholstered and you may need to replace the flooring in the operatories.  This small investment will be well worth it.  Have your equipment representative provide you with some feedback on updating some of your technology on a modest level.



I am thinking about the future sale of my practice. What do I need to know?

You should consult with a practice transition advisor 3- 5 years in advance of your goal retirement date. An advisor will be able to provide you with some options or alternatives to an outright retirement. They will also likely recommend an appraisal as your 'first step' so that you will have an idea of what the practice's value is. This will help you to ensure with your financial planner that your retirement timing is coordinated with your overall financial plan.  

An appraisal will also help you get a 'health check' on your practice as a good appraiser will review your overhead items and give you some guidance as to the normal levels so that you can get the house in order prior to putting your practice on the market. There are also creative ways to structure the sale proceeds so that you can take advantage of some benefits which would have the result of reducing your overall taxes.

Therefore, talking with someone ahead of time can give you the opportunity to have an advance plan before stepping into retirement.

Will the bank loan money to a recent graduate with student loan debt?

Question:  With the rising level of dental student debt, at $450,000 for education, will a bank loan money to a buyer candidate?

Answer: The answer is 'yes' provided that the candidate does not have any derogatory items on their credit report, and provided further that the purchase price of the practice 'cash flows' based upon the practice profitability. The specialty lenders know that dentist as a group represent a very low default rate and are therefore willing to loan potentially up to 100% of the purchase price with the only collateral consisting of the practice assets.