Preparing for the sale of your dental practice can be a long and complicated process. There are many factors that go into a practice transition, and perhaps the most important is when you want to sell your practice. While your timetable may vary depending on your personal circumstances, we recommend starting your practice transition early to account for any unexpected events.
You should ideally begin the process of selling your practice at least two years before your planned transition. Nevertheless, you may be facing external factors that make it difficult to continue practicing. This is precisely why you should consult a trusted dental broker early on, as they can help you create a plan for your practice transition that accounts for the unexpected.
Important Questions to Ask if You’re Considering Selling Your Dental Practice
There are several considerations that go into deciding when to sell your dental practice. You only sell your practice once, so it’s important to get it right the first time. It’s important to communicate regularly with your financial advisors to ensure you are meeting your goals for retirement. Carefully consider the following questions to determine the right time to sell your practice:
- Would you rather continue practicing dentistry or devote your time to something else?
- What are your plans after the practice sale? Are you looking to retire or simply take a step back from management?
- If you want to retire, can you afford to?
As you consider the sale of your practice, you should keep the answers to each of these questions in mind.
The Best Time to Sell Your Dental Practice
The best time to sell your dental practice is entirely dependent on you and your future plans. If maximizing the sales price is a priority, you should sell your practice when collections are at their highest. As cash flow increases, the practice value increases as well.
Here are some key performance indicators you should track and regularly review to ensure that you get the best price for your practice:
- Monthly collections
- Collection ratio of accounts receivables
- Monthly new patient numbers
- Overhead as a percentage of collections
It is also important to remember that any potential buyers will want to review financial statements and tax returns for the previous three years, so you should plan for your transition early to maximize your practice’s performance.
How to Maximize Your Dental Practice’s Value
Once you have decided to sell your dental practice, the best way to maximize your practice’s value is to consult a trusted dental broker early on in your transition. A trusted dental broker is important to any practice sale as they can help you plan for a successful practice transition ahead of time to account for anything unexpected.
Nevertheless, there are a number of things you can do on your own to prepare for the sale of your dental practice:
- Review financial statements, tax returns, and all other important business records
- Continue marketing efforts and increase hygiene production
- Update office equipment and make necessary repairs
- Make sure your office space is clean, organized, and in good order
As you prepare for the sale of your dental practice, you should keep each of these points in mind so that you can get the best price for your practice. Much like the sale of a house, you want to provide prospective buyers with a good first impression. This includes everything from the physical appearance of your practice to your financial records and documents, as these numbers are key to your valuation and will be carefully reviewed by any potential buyer.
When Should You Sell Your Dental Practice?
While there is no single answer to when you should sell your dental practice, there are a number of factors that can help determine the right time for you. The most important thing in any practice transition is to consult a trusted dental broker early on, as they can provide guidance throughout your practice’s sale to help you maximize your sale price and prepare for the future.
Frank Brown, JD, LLM, is a tax attorney and accountant who limits his practice to practice transitions. Mr. Brown has helped dentists with sales and appraisals since 1990. Reach him at 469-222-3200 or 888-419-5590, ext. 469, or frank@ADStexas.com.
Terry D. Watson, DDS, and Frank Brown, JD, LLM, are with ADS Watson, Brown & Associates, a dental practice transition consulting and brokerage firm in Dallas, TX. They are members of American Dental Sales and can be reached on the Contact Page.