Three simple rules for passing on your dental practice

Passing-down-you-dental-practice

They say you can’t take it with you. And it’s certainly true of dental practices.

Whether you plan on passing it on to family members, selling to a corporation or even another practitioner, there are three simple rules to keep in mind.

Rule 1: Value does not equal price. Value is an estimate of the financial worth of a practice determined by formulas. Price, however, is determined by the careful dance between how desperate a seller is to sell and how determined a buyer is to buy.

At present time, most of the dentists I know above the age of 60 cannot wait to sell their practice. Typically, the dental practice is one of their largest assets and is generally considered the best way to ensure a happy and  secure retirement.

Rule 2: Gross production is not what you want to purchase. A much better determinant of the value of a practice is really net income. So whether you’re considering selling your dental practice or making a purchase, it’s critical that you look at net income from the seller’s tax returns related to the practice. What a buyer should look for before making the purchase is the dental practice’s ability to make a profit. So as a seller the number one goal is to make the practice as profitable as possible before putting it on the market. The more profitable it is, the more valuable it will be to a would-be purchasers.

Rule 3: Never buy a practice’s potential, only the present or historic value. Future profits can be uncertain. Many times I’ve had someone say to me, “Dr. Coughlin, I’m thinking about buying a practice. It has great potential.” You really want to make your purchase price based on today’s value, not what tomorrow’s value might or might not be.

I cannot emphasize enough that even if you feel you’re not interested in selling your practice or you’re not considering buying a practice you should be prepared to sell at any point in time.

If you are considering buying a practice or selling your own practice, I may be able to help. My coaching services leverage over 30 years of real experience growing my business from one practice to 14.

Contact me today and let’s make sure you make the best and most profitable decisions based on your current situation.

The tricky path from dental school to dental practice

Although it’s been a few years since I walked out of dental school with my degree in hand, I still think about new graduates going from the halls of academe to their careers in a dental office.

When today’s dentists start their career, most will be unable to purchase a practice. A quarter million dollars of student debt will make certain of that. Further, most lack the basic business knowledge to run a small or medium size business. If that seems odd, it’s because since they entered high school, the sciences have been their focus and following that, four years of an intense dental education.

Fix a tooth? Easy. Seeking out suppliers? Not so much.

So it’s been encouraging to hear that most dental schools are starting to provide at least sixteen hours of practice management education. The goal is to prepare these young businessmen and women how to make sound business decisions. Are they going to join a group practice, corporate dentistry, become an associate with an existing practice? Ideally this training will help them dovetail these options with their own personalities, ambitions and drive to find the right path to follow.

Consider the private practice option.

In my experience if a dental student is considering going it alone, the process should be begin in dental school.

They likely know that after the graduation accolades fade, the reality of starting their professional life will come rushing at them faster than their first loan repayment installment.

There are several stages that a practice goes through when you’re looking to either purchase or start your own.

Stage one is simply opening up one’s own practice de novo: put a shingle on the door, market the hell out of the practice and yourself and hope to God you have a patient base to both support your debt and provide an income that’s necessary for you to survive. In general, you will need approximately 1,800 active patients, meaning that those clients come to your office at least every 18 months to make it work.

Sound impossible? Most realize it is, which is why it’s done so rarely right out of dental school. Many opt for a way to ensure steady income while they pay down their student debt and put their solo dreams on hold.

If you are considering starting up your own practice, I offer personal coaching for dentists help you navigate the business end of dentistry. It may be the wisest investment you make because I can quickly tell you whether or not this is a smart decision.

And if you do go through with it I’m here with over 30 years experience running 14 practices to help you implement the processes and procedures to help you build the practice of your dreams.