5 Considerations For A Smooth Dental Practice Transition

Posted by Rachel Lenton on Dec 30, 2019 7:30:00 AM
Rachel Lenton
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Practice transitions differ per the situation the practice is in. This situation could be buying vs selling, a new owner vs seasoned, a students vs a retiring dentists and so on. There are rules and process that stay true in every scenario but are subject to being adjusted.

Dental Practice Transition Blog Square PracticeWe partnered with Molly at SDT Planning who specializes in dental practice transitions. We asked her to come up with 5 "checklist" points that we recommend you keep in mind during your practice transition. Let's read what she recommended below. 

 

1. Build a continuity or transition plan:

We suggest collaborating with your financial professionals as soon as possible and appropriating a roundtable of professionals with your best interest in mind. This roundtable of professionals should consist of your practice consultant, accountant, personal financial planner, attorney and practice broker. The benefit of having a team who will collaborate on your behalf is being prepared and confident to sell your practice on your terms.

 

2. Consider your goals & determine how much you will need for your retirement

A common misconception for dental practice owners is the proceeds from selling your dental practice will fully fund your retirement. Plan ahead and think realistically when considering your financial situation for your transition into retirement. Working with a financial planner will give you the confidence to reach your goals and understand the complex questions around owning a practice.

 

3. Collaborate with your CPA

As mentioned above, an accountant should be part of your roundtable of professionals. Be sure to collaborate with your CPA on any tax liability, from the sale of your dental practice, as well as, the sale of the real estate associated with the dental practice, if applicable. This often catches dentist off guard and can alter retirement plans.

 

4. Buyer Due Diligence

When selling any real estate associated with your practice, ensure the buyer is able to obtain proper financing. If not, you should work with your team of professionals to draft a lease document and business entities (if not already created), including research of fair market rental value in your area.

 

5. Be Careful of Seller Financing.

Consult with your team of professionals if seller financing comes up in conversation through negotiations, as there is risk with this type of lending. If the buyer is utilizing a blend of financing between the bank and seller financing, the bank would often be the first line holder. Furthermore, if the purchasing dentist defaults on the loan, the bank would be entitled to have the remaining balance paid off first before any capital is applied to the seller financing note.

Final Thoughts

Since a practice transition varies per practice so will your strategy. Within that the roles of your team that Molly mentioned might change to. Certain roles will get pulled on more then others depending on the situation. It's important to remember to utilize your team and their skill set to help you and your practice during the transition process.

 

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Topics: Buy and/or Sell a Dental Practice