If you’re planning on retiring and selling your dental practice in the next five-to-seven years, what do you need to know before you head down that road? There are many factors to consider before selling a dental practice, and your transition out of the business and into retirement can either be rocky or smooth. Fortunately, the brokers at DDSmatch Southwest specialize in finding you the perfect buyer and making the transition as easy as possible. To help you ease into retirement check out the tips below from Matt Howard at Blue & Co., and the dental brokers at DDSmatch Southwest. With careful planning, you can ensure a smooth transition.

Business Valuation: What Is It?

As a dental CPA, accredited business valuator, and a certified valuation analyst, Matt Howard knows a thing or two about determining the value of a dental practice. Before selling a dental practice, you need a business valuation to show potential buyers. This document will show buyers how much the practice is worth, taking into consideration the physical practice, operations, and average collections. “The first part of the business valuation always has historical numbers of the practice,” says Matt. (For his full webinar, see the video below on this page.) Has your practice grown, stayed the same, or decreased in revenue in the past five years? After that, your business valuator will look through financial statements and your practice operations. “We’ll go through the data. We’ll enter it into our models. We’ll ask very specific questions about that data… We want to really understand everything that’s going in going on inside the practice,” explains Matt. After taking into consideration market variables, a business valuator will present a draft to the seller and be open for input from the seller’s perspective. Then a final draft is made that the seller can present to potential buyers.

Building Value Before Selling a Dental Practice

When should you start preparing to sell your dental practice? Matt Howard says “anywhere from five, maybe even a little bit over five years would be a good time to meet with your DDSmatch Southwest broker and start discussing what do you want to do in the future.” It is important to start planning your transition early so you don’t make mistakes that could cost you when selling a dental practice. Matt Howard explains that “some things to take into consideration are knowing yourself and knowing what your aspirations or your goals are for the practice transition.” If you desire to slowly ease out of the practice, you may have already started to cut back your hours and started seeing fewer patients. What you may not realize is that decreasing your revenue stream in this way makes your practice less valuable for a future sale. According to Matt Howard, “A decreasing revenue stream in the valuation world is not exactly ideal. What we like to see is [the practice] either consistently growing by inflation or at least steady in the collection perspective.” Decreasing your hours and your revenue stream is not a bad desire but consider how it will affect a future sale before you take that step. It may be time to bring in an associate so you can still build your business while cutting back on your hours.

Office Remodels and New Equipment: Is It Worth the Cost?

Many dentists think adding value in the form of newer equipment or a remodeled office will be helpful when selling a dental practice, but as Matt points out, that is not always true. Matt suggests avoiding significant equipment purchases and remodels five years before you plan on selling, saying “significant remodels at that point would probably not be a complete one-for-one return on your money.” If your practice desperately needs updates to bring it up to an average standard of care then spending money on that makes sense. For example, if your practice has not moved into the digital age, now is the time to update your operating systems. But a newer x-ray machine or more comfortable dental chairs won’t get you a higher price if the ones you currently have are working well. Hold off on large business expenses that aren’t necessary to get your practice up to an average standard of care as you won’t see that money coming back to you when you sell.

Talk to a Dental Broker About Selling a Dental Practice Today

The American Dental Association released statistics stating that in 2015 the average age of dentists in the US is 50 years old. With so many dentists nearing retirement age, an increase in those selling a dental practice can be expected soon. Don’t get stuck trying to sell your practice in a flooded market. Depending on your specific market, you could get more from your sale if you decide to sell in three years instead of five. Talk to a dental broker at DDSmatch Southwest today for advice from local experts. We can help you plan, so you can take the appropriate steps in the coming years that will assure your smooth transition into retirement.  Call today to find out how we can help you.