An ethical dental practice transition starts and ends with the broker in charge of the task at hand. Hiring a dental practice broker to act as a fiduciary in the matter is the only way to keep both the buyer and seller in check throughout the process. There are a number of areas to help guide the dental practice transition process to ensure ethics are at the forefront of the transaction. Here are some steps to keep in mind.
Present an accurate and transparent prospectus for the buyer
Accurate and transparent prospectus
When looking to purchase a dental practice, obtaining a prospectus is part of the valuation process that will help you determine if the practice is growing, in status or declining. The 20 or so pages broken down into different categories of interest to the buyer will identify the areas that potentially need attention, such as marketing and additional operating costs. The key metrics used to appraise a practice are generally agreed upon in the practice's specialty and include a practice description, production, patient analysis and finances. That way, the buyer will better understand the options to make an educated decision.
Educate the seller on the valuation
Valuation education
While many dental entrepreneurs believe they can determine their dental practice valuation by taking 70% of your last three years’ collections, or 1.5 times your net income, there is a lot more that goes into establishing the value of a practice. Factors include location, type of dentistry, growth potential, and patient attraction and retention rates. The typical information collected to create a valuation includes three years of profit-and-loss statements and tax returns, production broken down by provider and procedure type, and total active new patients and new patients per month for the last 12 months. An experienced dental practice broker will also take inflation, rent and salary into consideration to present all options to the parties involved.
Keep the personal and financial goals of the seller in mind at all times
Personal and financial goals
“Everybody has different goals and what it is they’re trying to figure out in the long run and sometimes that’s more financial, sometimes that’s more emotional, sometimes that’s more operational, it kind of depends on the person,” Professional Transition Strategies Founder and President Kyle Francis said. Being honest about what you can achieve can contribute to an ethical ownership transition. This often starts with establishing a comprehensive life plan that strikes a balance between personal and professional goals.
Make the transition a win-win for both the seller and buyer
Win-win transition
There's more to a successful dental practice transition than signing on the dotted line. It benefits both the buyer and the seller that the process is smooth to maintain a reputation while keeping patients and staff happy. The first step is to figure out whether you want to have an outright sale of their practice or bring on an associate to transition the practice over some time, depending on whether you plan to retire or stay after the sale of the practice. After establishing your team of advisors, a good dental practice broker will walk you through all the agreements that must be put in place. After that, you’ll want to maintain the value of the practice and also notify patients and staff.
Service: a commitment to staying true to our dental community
Commitment to staying true
It’s easy to get wrapped up in the details that go into a dental practice transition, but hiring a dental practice broker will help you avoid costly mistakes in the long run. Rather than taking the first offer presented to you, use that as an opportunity to find out the fair market value of your business before putting it on the market. Knowing what your dental practice is worth will help you determine what improvements need to be made to increase the value of your dental practice to get what you want out of the transaction with the highest level of integrity. Keep in mind there’s always the option to affiliate with a dental service organization (DSO) to help alleviate any challenges you might face.
What’s next?
Bottom line
The easiest way to ensure a dental practice transition follows an ethical process is to hire a dental practice broker to guide you throughout the process. Contact the experts at Professional Transition Strategies to get started.