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Transitions, Part II: Additional Options Douglas Carlsen, DDS

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The Walk-Off
It works. There is no fear of anyone suing you after-the-fact and the time and costs of planning are minimal. The downside – you don't realize a sales profit and you will not have as much control of your patients' future care.

The walk-off most often occurs when the dentist has a leased facility. When the lease is up, you walk. Often, equipment is either given away or consigned to your local dental supplier. The dentist may store the charts with information sent to patients as needed. Shredding of charts may be done when legally permissible.

Patients need a dental referral for continuing care. At a minimum, the retiring dentist needs to leave forwarding information for the local dental society. Often the charts are given to other local dentists. Patients must be notified where their information resides.

Often, a dentist will "sell" charts to another dentist. Charts sell for an average of about $100 per chart. Purchasers alternatively might pay a percentage of production for the patients transferred, often 10 to 15 percent for several years of treatment. An excellent thread with further information can be found on Dentaltown.com.¹

If the dentist's building is owned, the walk-off is normally not a wise option. Because there has to be a financial transaction, be it a sale or a rental of the building, to leave an empty practice or sell charts doesn't simplify the transition process much.

Work Two Days a Week as Long as You Wish
Another intriguing possibility emerged in my study of transition techniques. Two doctors I interviewed cut back their patient contact to half; one worked four half-days per week; the other worked 88 days per year on a rotation of a three-day week for several weeks followed by several weeks vacation. No associates or consultants were involved. Both doctor's net income was at least 65 percent of their previous full-time income.

The doctor who worked four half-days stopped assigning benefits and transitioned quickly to his half-time practice. His last six years were practiced as such and he touts it the best six years of his life. He worked only on select patients and he had extra time to learn about implants and microscopic dentistry. He eventually sold his practice – at about 65 percent of what he would have received six years earlier – yet has no regrets and feels he was able to save more than the difference over those years.

The other part-time dentist actually had the same net income he had while working four full days. Over a period of several years, he gradually cut back to less than a two-day average per week. He feels his systems and time management abilities improved tremendously during the gradual removal of patient hours. This might be due in part to ample "recovery" from work. He is still practicing and feels, at age 63, he can continue indefinitely. He might or might not sell his practice and does not include it in any retirement scenarios.

Dan Sullivan, a well-know business coach states, "Many entrepreneurs are totally fixated on work, with no time for anything personal. They are successful for a while, but their one-sidedness catches up to them, especially in their personal and family lives. I believe the most successful entrepreneurs achieve a balance between their personal and professional lives, using Free Days as a strategic tool in their long-range planning."²

A free day, according to Sullivan, is a 24-hour period completely free from work-related problem solving, communication and action. Different professionals need different numbers of free days, yet dentists are notorious workaholics and need more rather than less of these.

Summary of Transition Alternatives
Overall walk-off doctors are happy with their transitions. This tiny group all had at least $3 million saved and didn't want the hassle of negotiating a sale or bringing in another dentist. Most dentists can expect to net from $200,000 to $400,000 from the sale of a practice after all fees and taxes. Yet, with the needed current average retirement savings of $2 million to $2.5 million, the practice sale often amounts to less than 20 percent of the total. Via software simulations, I find the average dentist working full-time needs to work about two and a half more years to make up for not selling the practice. A dentist working two days a week needs about three and a half years. If you can't sell easily, then work two more years and walk away.

Regardless of the state that you leave things, you cannot control the future of your practice. It doesn't matter if you walk away or if you carefully court a buy-in associate, the future of your practice is out of your hands after you retire.

The two-day-a-week crowd is virtually stress-free and is the most enthusiastic about dentistry of any group I've ever encountered. How tough would it be for anyone to have a perpetual five-day weekend? This option is a must for all boomers to consider. If you want further information, I can provide contact information for one of the dentists described.

The straight sale is the traditional way of departing dentistry and still the most common. The process takes two to three months to initiate with a qualified broker. After a buyer signs the Letter of Intent, the process is fairly simple, with a transition that takes about two months. The total time involvement is miniscule compared to an associate buy-in. A very high percentage of selling dentists have been quite happy with the process and results.

On the East and West Coasts, with the high practice valuations of the past few years, there have been numerous cases where the purchasing doctor has not been able to cover his loan and has sufficient net income in a volatile economy. This has led to lawsuits involving the selling dentist.

Please be sure to use a qualified broker with a long track record. Ask for referrals. Take your time. Do not attempt to save 10 percent by selling on your own! You are asking for legal trouble later on if the purchaser isn't happy.

If you have a lot of energy, love to teach young dentists the ropes of a practice, employ the patience of a saint and have several years before retirement, then consider the buy-in option. When considering the consultant's fees over the transition years, a dentist might not come out ahead financially compared to a straight sale. If you do it only for the money, you might be sorely disappointed.

Please remember to nurture a relationship before you commit to any association or partnership. This gives the transition a much better chance of success.

For any buy-in, use a very experienced consultant with an entourage including a CPA, tax attorney, actuary, broker all with superb referrals.

*Note: this article provides only summaries of transition processes. Detailed information can be found by contacting a practice broker, transition specialist or dental consultant.

References
1. Message Board Thread Link: www.dentaltown.com/MessageBoard/ thread.aspx?a=11&s=2&f=148&t=12271&g=1.
2. Dan Sullivan, "Free Days," Published August, 2005 on line. Downloaded at www.strategiccoach.com/articles/view/free-days on June 13, 2010.
Author's Bio
Douglas Carlsen, DDS, founder of Golich Carlsen, has provided independent financial education to dentists since retiring from his practice in 2004 at age 53. Golich Carlsen, an approved AGD PACE organization, delivers common sense consulting, efficient CE lectures, and smart continuing education CD/workbooks – all backed by academic research. Visit the web site at www.golichcarlsen.com for archived articles, information on services, and to sign up for Dentist's Financial Poll and Newsletter. Contact at drcarlsen@gmail.com or 760-535-1621.
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