It’s a rare doctor that wakes up one morning and just decides out of the blue, “Today is the day make my dental office for sale. I am financially and emotionally ready to start the next chapter of my life, and I’m committed to making this process a success for my patients, my staff, myself, and my family.”
Usually, the thought process is a little different:
“Shoot, my hand/back is killing me. I’ve got to get out of here…”
“I’d like to spend more time with my spouse/children/grandchildren and do more traveling, but I can’t imagine any other doctor taking my place.”
“I would love to retire, but I’m not sure I can handle it financially.”
So, are you ready to sell your dental practice? Let’s find out.
Are you financially prepared to make your dental office for sale?
The big question, right? Where do you start when thinking about posting your dental office for sale? Let’s start with the basics. If you already have or will be purchasing another practice, or if you have a job lined up teaching or as an associate or even something completely different, then already have an idea about where your future income will be coming from. However, if you’re planning to retire, here are two questions you’ll need to answer before you know whether you’re financially prepared.
- How much do you spend in an average month?
- How much do you have saved for retirement?
Then you have to determine whether the amount saved will be sufficient to provide you with your expected lifestyle. The popular 4% rule – based on research in 1994 by William Bengen – states that you can expect to safely withdraw an inflation-adjusted 4% from your portfolio each year without cutting into principle in the long term. In other words, a $3M portfolio will yield $10k/month in today’s dollars well into the future.
Of course, it’s not that simple. Many dentists have alternative investments in their portfolios, like real estate. And you need a plan that accounts for unexpected healthcare expenses, changes in the tax code, and leaving a powerful legacy. Your dental practice is an important part of your portfolio, but it’s unlikely that it will fund your entire retirement.
As Certified Financial Advisor Tim McNeely says, “When you realize that your practice is an asset, you’re going to treat it differently.” When it comes to retirement, Tim – who specializes in helping dentists – compares financial planning to oral health: “Getting your teeth cleaned is not a one-time event, and neither should planning for your retirement. It should be a series of ongoing meetings with your financial team.”
Making sure you have an accurate picture of your life in retirement. Speak to a financial advisor to make sure that you have all the right pieces in place.
Does your dental practice look attractive to potential buyers?
In other words, have you prepared your practice to fetch the highest price that it can? There are a number of important strategies for maximizing the value of your practice in the years before a sale. But one of the most fundamental is providing a clear picture of just how lucrative your practice is to a potential buyer. How do you prove that? Much like an x-ray tells a story about a patient’s health, financial statements (like your P&L) and your business tax returns tell a story about whether a practice is well-managed and profitable.
The most attractive dental office practices are able to show three years of consistent financial performance. That allows buyers to feel confident about the future of their business and bankers to approve loans. This means that in those last three years, you can’t take your foot off the gas. If you don’t have the best track record in the last three years, don’t fret. There are ways to still make your practice look attractive to other buyers. Your practice may need a facelift or advice from a consultant on how to get it in the best place.
Are you emotionally prepared to post your dental office for sale?
It’s natural to be emotionally attached to your practice. After all, you built it! It’s probably what made you a great dentist! But that connection – built over years of sweat and hard work – can make selling your dental practice more difficult. The emotional connection sometimes makes it hard to let go.
Denise Logan, a speaker, author, and consultant who helps sellers negotiate the emotional side of business sales, talks about building ‘ladders to a compelling future’. She recommends you consciously work on building an identity outside of your dental office (no, TV and golf don’t count). Find another career, volunteer, anything so that you don’t go from 100 to 0 in one sudden moment. She also recommends you set clear goals for yourself post-sale so that you’re able to stay focused and have a sense of normalcy and routine.
Where are YOU at in this process?
It doesn’t matter where you’re at on your timeline putting up a dental office for sale, sometimes it helps to just talk things out. Give us a call! We’d love to talk about some of these ideas with you over the phone or in person. This isn’t a sales call, we aren’t asking you to commit to anything, but if you’re curious to learn more and want to talk to some folks who have seen it all, we’re here for you.