Articles of Interest

Appraisals are obviously needed for purposes of establishing practice value at the time of a sale. However, there are many other benefits to be gained by commissioning an appraisal in advance of a sale. Read what one dentist says about the many ways an appraisal benefitted him and his practice, even when he was not considering a sale.

Several years ago I was contacted by a dentist who was desperate to sell his practice. Although he already had a nonexclusive listing with another broker, he also agreed to list his practice with me in an exclusive listing, which meant that I would receive a commission even if the other broker sold the practice. (I told you he was desperate.)

If you're in the market to buy a practice, my best advice is to have a professionally prepared cash flow analysis for the practices you're considering.

As we baby boomers work our way toward retirement, we need to consider how to best accomplish this final stage of our careers. Most of us have made some mistakes along the way, but we were able to repair most, if any, damage. However, in this last career step, we need to nail it the first time.

I saw an advertisement in a state journal for the sale of a practice. The ad contained the capital letters "NO BROKERS", which was to me an irresistible invitation to reply.

I am often asked 'How do you appraise a dental practice' and 'What percent do you use to get the price?'. If the process were that simple, we wouldn't need experts in practice appraisals, just a calculator that can multiply two numbers.

I remember sitting in class in dental school back when the earth was cooling, thinking, "If I ever get out of here, I'm never coming back." Well, eventually I did get out of there and realized afterwards the incredible knowledge and skills I had somehow acquired. I also realized how ill-prepared I was to face the many financial decisions that were not based on my extensive knowledge of enamel rods or biochemistry.

I have been hearing from more and more dentists that things are slowing down in their practice as the economy continues to unravel. Dentists who were booked for four weeks in advance are now only booked for two weeks or less. Patients are seeking more "needs" based treatment than "wants" based treatment. Cosmetic dentistry is waning as more patients are presenting for the most basic treatment.

Locum tenens has been around dentistry for many years, although not always known by its formal Latin name. Locum tenens literally means "hold the place down" and that is what we are doing when a dentist fills in for another dentist who is on vacation, disabled, given "time out" by the dental board, or who has died. Our physician brethren have used this concept for many years, as their practice needs are more acute than in dentistry and keeping a practice open is more critical.

Recently I structured an Equity Development Plan, our safer alternative to partnerships, for a practice owner and an associate dentist. I assumed that they were happy and doing well until I received a call from the owner that the associate was making too much money and that the owner was losing money. Apparently, while still less than six months into the relationship, the associate was producing $50,000 per month and increasing.

The emergence of women in dentistry has been a slow but steady phenomenon that has challenged many of us to examine our preconceptions and stereotypes of how women practice. Besides the many effects women are having on the clinical side of the profession, women are also impacting the management and transitioning of dental practices.

As I consider the topic of the value of a dental practice appraisal, I think of all of the instances in my twenty four year's experience of why people have had their practices appraised and what good it has actually done for them.

I don't know how many times I have heard a dentist tell me how he plans on cutting back and slowing down and he gets closer to retirement. On one occasion in which I had listed a practice for sale, the seller told me of his plans to cut his schedule back by one day per week to work on his golf game. I had never thoroughly analyzed the effect of a cutback before but decided to take a very close look at what the exact effects of such a cut back would be.

The best business dealings are when you deal with someone whose word and handshake are all you need ... and then you put it in writing!

My former article discussed the pitfalls of partnerships and buy-ins which include loss of control, loss of marketability, and loss of value. These are consequences of converting a real tangible practice into intangible undivided interests.

One of the most popular practice transition strategies is the buy-in. The interests may be any size - 10%, 49%, 50 % or more. Sometimes it involves selling progressive interests and other times it involves selling a remaining interest by a retiring shareholder.

In the past year, our firm encountered three dentists who experienced the same event - death.

The importance of value to the buyer of a dental practice is emphasized, since value is the buyer's actual take-home income. This article explains how to recognize and measure value in practices.

All to frequently buyers zero in on price as the primary practice purchase issue, while ignoring the issue of value. However, buyers stand to benefit much more by receiving high value than by paying a low price, since the primary practice value actually is the net income the buyer takes home from the purchased practice.