Transitions
May 2022
Experience, Information, Consultants You Can Trust
Congratulations! Burbank General Dentistry Practice Terry A. Tedford, D.D.S. to Tony D. Hong, D.D.S., Highlands Ranch, CO Glenn DiBartolomeo, D.D.S. to Efraín Plaza, D.M.D., Altamonte Springs, FL Barry Rubenstein, D.D.S. to Timothy Adams, D.D.S., Clermont, FL Joseph Abiad, D.D.S. to Sharvil Shah, D.D.S., F.A.G.D., Southgate, MI Fountain Valley General Dentistry Practice Garden Grove General Dentistry Practice Charles C. Harrington, D.D.S. to Christine Chen, D.M.D., LLC, Gaithersburg, MD Peter J. Fauth, D.M.D. to Pamela Moses, D.M.D., Cazenovia, NY Doyle Sam Spence, D.D.S. to Jake Berry, MBA, Abilene, TX
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Are You Thinking About Selling Your Practice This Year? The rebound of dental practices from the pandemic has been extremely strong, with the most recent American Dental Association (ADA) data showing that patient volume is at 90% of pre-pandemic levels. For most practitioners, economic confidence is very high. Many practice owners who put thoughts of selling on hold during the COVID-19 pandemic are revisiting their plans.
“It’s a seller’s market, with many practice values rebounding from 2020 or exceeding their pre-pandemic levels,” says Dr. Thomas Snyder, Senior Director of Transition Services with Henry Schein Dental Practice Transitions. “Bank lending is also very strong, and interest rates have remained historically low.” Practice valuations vary based on dental location, earnings/cash flow, and other factors, but anecdotally, the majority of sales of practices around the country generally range between 60%-85% of their prior year’s gross revenues. Now continues to be an opportune time for young doctors to purchase a practice, as well as established practitioners to buy another practice. The Small Business Administration found that the failure rate of dental practices is less than 1.5%, which makes them an attractive type of business for banks to fund. Although some dentists have high student loans, recent statistics show that 20% of young dentists have no debt, according to the American Dental Education Association’s annual survey. “Even for doctors who owe $400,000 in student loans, based on their credit history and the business they’re interested in buying, you may be surprised that banks will fund them,” says Dr. Snyder. Securing a loan does take some time. A general rule of thumb is to allow from three to six months, or potentially nine months in outlying areas from start to finish, for the sale of a practice.
If you’re considering selling your practice, it’s wise to engage with a team experienced in dental practice transitions. This starts with a financial planner. They can provide strong, objective advice, based on the assets and liabilities you have, your lifestyle, and your financial targets after retirement. They will also want to know if selling the business is a financial necessity or simply a quality-of-life decision, as this can impact the timing and other factors of the sale. A transition specialist can then work with you to value your practice. This is based on a three to four-year look back, although valuation experts carefully review the performance of the practice in 2020, giving credit for mandated closure time where appropriate as a one-time event. Valuation experts, and lenders, will look more closely at the last, or trailing 12 months of financial performance. Many doctors choose to hire a transition specialist or broker because they have an inventory of qualified purchasers, but the transition specialist’s job shouldn’t end there. It’s best to work with a transition specialist or broker who will be fully engaged in the transaction and help you get the maximum value and to find a buyer you’ll be proud to take over your patients. Transition specialists or Brokers should have deep knowledge of the local market, and also have strong ties to lenders, attorneys, and CPAs who are well versed in dental transactions. Despite the pandemic, today’s economic conditions are fruitful for those looking to buy or sell a dental practice. If you’re considering selling, start early so you’re not rushed in finding a buyer. Whether buying or selling, the first step is to put an experienced team in place. They can help you navigate the complexities which will prove helpful for keeping your transaction moving forward and achieve your goals.
Transitions | May 2022
Do I Need a Dental Practice Appraisal? The question of “do I really need a dental practice appraisal” often comes up when working with clients. The simple answer is yes. Here are a few of the instances where practice owners would need an accurate dental appraisal: • • • •
Selling a Dental Practice Hiring Dental Associates Taking on a Partner Estate Planning
• Buying a Dental Practice • Navigating a Merger • Entering into Litigation • Securing a Letter of Instruction
In each of these situations it’s critical to have an up-to-date assessment of the current market value of the dental practice, though for different reasons. It’s recommended that all practice owners value their practice every year.
What goes into valuing a dental practice? There are many factors that make up a comprehensive valuation, including: • • • •
Gross Income Net Income The Fee Schedule Staff Compensation Information, including: Payroll Benefits Tenure Training • Total Number of Active Patients • Number of New Patients per Month
•W hat type of insurance and/or payment is accepted: Amount of Reduced Fee Payment Programs PPO, HMO and Medicaid insurance participation • Specialties Referred Out or Performed in the Office • Patient and Area Demographics • Desirability of the Local Market • The Practice Goodwill
The above list is far from comprehensive. All dental practice valuations should include a written report and must be based on all the relevant information and not just selective pieces. This includes both tangible and intangible aspects of the practice.
How to Accurately Value Your Dental Practice Unfortunately, there are Dental Practice Transition Specialists and then there are brokers and consultants who will tell a seller what he or she wants to hear to engage a client. If the seller thinks the practice is worth $500,000 but an actual fact based dental practice appraisal suggests it is worth $350,000, the seller is going to be more inclined to engage the party who tells him the practice is worth $500,000 - even if the party knows the practice will end up selling for $350,000. Often, the Practice will have a contractual period, usually a year, during which the seller will be obligated to work with that party.
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A fact based dental practice appraisal or valuation provided by a dental transition specialist is going to tell you what the market value for the dental practice is, providing you with a realistic and actionable price that you can count on. In contrast to an Appraisal, a “valuation” does not have to be in the form of a written report. Whether Comprehensive or Limited, the analysis provided by a dental practice transition specialist does comprises all the pertinent information that would go into a formal written report.
Do I Need a Dental Practice Transition Specialist for a Formal Practice Valuation? Working with a trusted Dental Practice Transition Specialist is the best way to receive an accurate dental practice valuation. Some banks that finance the transaction will certainly want the same information that the dental practice transition specialist or consultant has used to arrive at a sale price as a requirement for financing. In the case of litigation, partnerships, mergers or estate planning, it is probable that a comprehensive written appraisal report from a reputable dental practice transition specialist would be required.
For Doctors Who are Veterans in Practice Since your practice is one of your most valuable assets, doesn’t it make sense that you would want to know its true value? We encourage all dentists to periodically have their dental practice appraised as an element of their net worth, transition strategy planning, and estate planning purposes. Not only does it give you the peace of mind to know what your practice is worth, the process can look into your practice metrics to allow you to be more effective, efficient, and profitable - now and in the future. An appraisal helps you in the short term, allowing you to sleep better at night, while also serving a long-term benefit for you, your family, and your retirement.
For Younger Doctors Since buying a dental practice is probably one of the most important decisions of your career, doesn’t it make sense that you would want to know its real value? Understanding dental practice appraisals and valuations - and the information and terminology they use - can make all the difference. Whether you’re ready to sell your dental practice, buy a dental practice, or investigate your transition options, the Henry Schein Dental Practice Transitions team including our Dental Practice Transition Specialists is here to help. Schedule a free 30-minute consultation with one of our expert consultants today.
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Is 2022 the Year to Sell your Practice?
WHAT OUR CLIENTS SAY: At 67 years of age, I decided that selling
guiding me through the process. She
my dental practice and becoming an
was available after normal work hours
associate for the purchasing dentist
to answer questions. She traveled a
was my best choice. I was overwhelmed
good distance to my office to come run
with the process and turned to my
needed reports so as to not interrupt
Hear from Senior Director of Transition Services, Thomas Snyder, DMD, MBA for an update on practice values and considerations for successfully selling your practice in 2022. A nationally recognized speaker, author, and consultant who has been advising dentists for more than 30 years in dental practice strategic planning, practice valuations, and dental partnership formation, Dr. Snyder discusses:
good friend Adam Halabi for guidance.
my workday. If she didn’t’ know the
I have known Adam for many years as
answer to a question, she would find
a Dental Equipment Specialist. I was
someone who did. Lindsey was honest
unsure of hiring a consultant because
and told me when she didn’t think a
of the cost and Adam gave me great
potential buyer was the right fit. She
advice for what he thought a broker
encouraged me to walk away. And,
could do for me and for what he
even after the closing, she has been
thought I could do on my own. It came
available to answer further questions.
down to a matter of trust. I contracted
I highly recommend Lindsey Ingram
with Adam, and Henry Schein Dental
with Henry Schein Dental Practice
Practice Transitions, and the process
Transitions because she is insightful,
• How 2022 practice valuations will likely be conducted
began. Things like this throughout my
honest, and dedicated.”
• The latest bank financing guidelines
working for you attitude” prevailed.
• Using a broker to sell your practice
every penny! Although nerve-racking
“I was very comfortable talking and
and stressful, Adam kept me on track
discussing things with Jay Harter as
• The key elements of a practice purchase agreement
and brokered a win-win transaction
soon as I met him. He’s like an old
benefitting me, the purchasing dentist,
friend. There is a lot of paperwork and
my staff, and my valued patients. It
reports and other tasks to complete
webinar, visit
would not have ever turned out as
for the transition and Jay walked us
HenryScheinDPT.com/webinars
it did without Adam. I am deeply
through it all. My practice took quite
indebted to Adam and Henry Schein
a while to sell because it’s in a small-
for their amazing work. Thank You.”
medium town so I was getting anxious
To watch this pre-recorded
career have not been easy but Adam’s contacts, business acumen, and “I am
Dr. Margaret Szott – Seller Greensboro, NC
It is my opinion that it was worth
and wanted to drop the asking price Dr. Warren Rensner – Seller Wichita, KS
significantly but Jay held out and got me a good price when the right buyer came along.”
“I was introduced to Lindsey Ingram by my Henry Schein Sales Rep when I mentioned that I was interested in
Kevin Platner, D.D.S. – Seller Redding, CA
starting to transition out of practice ownership. I went to school to become a dentist, not a real estate broker. Lindsey was there every step of the way
HenryScheinDPT.com 866-805-2807
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