Why You Should Sell at Your Peak Instead of Slowing Down
When you started your career as a dentist, how did you think you would retire? For many, the ideal scenario was probably that you would dip your toes into retirement by slowing down, reducing clinical days and/hours per week and taking more time off. Then, you could keep this schedule for a few years until you decided to retire completely. At that point, you would find a young dentist who would be eager to take over your legacy and sell the practice. In the past, this was a great way to retire, but unfortunately for most dentists in today’s world, it’s more of a dream that reality and can actually delay your retirement.
Why in the world would you sell your practice when you want to keep working for a few more years? You spent the beginning of your career dreaming of practice ownership and then the majority of your career being your own boss so why is the world would you give that up before you’re ready and when you are at the pinnacle of your career and earnings potential? It’s is a legitimate question, but one that you must ask yourself and really contemplate.
Today’s typical single doctor buyer is much different from those of years past. Younger doctors want a move-in ready office. They don’t wait to add operatories, update equipment or have a completely outdated décor. Gone are the days when a buyer was willing to purchase an office that needed a lot of updates. Buyers do not want to spend additional time and money to replace the flooring, pull down wallpaper, update bathrooms, purchase new x-rays, a compressor and other equipment. With the amount of student debt they have nowadays, buyers need to know that they can walk into a practice and not have to deal with additional expenses and constructions and repair delays. They also don’t have the patience to update and build up a practice. In the age of Amazon Same Day Delivery and Uber Eats, consumers today are used to getting exactly what they want right now and dentists are no different. When you start to think about retirement and begin to slow down, you lose interest in keeping your practice updated. Why put in new flooring, buy new chairs instead of repairing your old ones or upgrade to a Nomad when you only plan to practice for 3 more years? It doesn’t make sense to do these things when you are cutting back and getting ready to retire. But, without these things you risk not finding a buyer for your practice, or finding a buyer that will only pay a reduced price for your practice. But, if you sell your practice when you are still invested in it, your practice will be updated and attractive to today’s typical Buyer.
If you want to sell your practice in a timely manner, your best shot is to keep the practice updated. Give it a refresh every few years – make sure the décor is up-to-date, the paint looks good, that your equipment is in good working order and not antiquated – you need to stay up to date with technology! This doesn’t mean that you have to have the latest and greatest equipment, but you should have equipment that a 30-year-old dentist is going to want to use. You also need to keep your new patient flow at a decent level. You don’t need to hire an entire marketing team and spend a quarter of your collections on ads, but you need to make sure that you have new patients walking through your door each month and that your schedule is full and collections are up. If you slow down from 5 clinical days a week to 3 and start taking 8 weeks off a year instead of 4 and stop accepting new patients, it will show in your numbers. Just because your practice collected $1 million a few years ago, it does not mean that you can get a purchase price based off of that today. Buyers and banks are going to fund the sale for what your practice is doing NOW, not what it did in the past or what it has the potential to do again. This will also help you while you are still working in the practice. We always say, treat every day like it’s your first day in the practice. Even when you are going through the sale process, you still need to treat your practice like you plan on working there for the next 30 years.
Buyers can’t afford to purchase a practice that collects a lesser amount. Ten to fifteen years ago, a dentist could make a nice living by purchasing a practice that collected $500,000. A senior doctor whose practice, real estate and home are paid off can still afford a nice living on this size practice so it might seem logical for you to just slow down. A younger doctor with student loan debt, a car payment, mortgage, practice loan and other expenses just can’t afford a practice of this size. As much as they may like a practice, including the location, technology and décor, they can’t purchase it if it will not support their lifestyle.
There is a solution if you do want to slow down and don’t have the desire to keep updating your practice. Sell before you are ready to give up dentistry. This way you can achieve the maximum amount for your practice and fund your retirement. If you still need or want to keep practicing there is nothing stopping you from doing that. Good associates with experience are still in huge demand right now. Depending on the buyer you choose and the size of your practice, you may even be able to keep working in your practice. If this isn’t a possibility then you will still be in demand at other practices. With so many DSOs out there, small groups and individual doctors with multiple practices, good associates are always in high demand. If we had a qualified associate for each practice we sell, each and every one would be sold in mere days! By becoming an associate, you can negotiate more time off, more scheduled weeks off per year and a very good daily rate or percentage of collections. You can be a dentist and nothing more. If you are like most dentists, this sounds great. You can give up management duties, the headache of staffing, and fixing and updating equipment. And, when you are ready to retire, you don’t have to worry about selling your practice. You can quit when You are ready.
Selling early is not going to work for everyone, but the market is not the same as it was when you entered the profession or even what it was a few years ago. When you are a few years from retirement or have the desire to slow down, we urge you to discuss all of your options with your family, financial planner and a qualified dental practice broker to figure out what will be best for you. You must decide if selling at your peak to achieve a higher selling price and a faster sale is more beneficial for you or if a better scenario is to slow down, keep ownership and take your chances in the market in a few years.