Why you should plan for your Dental practice’s future, even long before you Retire.

If you’re a successful dentist with their own practice, you know all too well about the blood, sweat and tears that got your practice where it is today.  You have worked your way up the dentistry ladder, have built your own dental and administrative teams and have transitioned through the growing pains and have become the “best dentist in your Virginia town.”  Have you ever asked yourself what will happen in 5, 10 or even 20 years from now?  Have you considered if or how your practice has more room to grow?  Will you hire an associate that will take over the practice? What if something unforeseen were to happen to you?  Do you have someone that could carry on the business and keep the overall culture flowing? 

 Photo by BrianAJackson/iStock / Getty Images

Photo by BrianAJackson/iStock / Getty Images

These are probably tough questions to ask yourself, but just as when you are planning for your financial future, the future of your business is at stake also.  Some dental practice owners may have aspirations to leave their practice to a family member that will take over.  Others plan to leave their practice to an Associate, or selling the practice all together. This is where the beauty of Commonwealth Transitions and the service that we provide come into play.  

Here are the TOP 3 Questions to ask yourself when planning the FUTURE of your Dental Practice: 

1.    Do I have a back up plan for my business if something unforeseen were to happen to me? 

2.    Do I have know of someone or do I have an Associate that would want to take over my business once I retire?  

3.    Are my employees jobs secure if something unforeseen were to happen? 


Now that you have considered these key questions, we have you thinking.  Step 2 to these questions is reaching out to someone like Commonwealth Transitions (if you are in Virginia), or other similar business in your home state.  Experts like us will help you and secure your back up plan.  We have helped several dental practices carry on their business after everything from sudden changes to planned sales.  We will even help you find a qualified Associate for your dental practice!  

Contact us today with your Dental Practice concierge needs.  

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What's Involved when you decide to sell your Dental Practice?

You worked hard to build a successful dental practice; acquiring a loyal staff and drawing in patients. You put effort into building a reputation and poured many hours into making a name for yourself. Now that you are preparing to retire and have considered stepping out of the equation, it can be a very emotional process. The good news is, we are here to help you through every step of the process and make it a seamless, positive experience. Consider these tips as you move towards passing down your legacy: 

1. Be confident in your decision. For this process to run smoothly, you must be committed to transitioning your practice to another dentist. You should have thought through the personal transition you will undergo, and decide if you want to continue working part-time throughout the transition or simply step out of the practice once the transaction has been completed. Consider any implications on insurance policies, other assets owned outside of the business, and determine what and when you will tell your staff. 


2. Consult with your CPA to review all financial statements. Your CPA will do an analysis and give you advice that will impact your retirement fund as well as any tax implications. They will also provide you with profit and loss statements, which are crucial to have available for potential buyers to review. This meeting will also give you the numbers you need to have available when you meet with a transition specialist. 


3. Once you have a solid understanding of your finances (both business and personal) as well as your transition goals, contact Commonwealth Transitions so that we can start preparing for the sale. We will review market prices in your area, establish a practice sale timeline, conduct a comprehensive practice analysis, and reach out to our pool of financially viable buyers. We will provide current industry averages for revenues, expenses, and more to use as a comparison between your production and those industry averages. 


4. Commonwealth Transitions will then vet the potential buyers for you, and ensure a recommendation that will be a perfect match. We were founded on the premise that quality Dentist’s need a total transition solution for their Practice & Real Estate needs, with a concierge style service. We have experience in: 

* Dental Practice Transitions 

* Dental Practice Mediation 

* Dental Practice Appraisals 

* Dental Office AutoCAD Design 

* Dental Office Engineering Auto CAD Plans 

* Dental Office Equipment & Technology Sales 

* Dental Equipment Installation 

* Dental Office Supply Management 

* Dental Office Practice Consulting 

* Commercial/Residential Real Estate 

* Accounting/Reconciliation 

* Local Representation 


We look forward to helping you find the perfect match for transitioning your practice. Please give us a call when you are ready to chat! 

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Now What!? . . . Your goals as a Dental Professional

Now What!?  . . . Your goals as a Dental Professional

Owning your own dental practice may seem impossible, but it's not.  Learn the ins and outs and gain insight and guidance from Commonwealth Transitions. 

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The Psychology of Selling your Dental Practice

Once an owner realizes that a transition of their practice is inevitable. “see our article on Death, Taxes and Transitions”  the owner needs to take some time and make certain that he or she is emotionally ready. For most, the issue of emotional readiness to sell is a concern.

The emotional bonds of ownership can be strong. The ownership-bond encompasses issues of Identity, lifestyle, and financial security. The best time to come to terms with these issues is before engaging in active discussions with buyers. Otherwise, an owner may find that instead of focusing his full attention on the substantive aspects of the negotiations, his attention is diverted to emotional issues—a situation could obscure the owner’s view of the process and lead to errors of judgment.

Identity Issues: In our culture, what we are is often defined by what we do. If we own a business, it is natural to think of ourselves as owners and “entrepreneurs”. Being an owner can become part of how we define ourselves, part of our self-image.

Ownership pays certain emotional dividends. It can provide a general sense of self-esteem, pride, and feeling of control. It can bring recognition by the community. For some owners, their business and social lives are interwoven, making letting go all the more difficult.

An owner needs understand this transition will happen at some point and prepare mentally.

Lifestyle Issues: An owner enjoys a sense of independence and self-reliance. He’s his own boss. Ownership can provide a sense of focus, direction, and productive purpose to one’s life.

After the sale, the owner may find that they are suddenly retired or working on a part-time basis. If the seller remains with the practice as an employee, he will have to adjust to being an employee and the loss of control and responsibility.

The owner should consider the likely impact of selling on his or her lifestyle. If the owner plans on remaining active in the practice after the sale, is he prepared to account for his actions and report to the new owner? If the owner exits from the practice completely, how will he spend his time?

Financial Security Issues: Fortunately a healthy majority of Dentists we encounter are not so concerned with the financial impact of selling. They have been saving for retirement for years and have minimal personal debt. These Dentists view the amount they receive in a sale as a “bonus”. Others we encounter whom were not so fortunate in financial planning will be losing a very healthy stream of income for an “advanced lump-sum” usually equating to 2-3 years’ worth of full time annual salary. These owners will need to adjust their financial plan. The steady income previously derived from the business through salaries, dividends, and perks will no longer be available. While a revision of the owner’s financial plan can address these matters, the selling owner needs to recognize that future income may be derived from investments rather than the company. The time to begin developing a new financial plan is prior to the sale.

By and large, owners are resourceful and resilient people. Facing the emotional realities of selling should pose no great challenge. Selling is going to change the owner’s life. Before starting the process, the owner should ask himself if he’s ready for the change and what will his new life look like? If he is comfortable with the anticipated change and has a clear vision of “life after sale,” then he is probably emotionally ready to let go of the company and move on to the next chapter of his life. Below are three points to focus on while mentally processing your eventual transition.

1) Accept that this will be a reinvention process: Take an inventory and understand the emotional benefits of ownership. We recommend the books Chapters by Candice Carpenter and Life launch by Frederic Hudson. Excellent reads on reinventing your life after change.

2) Develop a game plan for the first six months. (Examples below)

·       Get my personal finances in order.

·       Coach my grandson’s baseball team.

·       Take the extended family on a vacation to Hawaii.

·       Become a Mentor

·       Volunteer

3) Get Curious Again: Rather than resist, try to embrace this as a period of exploration. What are you curious about? Remember before you became a “Dentist/Business Owner” what other interests did you have that you gave up on? What life goals did you have? (Examples below)

·       Write a book

·       Take a cooking Class

·       Learn a musical instrument

·       Start a blog

·       Buy a Motorhome and Travel

·       Enter Public Service

When you are thinking about selling, you need to pause and take an inventory of the situation. Do you have a compelling reason or motivation to sell? Do circumstances within the company and the general business climate favor selling at this time? Are you emotionally prepared to sell? Although the above outline is not all-inclusive, you can use it to help you arrive at a decision. If the answers are yes, then perhaps it’s a good time to sell. If the answer is no, then turn your attention to building your business and increasing its value so that when the day comes that it is right to sell, you’ll get the best price and most favorable deal.

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The Market of Dental Practice Sales



For those Dentists whom are interested in selling their business at the optimum time, this article might serve as a good reference point. 

In order to understand the current dental practice sale market conditions, it’s wise to review the three factors which have the greatest impact on the sale price of the dental practice.

The first factor is the business’s cash flow. EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) is becoming more of a standard when evaluating the profitability of Dental Practices. While EBITDA can be managed there are certain market pressures that have begun to shrink the average profitability of Dental Practices. The two most prominent factors include the higher cost of obtaining and retaining good employees, and the Dental “Insurance” marketplace. The days of “fee for service” dental service is slowly being forced aside by a nationwide belief system of insurance driven medical treatment. This pressure is forcing long established Dental practices to “get on board” or lose a % of their patients. It’s simply a game the veteran dentist entering or in their 60’s generally doesn’t have the energy or time to fight against.

The second factor is “Industry Loan Favor” or better explained as access and cost of financing. Fortunately, the average Dental Practice has historically such a low default rate (less than 2% for acquisitions) that there is a strong market for Dental Practice Acquisition (DPA) lending banks. Each region has at least half a dozen specialized DPA lenders whom understand the business of Dentistry as well, if not better, than most buyers and sellers. While we do not see the lender market changing for better or worse, the cost of financing is bound to increase over the next few years. Interest rates have a direct influence on the price paid for equities. While we are only speculating on this issue, most economists agree we are expected to see higher interest rates over the next few years. The higher interest rates effect the buying power, hence the amount DPA’s are willing to lend on Dental Practices. The other major form of financing in our industry is “Private Equity”. Love them or hate them, the entrance of “Corporate Dentistry/Dental Service Organizations” has driven up the average multiple paid for all dental practices over the past few years. According to Bain & Company, in early 2015, “dry powder” (the term used by private equity firms to define liquid assets ready to be invested on a balance sheet) reached an all-time high of $1.2 Trillion and the major result of this glut has been increased deal-making and rising valuations. Combine today’s record-level dry powder held by PE firms with strategic corporate buyers seeking to meet revenue growth and profit targets by acquisition and you have a recipe for a seller’s market. Over the past few years we have seen Private Equity scooping up all the low hanging fruit, and now the preferred “6 plus treatment room, $800,000 collections or more, 3 years post sale seller working agreement” sales market is shrinking. This will force the growth strategy of many DSO’s to shift to a De Nova platform (Dental Practice Scratch Starts). One must consider how your practice will be effected when these “pop-up” next door to your 30 year old established practice…..

The third factor is supply and demand. Boomers Are Exiting Now. According to the Pew Research Center, beginning on January 1, 2011 and ending in 2030, 10,000 Baby Boomers will celebrate their 65th birthday every day. Many predict a Tsunami-like business exodus by Baby Boomers during this time. Compile that with two negative buyer factors: Approximately 50% of graduating Dentists are female Dentists, whom prefer a more “lifestyle to work balance”. Secondly, the average school debt of graduating dental students has risen over 150% over the past decade to approximately $250,000. Thus forcing more dentists away from practice purchases. The clear increase in seller’s pool from retiring baby boomers together with the shortage of individual buyers will increase the amount of practices for sale while decreasing the pool of individual buyers.

For those Dentists whom have considered selling or retirement over the past year, it is clearly a great time to sell. In addition to the above factors, there appears to be favorable tax changes on the horizon for sellers to keep even more of the profit from their sale. While nobody can tell for sure, all factors point to an eventual shift in balance from the current seller’s market to a buyer’s market. Please take some time to consider your position and set up a meeting with us to discuss your exit strategy. 

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Death, Taxes and Transitions

Benjamin Franklin famously coined the phrase in a letter to Jean-Baptist Leroy, “In this world nothing can be said to be certain, except death and taxes”. For owners of Dental practices there is another certainty they will eventually face and that is the transition of their business. While you can’t stop an eventual transition, you can take steps to influence the form the transition takes.  With planning, you could sell your practice for maximum value to help finance your retirement, and ensure that your patients will continue to have access to quality care. 

About a year ago, I was having a follow up lunch with one of the practices we recently transitioned. It was a celebratory meeting since we are able to get a satisfied buyer to pay the full asking price and both buyer and seller seemed to be a great match. The lunch went great but right before we were leaving the selling dentist blurted out, “Bill, How could I have gotten more money for my practice.” I was a little shocked since the ratio of price paid to previous years collections was rather high. I paused for just a moment and instinctively answered, “If you had contacted me 2 years ago.” The seller was surprised but satisfied with my retort.

In an ideal world, I would suggest every business owner begin to discuss their exit strategy at least five years prior to their anticipated retirement. Below I will demonstrate on a verbal timeline why:

Pre-Sale (2-3 years): Just like preparing your residential Real Estate for Sale by remodeling a kitchen, or adding a new roof, a seller should plan to prepare his/her business for sale way before they actually list it. Every Dental Practice I analyze for an appraisal has some deficiencies. Some more than others. These deficiencies can be cleaned up over time to improve marketability hence value. In order for these deficiencies to be corrected properly and actually count towards an increased value, you must allow at least 2 years of these corrections to show on your books. In order to maximize practice value, this is the most important time period.

Sale Process (1-2 years): Typically, a transition from initial contact to close is approximately 1 to 2 years. Some may seem surprised by this but it is a realistic range. We find a seller takes on average 6 months from first contact to actually signing a listing agreement and gathering all the data required to do a comprehensive practice analysis. Finding the right buyer tends to be the largest variable. It can take as little as 30 days or as long as a year or more depending on the marketability of the practice. Lastly, the closing process can be 45-120 days depending on the finance position of the buyer or diligence required of the Dental Service Organization.

Post Sale (6 months to 3 years): In addition, a seller selling to a sole practitioner, should allow between 6 months and 1 year for post-sale transition assistance to maximize value of the goodwill. In the case of selling to a Dental Service Organization you must be willing to stay for at least 2 years post sale.

Regrettably, a large amount of phone calls I receive are from Dentists whom haven’t planned and/or have fallen ill and need to me sell their practice right away. In these events, we typically see practices that have reduced their hours/production which causes their expense ratios to look inflated and net profits reduced. The value banks are willing to lend and buyers are willing to pay for is greatly reduced. In addition, the marketability is damaged, making the sales cycle actually longer.

There seems to be a correlation between holding on too long and not planning to having a fear of loss of Identity. It is completely understandable that a Dentist whom has been leading the charge for so many years and whose Identity is so tied to their business that the thought of losing that identity is terrifying. The reality is that in almost all the sales I have been a part of the seller expresses a recognition of relief and a renewed sense of freedom once the transition is completed. The most successful transitions occur when the seller has come to grips with moving on to the next phase of their lives and embraced that reality.

In summary, Every Dentist is going to face the transition of their business and occupation. The Dentists whom plan will have a more successful and profitable transition than the ones who do not.

If you are considering selling your practice, bringing in a new associate, or otherwise transitioning your practice, call Commonwealth Transitions early in the process to ensure that you are getting the best possible outcome for your situation.

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