Are you a dentist or do you work with dentists? If so, welcome to the third entry of “Mike’s Molars of Info”: General thoughts for the dental professional practice owner or aspiring dental professional practice owner.
I hope you find value in these thoughts. Thanks for tuning in!
Entry #3: Timeline for Succession
As a business advisor and attorney for dentists and dental practice owners, one of the most frequent questions I receive around exit planning is: “When should I start planning to sell my dental practice?”
This question is really a function of the great equalizer—TIME—queue Mike’s search for songs about time = “Time” by Pink Floyd; “Time” by Hootie & The Blowfish; “Time Bomb” by Dave Matthews Band; “Time Is On My Side” by The Rolling Stones and “Fly Like An Eagle” by Steve Miller Band.
Short Answer: (i) Your mileage may vary on timeframe based the particular circumstances and (ii) Instead of a date certain, I prefer to think of this as trying to identify a “runway” or “time range” in one of the following three categories:
(1) Ideal 3-5 Years: Allows for maximum flexibility and planning. For instance, if you have to clean up some corporate records and financials this is easily accomplished in this timeframe. It will also give you the opportunity to evaluate production levels of the practice and how to improve production, collections and profitability through staffing, equipment/technology, vendor contracts and systems and processes so as enhance the maximum potential value realized upon sale.
(2) Appropriate: 2-3 Years: This should still allow for amble opportunity to clean up corporate records and financials, but it makes it a bit more difficult to implement staff, systems and/or process changes that can drive increased value. In this type of time frame enhancing the value of the practice is still achievable, but probably less likely given the time it takes to evaluate and implement changes that will really move the needle on value.
(3) Workable: 18 months or less: There is plenty of time here to evaluate prospective buyers, entertain offers and execute a relatively seamless practice sale and transition. However, in this timeframe, the practice financials that will be evaluated (on average the past 1-3 years of collections) will be fairly “locked-in” and the value will be largely determined by that history and the current year trend.
Key Take Away: Give yourself as much time as possible, with a target of beginning the planning process of selling your practice about 3-5 years prior to your projected sale date. If you miss that window, all is not lost, simply regroup and reset that target to 2-3 years prior to your projected sale date and you should still have plenty of time for a successful transition.