Exit Strategies & Estate Sales

Coming soon to a Spectrum Dialogue October 2009 Issue

Written By: Nadean Burkett

Practice ownership transition is challenging at every stage of one’s career, however it is truly a matter of degree. We’ve talked about successor planning in previous articles which focused on Associate buy-in/out options, partnerships, etc. as part of practice management. As humans we fear the unknown – transition issues are one of those unknowns which is why most practitioners choose not to deal with preparing an exit strategy. It is challenging for everyone to consider the underlying meaning of this – death or disabling medical condition. From experience, I can state that there is none more difficult than the posthumous transition. The truly unfortunate aspect of this is that it is the family, the survivors, who are left to deal with the situation at a time that they are also struggling with the loss of a loved one. Usually the surviving spouse has little knowledge of the practice or who to turn to at a time that they are most vulnerable.

There is a deadline to transition ownership of a dental practice – usually six months. That being said, as we all know the most valuable asset in any practice is the goodwill; represented by the people – patients and employees. The goodwill value may evaporate quickly when a dentist passes away or has a serious medical disability which prevents him (or her) from being a visible and active part of the transition. I say “may” because this is not necessary – there are strategies and solutions that can be employed by practice owners to mitigate the problem.

As we have discussed on many occasions the solution is simple, have an exit strategy. The problem for most people is that it is not easy. It’s not easy to confront our mortality. Age is irrelevant. Whether you are 35 or 75, we have to accept we can be victim to the one certainty in life - death. From day one of becoming an owner, there should be a realistic successor plan in place.

For the full length article, some helpful tips, suggestions and other articles, visit our educational website for more details on how you can prepare yourself and your practice @ www.edu-dent.com. Visit www.dentalbusiness.ca for practice listings, associate positions and much much more.

Attracting & Retention: The Invitation to Treat

Patients know what they hear, see and experience. The value of your practice to them is based on their experience with you and your team.

There are many ways to “attract” prospective patients to your practice. The focus in today’s dental marketplace tends to focus on the external options – display ads in community newspapers; visibility through physical placement of the clinic or signage, and convenience factors. Ads which offer specials or bonuses to new patients exclusively are known as “an invitation to treat.”

It has become fashionable and popular to employ advertising in community newspapers, magazines and on the Internet in order to “attract” patients. This method of “promotion” is very expensive and generally ineffective. If you have a general announcement to the community such as a relocation of your clinic – which is short term (+/- six months) placing a display or print ad can serve your purpose. Websites can be useful in patient education and communication especially for the internet-savvy patient, but I caution my clients not to expect it to be more than an internal communication tool.

We have all seen examples of “invitation to treat” ads in our local papers. They offer “free” whitening kits, or discounts on cleaning with a “new patient exam”. In my opinion the “invitation to treat” ads are the most damageing to dental practice because the are a net loss to the practice – you are working on that patient for nothing. Worst of all they can contribute to loss of patient retention in a practice – you are working on that patient for nothing. Worst of all they can contribute to loss of patient retention in a practice because they demonstrate utter disregard for a patient’s loyalty. If you are going to make a special offer, make the offer to those patients who have “earned” it – give a whitening kit to a patient as a “thank you” for referring a friend or co-worker to your practice, or an electric toothbrush to a patient who has just completed a major restorative procedure, for example. If the patient has been loyal for several years and is celebrating a milestone in their life, why not recognize that with something special from you? They will appreciate your recognition and your simple gesture tangibly expresses the value you place on your relationship. Visibility and convenience by physical positioning of the clinic or through signage to a broad spectrum of people (traffic) presumes that “if you build it, they will come”.

This full length article also explains the 5 benefits of patient recalls versus the "transient patients" and can be found in the article series Attraction & Retention on www.edu-dent.com. More articles on career and practice management and transition written by Nadean are posted to the website. Also check out www.dentalbusiness.ca for updates on possible listings and purchase opportunities across Canada.

What You Don’t Know: It Can Hurt You

In previous articles we have discussed the value of practices for both Vendor and Purchaser. Guided by the principle that one owns, makes the Vendor more aware that he has the right to a fair price for the transferable value to a qualified Purchaser, and the obligation to identify and disclose the good, the bad and even the “ugly”. In our experience, Vendors are often unaware of the weaknesses or limitations of transferability in their practice. Value to them may not be value to a Buyer. It is the obligation and responsibility of the Vendor’s broker to uncover defects that can (and do) affect transferability of practice performance and assets unencumbered to any prospective Purchaser. It is also our job to communicate the affect that these may have to the Vendor.

Fear is a primary motivator for everyone and it has proven to keep Vendors from disclosing the “bad” and the “ugly” to prospective Purchasers. Putting lipstick on a pig doesn’t hide the fact that it is a pig. Eventually, everyone will recognize it as such. However, challenge opens the door to opportunity in most instances. When a risk or limitation is identified it offers the Vendor and advisors the chance to be creative in providing strategies and solutions for prospective successors in the practice if these are not able to be corrected prior to marketing the practice for sale. To read the full version of this article, visit the articles section at www.edu-dent.com.

An Exerpt on Business Planning Vision, Philosophy and Mission

Visualizing what success looks and feels like for us means that as we get closer, we can realize and enjoy our efforts. It can also assist in identifying those efforts which are not paying off for us, and allow the opportunity to readjust the settings of our vision or navigate a new path along the way. Many of us are more confident in what we don’t want, and this can be a starting point but remember the Universal Law of Affinity which states that “like attracts like.” If our focus is on what we don’t want, that is what we will attract. Even if we are not exactly certain of our complete long term vision, best to start with those things that we do want to achieve and build on them. We will always get what we focus on so we must ensure that our vision, even if it is limited, is clear and detailed. The person who simply wants unconditional love, is as likely to get that from a puppy as from another human being. Since success is a journey, we all must be prepared to fail on occasion in order to fully appreciate our achievements. That means we have to act; to strive ahead and be prepared to learn from our mistakes.
Asserting our philosophy of practice; patient care and career fulfillment is a practical next step in this process. These must be matched cohesively to one another and your vision. The answer to the following question will help determine how the 5 “P”s are structured in our business plan. To read more about the questions to ask yourself about the 5 "P"s in your planning visit our website and sign up for full articles. Magazines featuring Nadean's articles include Spectrum Dialogue and Team Work and the Canadian Journal for Cosmetic Dentistry.

Going for Broke-r

Whether buying or selling a dental practice, dental professionals know they need to involve an accountant, a lawyer (solicitor) and financial institution (usually a bank). Each one of these professionals has a specific area of expertise and function. The “optional” service provider appears a “broker”. I say optional because there are an increasing number of FSBO (For Sale By Owner) practice transitions, particularly in the “hot” urban markets. The presumption is that brokers’ services provide a minimal value to Sellers and zero value to Buyers. As a licensed realtor who is specialized and strictly involved in professional private practices, I would like to take this opportunity to clear up some common misconceptions and presumptions about brokers, facilitators and others who endeavour to assist professionals in transition

The brokers’ services should include (but not be limited to):

- assisting the client to determine all reasonable options in transition into or out of practice ownership
- review and analysis of practice performance that results in a detailed and comprehensive practice valuation report;
- understand and explain the terms and terminology involved in the sale/purchase process;
- protect one’s confidentiality appropriately;
- pre-qualify prospects;

The functions offered and delivered by your broker will depend on their level of expertise and capabilities. There are tips available on our website (www.edu-dent.com) to help you conduct your research before hiring a broker.

To find more tips and the full article printed in Canadian Journal of Cosmetic Dentistry, visit our website at www.dentalbusiness.ca and sign up for membership and free access to other coaching & transition resources.

From Associate to Owner

There is a certain price tag that comes with what we want to be, to have and to accomplish in life. Sometimes it is more than we are willing to pay in terms of financial obligation, cash flow, or the effort required to accomplish our goal. The quest to become a practice owner begins with certain observations, assumptions and expectations – good and bad – that lead most professionals to make their decisions long before they analyze a specific opportunity. Here are some myths and realities that you may want to consider as part of your move from associate to ownership.

Myth:

Owners are compensated in the same way as contractors.

Reality:

There are advantages and disadvantages to every career management option. Being an associate (contractor) offers a relatively higher percentage of production as compensation with the risk that there is little to no control over practice management decisions, patient scheduling, and no equity is built in your own business. Most owners earn a smaller percentage of their production as compensation, but have opportunity to enjoy long-term equity and an escalating personal income as debts are retired and infrastructure is built. Your accountant wil also tell you that practice owners benefit from more tax deductions than their contractor counterparts. It is true that in the first 1-3 years as an owner, personal income and retained earnings are lower than what properly this is a short-term. Depending on the community that the practitioner decides to buy or set up, capital investment and operating costs vary considerably. The prospective buyer needs to decide what best fits their business and lifestyle goals before focusing on any one community or specific practice.

For more myths and realities explained, visit our website www.dentalbusiness.ca and sign up as a member to view full versions of our written articles. Nadean Burkett’s articles appear in various trusted dental professional magazines including Spectrum Dialogue, the Journal for the Canadian Academy of General Dentistry, and the Journal for the Canadian Academy of Cosmetic Dentistry.

Cooperation and collaboration

After more than 30 years working with dental and other professionals in managing their practices and careers I'm constantly amazed with the head butting that goes on particularly amongst practice brokers who protect their listings as "exclusive" under the guise of protecting their client's privacy. Admittedly, I am relatively new in the "broker" world and therefore have a different perspective than the "old boys' club". You see, I believe that both parties deserve to be equally represented by those who understand the inner function of professional practices - the interpersonal relationships that are the barometer of practice success. Not all brokers have the education and experience (expertise) in this area to be able to guide and assist through the transaction and transition which is so vital in successorship. When listings brokers and other brokers representing a buyer or buyers work cooperatively in an atmosphere of collaboration and focused on doing the best for both parties, a harmonious relationship that enhances the transition of ownership occurs. Also, it would allow brokers the ability to fulfill their clients' expectations more efficiently - thereby enhancing their bottom line.

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