Please activate JavaScript!
Please install Adobe Flash Player, click here for download
ePaper created 2017-11-28, 08:58:45 | version 1.38.0
20 exhibitors Greater New York Dental Meeting — Nov. 28, 2017 Be prepared The years you have invested in building a thriving dental practice amount to nothing if you have not planned in advance for the catastrophic loss of your ability to see patients By Alan Clemens n We have always been taught to be prepared — and we usually are. We prepare for our patients. We prepare for vacations. We even prepare for the future of our families when the time comes that we can no longer care for them by drawing up a will. Your dental practice is part of your estate – most likely, it’s one of the larg- est assets you have. But how many doctors stop to think about what that practice might be worth if they were not there to run it? A dental practice is not like a shoestore, which can remain in busi- ness or perhaps even thrive with the same staff simply performing as they always have. Most dental practices are personal service businesses and depend primarily on one person – the dentist. If the dentist is unable to see patients, the practice will deteriorate rapidly as patients see other doctors for their treatment. Indeed, the value of the practice declines every day the doctor is not able to treat patients. This process of value erosion must be halted or reversed as soon as possible in order to maintain the worth of the practice for possible transition. Window of opportunity There is a critical period after a doctor becomes ill or disabled during which the practice must be sold in order to realize its full value. This period is usually 30-45 days, especially in the case of the death of the owner. Typically, however, during the first month, the grief-stricken spouse and heirs understandably do little or noth- ing regarding the practice. Others, including the family attorney, may become involved; but often, these people are not well-versed in dental practice evaluation and may believe the practice has a wildly unrealistic value. There are ways to prepare for the preservation of the value of your prac- tice in the event of the unexpected loss of your services. A first step is to get a professional evaluation to deter- mine what your practice is worth today while you are still active. This establishes a benchmark that can be used to determine whether any contingency plans you make will pre- serve the practice’s value in the event of unforeseen events in the future. Selling yourself short There is a misconception that dental practices in high-demand areas, such as Manhattan, the Gold Coast, Long Island and Westchester rarely are sold for more than 80 percent of gross. Our experience is quite different. Proper preparation, timing, packaging and matchmaking make the difference in not selling one of your most valuable assets for less. Practice valuation: Net vs. gross Many dentists think of the value of their practice as a percentage of gross revenue. For example: 60 percent of $700,000 GR. = $420,000 “value.” How- ever, most offices operate at different levels of profitability, mostly ranging between 25–45 percent profit. The purchaser pays for the practice with the profit left over after paying the fixed and variable expenses, including debt and equity payments. They also must take into consideration working capital and immediate and long-term capital improvements. The result being that after the purchasing doctor pays themselves and their expenses, the value of the practice is determined by the amount of time they’re willing to work to pay for the business. Another approach, the gross valua- tion model, is more concerned with how hard you have to work than the net results. There are many specific pricing models for your practice. Let a practice transition expert like The Clemens Group show you which one applies to you. Here in New York To learn more about The Clemens Group and its services, please visit booth No. 2813. tact your attorney and accountant. He or she should also know who you have chosen to implement any plans to sell the practice. We all hope plans such as these will never need to be implemented, and that when the time comes to transfer the practice, it can be done in an orderly manner and to complete satisfaction of the doctor and his or her patients. But that can’t always be the case, and it is for the benefit of eve- ryone involved that the doctor makes the effort in advance to be prepared. 5 Alan Clemens, left, and Paul Whotener of The Clemens Group (booth No. 2813). (Photo/Fred Mochmershuozen, today Staff) Your plans should aim at keeping the value of the practice in line with its current worth. Seriously consider consulting and experienced reliable dental practice transition expert to arrange for an appraisal and to arrange to have the appraisal updated on a regular basis. Make sure your accountant and attorney are aware of this appraisal and who is doing it so they can coop- erate, as needed, to ensure that the appraisal is fair and accurate. Easing the pain As part of your relationship with your chosen practice transition expert, you should make plans for that per- son to undertake all steps to market your practice as quickly as possible while it still has value. If this has been prearranged, your spouse and heirs will be relieved of many decisions that must be made without delay and could be painful and difficult to make under the circumstances. Involve key personnel, especially your spouse, in all aspects of the planning process so that they know exactly where important papers and records are kept and who your advi- sors are. None of the details of han- dling the disposition of your practice should come as a surprise, and fran- tic searching for records should be unnecessary. Let your practice’s office manager know of your plans and who should be consulted to keep the practice func- tioning as normally as possible. He or she probably knows where papers and records are kept and how to con-