Closing your practice before selling, or merely letting it atrophy, can turn a potentially hot commodity into an ice-cold dud that sheds value at an alarming pace. Here’s how to keep it viable—or, better yet, boost its value.
BY KRISTEN JORDAN
THE OLD SAYING is a practice goes down in value 20 percent per month until it’s worth zero. But I think it’s more like 50 percent in the first month and 20 percent a month after that.” That’s what Dr. Kyle Roth thinks about one of the worst-case scenarios when selling your practice: closing it, or letting it slowly wither away, when the time comes to sell.
Why would anyone do that? Surprisingly, according to Dr. Roth, “it happens a lot, a lot, a lot.” He would know. After starting his career in finance, he went to dental school. After almost two and a half decades in practice, he’s now running his own company, Encompass Dental Transitions, providing solutions for doctors looking to buy or sell their practices. (Encompass also partners with Benco Dental, the publisher of this magazine.)
The most common reason a practice closes before it can be put up for sale is that the owner passes away unexpectedly, or falls ill, piling financial stress onto an already heartsick family. “Because they haven’t been working with a broker, a transition person, there’s no current valuation on their office. There’s no doctor working in the office anymore. Half the staff has left, patients have been picking up their records,” he says.
That’s why it’s never too early to start talking about transitions—particularly if your family is counting on the practice’s value toward their long-term financial security. It doesn’t matter if you’re not planning to retire immediately. It doesn’t matter if you’re healthy. An unexpected injury or illness could suddenly make it difficult to continue. “Now we’re in a situation where the practice is worth nothing,” Dr. Roth says. “I often close the doors and hand the key back to the landlord.”
This almost never happens when a practice is focused on growth. “Growth isn’t something you should think about in seasons or phases. It’s not a onetime endeavor. The best time to grow your practice is right now.” The former owner of 36 practices, Dr. Roth says, “There was never a time not to grow or expand. I’ve never gotten to a point where I’ve been completely happy with where we are and keep it there.”
Should the unthinkable happen, or you simply burn out, a growing practice’s value is protected because it’s not only positioned attractively for sale but also staffed with at least one associate and a full team so it can continue serving patients. “If your business is not growing, it’s dying. So I’ve always pushed as hard as I can with everything I can.” That includes your equipment and facilities, though it doesn’t necessarily mean going overboard if a sale is in your foreseeable future. On one hand, “It’s going to be hard to sell without upgrading your equipment,” Dr. Roth notes, but “I try to trail the technology curve a little bit. I don’t need to be the first to own some new gizmo.”
The best time to grow your practice is right now.
What you do need: “Everything must be digital. Sensors are cheap. Computers are cheap. Intraoral cameras are cheap. Those are essential at this point,” he says. “I think digital impressions are necessary now. And in a year or two, I’m going to tell you a CT machine is necessary.”
My own recommendation: Don’t stress. Chill out, and let some experts take the pressure off by talking about transitions now. Reach out to me or your Friendly Benco Rep; we’re happy to help. You have too much to lose, and so much to gain for both your financial security and peace of mind.
KRISTEN JORDAN is Benco Dental’s Coaching & Education Manager, specializing in revenue analysis. She has been an office manager, regional manager and operations executive for several large practices. Contact her at firstname.lastname@example.org.