Why do so many excellent dentists make poor business decisions? Because dentists seek perfection. By nature, they are technical, disciplined and thorough in their work. But while the art and science of dentistry allows for flawless results, business is a decidedly less exact trade in which perfection is near impossible. Success in business is in no way concrete; in fact, it’s infinite. So dentists, trained and skilled as they are in perfecting the mouth, shy away from business decisions from which there is far less pleasure and satisfaction in results that will always be imperfect.
Your practice is a business. It must be treated with equal attention that you give your patients so your practice thrives with excellent patient care and financial success.
NOTE: Your business decisions hold substantially more weight for your future than your dental pièce de résistance. Take care to avoid these common business mistakes to safeguard your future and legacy:
1. Poor financial planning
Your retirement planning is paramount. Hire a financial advisor (this means more than having a CPA) to determine what your retirement needs are and set the appropriate goals. Every few years make sure you are on track, adjust your plan as your business and lifestyle change, and above all, make sure your plan is working! Also, have a plan for the unexpected in the unforeseen event that you are forced into early retirement. Furthermore, make sure your books are accurate and clean. Use your CPA’s regular reports to plan and implement your retirement program. As a business owner, you must know your practice numbers.
2. Associateships as a plan for transition
Most associateships will not result in the associate purchasing the host’s practice. Trying to create a buyer out of an associate is almost never successful, especially if he/she has already been employed in the practice 6 months and a year or longer. Consider, if you bring in an associate, the value of the practice will change. As a result, the practice sale price will become near impossible to determine because the associate has contributed to its value. We recommend that the prospective associate either buy the practice outright and employ the selling dentist for a prearranged period of time, OR have an agreement in place that the associate will purchase the practice within 6 months at a predetermined price.
3. Selling after your numbers peak
Practice values are determined by the last three years’ collections, so the best time to sell is when you are producing at your highest levels. Don’t wait until you are slowing down and your practice is losing market value! Loss of 10% in yearly revenue most of the time results in much more than 10% loss of practice value. Selling earlier and investing the profit yields higher returns than working in a decline and selling later.
4. Allowing your office to become outdated
Buyers in the current market expect offices to be computerized and digital. Within 5 years of selling your practice’s equipment should be upgraded, offices refurbished, and software brought up-to-date. The importance of technology cannot be understated for recent graduates who are trained in digital technology and have never seen a developer tank, or even an automatic developer. Not to mention, the rising-generation patient base expects modern technologies, too!
Bill Adams, DDS, FAGD, Founder
Did you like this article? Check out our other dental industry blog posts such as when is the right time to sell my dental practice? and do I need a help buying or selling a dental practice?
If you have any questions or would like additional information, please call us at 678-482-7305 or email at email@example.com