Most of us know a colleague or friend who was taken away from us too soon and unexpectedly, or was seriously disabled from an accident, stroke, or unforeseen occurrence. Most of us also make the same mistake of thinking that will never happen to us.
Unfortunately, too many of our clients over the past 20 years are estates, widows, and grieving friends and/or relatives of a dentist who was not prepared for such a tragedy. The only way to protect the value of your practice and to take the burden off of your loved ones during such an emotional time in their life is to be prepared in case such a tragic event happens to you.
From our experience, the value of a dental practice decreases about 25% following the first month after the death or absence of the sole practitioner, and the drop in value typically accelerates each month thereafter until there is little to no value left. By the time grieving loved ones contact a broker, and the practice is ready to be marketed, too much time passes. Patients naturally begin to seek a new practitioner, and the odds of them returning after the practice is sold to a new dentist is slim. Staff members fearing the loss of income, and in many cases benefits such as health insurance and pension plans, will too begin searching for new employment since there is no loyalty to an unknown dentist who will eventually take over what’s left of the practice. Therefore, another local practice with familiar staff or convenient location will look very attractive to continue their career.
That is why it is imperative to have a plan in place to protect your practice assets, being the well-trained staff and patients of record, which will preserve the practice value until transitioned over to a new practitioner. There are two significant tips we offer when lecturing to dentists at various dental shows and lecture groups:
Tip 1 – Form A Coverage Group.
Most, if not all of your colleagues immediately surrounding you are in the same position as you are; a sole practitioner. They too would need someone to cover their practice if something unexpectedly happened to them until their practice is sold. So the easiest solution is to contact local dentists and form a coverage group that will work together to keep the stressed practice running until a practice sale can be completed. Obviously, this is a burden on the covering practitioner’s practice and personal life outside of his/her office, so the larger the coverage group, the less frequent each provider is needed and the easier it is to work out a coverage schedule. Coverage does not need to be full time, but as many days as possible each week to maintain the practice’s schedule to the fullest extent possible. Each member of the group may also want to sign a mutual non-disclosure and non-solicitation agreement with other members of the group for legal reasons. Consult with your transition specialist and/or your local attorney.
Tip 2 – Have A Transition Plan In Place Now
Tip #1 above is merely a band-aid to allow the practice to continue to run until the ultimate goal is fulfilled, which is the sale of the practice. The critical step to ensure your practice is transitioned as soon as possible is to have everything in the hands of a transition specialist ahead of time, and the necessary authorizations in place to allow that specialist to proceed with a sale.
There are several steps involved in the sale of a practice which include: obtaining numerous financial and practice related documents, preparing a practice appraisal, putting together a marketing package, advertising, negotiating a new lease or purchase of real estate, obtaining acquisition financing, notifying patients of the sale, and so forth. It can take several weeks to accomplish all this if not prepared ahead of time, and as stated above, time is not something you can afford to lose if you want the value of the practice to remain high.
Furthermore, it is much easier to put this information together while the practice is operating under normal circumstances, than during a time of stress. Often, the estate or court appointed representatives have difficulty in providing essential information for lack of knowledge as to reporting systems in place, software, whereabouts, etc. whereas the practitioner himself/herself could provide this information quite easily and accurately.
What should you do now? We encourage you to speak to a transition specialist to enroll your practice into such a plan. The plan should include (1.) the maintenance and storage of all documents necessary to prepare a practice appraisal and to market the practice, (2.) the legal documents necessary to authorize the transition company to sell the practice upon such an occurrence that would trigger an immediate sale, and (3.) a way to notify the transition specialist of the triggering event. We are currently not aware of any existing plans in place that provide this type of service to dentists, other than our own plan known as the Practice Protection Plan (PPP). We implemented this plan years ago, free of charge, to remove the burden from the grieving family members, while accelerating the process of getting the practice placed on the market in order to maximize value as well as patient and staff retention. We welcome any practice owner to utilize our plan at any time or encourage you to find another similar plan of protection.
We have too many war stories from those who did not take advantage of these tips ahead of time and whose practice suffered the consequences by selling for pennies on the dollar. What took years to build was essentially stolen by those waiting for such tragedies in order to take advantage of a very sad and unfortunate situation for their own benefit. Do not make the same mistakes they made by thinking it will not happen to you. Act now.