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Specializing in Dental Practice Sales, Transitions, and Appraisals

George D. Stollings and Associates, Inc.

1 To 5 Year Pre-Retirement Sale Planning

We Offer Two Forms Of Advance Sale Planning Assistance:

 

1. If you are already within one (1) year of selling your practice in the open market, selling to your associate, or adding an associate to your practice to eventually become your buyer — inquire about our Free Preliminary Sale Consultation service.  Reading the rest of this page will help you envision what your can learn from this service, and Dr. Stollings will be happy to address any questions that you have about this service.

2. If you are 3, 5, 7 or more years away from either selling your practice, or adding an associate to eventually become your buyer, consider reading Dr. Stollings’ book: Your Dental Practice Sale — Planning Ahead (1—15 Years). This book is available at amazon.com, or your can contract our office to order a copy.

 

Necessity For Of Advance Planning

 

¨ Your practice is one of your most valuable assets.  When it comes to executing a successful ownership transition, $100,000’s are at stake, plus the structure of the transition determines whether you can continue to practice and earn income after the sale.  Your transition should not be left to chance. 

 

¨ Not all transition structure options are feasible for any specific practice.  Only with analysis of your practice will you know which transition structure options are feasible in your case.

 

¨ Not all transition structure options achieve the same financial result.  Versus the proceeds from the typical practice sale, some transition options may double or triple the combination of sale price and ongoing income that your receive from your practice. 

 

¨ Planning is the only way to maximize the dollar amount that your practice contributes to your retirement income and financial security.

 

The Objectives Of Advance Planning

 

Advance planning should seek to determine which of the following eight (8) ownership transition plan options are feasible given the characteristics of your specific practice, and then from the feasible options, determine which is most capable of achieving your individual career and financial goals:

1. Open Market Sale.  A short transition, followed by your full retirement.

2. Associate Addition — followed by sale of the practice to the associate in 1 to 5 years.  (Contracts for the later sale should be signed in advance.)

3. Sell Now — and work for the buyer as his / her associate until retirement.  (The terms of the owner’s employment contract are critical in terms of future income security.)

4. Associate Addition Now — complete the sale in 2 to 3 years, and then remain working as the buyer’s associate until retirement. (Contracts for the later sale should be signed in advance.)

5. Staged Equity Plan Associate Addition — Followed by sale of the remaining portion of the practice in 1 to 5 years.  (Contracts for the later sale should be signed in advance.)

6. Staged Equity Plan Associate Addition — Followed by a period of expense sharing practice, then later followed by sale of the remaining portion of the practice. (May span many years.) (Contracts for the later sale should be signed in advance.)

7. Semi-Retirement With Continued Ownership — Maintain ownership for an extended period, employ an associate to sustain the practice and carry the fixed overhead expense, allowing you to reduce your work schedule dramatically, but continue to work part-time and derive income from your practice and its hygiene department for an extended period of time.  (May span many years.)

8. Phase-Out — Maintain ownership, reduce your work schedule in increments over time, obtaining through continued income what you would have otherwise obtained from the sale of your practice. (May span many years, depending upon the profit reduction effect of your fixed overhead structure.)

 

Your Analysis & Planning Should Begin:

 

¨ Before you begin to slow-down (resulting in your practice’s value and income potential plummeting); and,

¨ While you still have adequate time to execute the plan you choose before you then desire to slow-down, sell, or retire.  

In most cases, this means that your planning should begin approximately 5 years before your anticipated sale or retirement.  If you are already inside the 5 year window preceding your possible sale or retirement, you should take time now to develop a detailed plan for your future ownership transition, sale, and retirement.

 

The First Step In Planning Should Be A Careful Analysis Of:

 

¨ The Sellability Of Your Practice—Is your practice easily sellable, or may it be difficult or nearly impossible to sale — and therefore, should you count on its future sale, or seek ways to maximize and continue the income that your practice can generate?

¨ Your Career Goals—How long your want to work full-time, how long you want to then work part-time, and when you want to fully retire?

¨ Your Current Retirement Plan—How much income it can generate in your retirement years, and when you must begin to draw upon your retirement plan reserves?

¨ Your Income Needs — How long you need to sustain your current income level, when you can accept an income decline, how much your income can then decline, and whether you’ll need some income in retirement to supplement your retirement fund proceeds?

¨ The Value Of Your Practice—After paying taxes on the sale proceeds, how much could your practice sale add to your retirement income?

¨ Purchaser Transition Requirements—Given the characteristics of your specific practice, can it be sold in the typical retirement sale format, or will it be necessary to add an associate, preparing that associate to later purchase your practice?

¨ Associate Addition Potential—Can your practice support the addition of an associate, would an associate addition be profitable, and could a transition structure including an associate addition add to the overall income and sale proceeds that you receive from your practice?

 

You Should Also Develop A “Plan B” (Back-Up Plan)

 

It is unfortunate, but true.  We don’t like to think about it, but In the years immediately preceding retirement practice owners may suffer unexpected illnesses, disabilities, or early deaths.  Transition plans developed before these unexpected events may suddenly become impossible to execute.  The value of a practice can plummet quickly if the owner is no longer able to work.  Delays in executing the back-up plan can cause significant financial loss for the practice owner, or for his / her family.

You should develop a back-up plan, and your family should be aware of that plan.  A consultant or broker, trusted by you and pre-selected by you, should also be aware of your plan and familiar with your practice, and should therefore be prepared in advance to quickly assist you or your family if suddenly needed.    

 

We Can Help You Develop Your Transition Plan

 

Our planning service is designed to assist you in analyzing your practice, your career goals, and your financial needs, helping you to then select the transition plan that is feasible for your practice, and most capable of meeting your personal goals and needs. 

Questions about this service?

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