An orthodontic practice is an asset that orthodontists spend most of their careers building. Upon graduating, they hit the ground running in acquiring and retaining patients, hiring and training a top-notch team, and making solid investments back into the practice. However, as the years go by, some orthodontists lose steam as they close in on retirement and put these activities on the back burner. It’s like a football player voluntarily putting the ball on the one-yard line right before he’s about to score the winning touchdown—it makes no sense. When you work hard to build value in an orthodontic practice throughout your entire career, it’s critical to stay in game. Especially within the last 5 years prior to retirement.

Be Smart

The most senseless thing an orthodontist can do when nearing retirement is to let their practice value decline. Nonetheless, I’ve seen hundreds of practices that have allowed their value to decline in numerous areas within the last few years prior to a sale, making it significantly more difficult for the orthodontist to retire.

The main reason an owner allows their practice value to decline in the last few years is because they personally begin to check out. They see the end is near, they start to lose the fire and hunger that they had at the beginning of their career, and they no longer feel like putting the same time or effort into building value in the practice. They steer away from organizing systems, training staff, and investing in new technology and office decor. The result is that a higher level of patients is lost to these practices in the last few years prior to a sale. After spending 30 to 40 years building a valuable asset, the doctor is essentially allowing it to depreciate at an accelerated pace in the last few years rather than understanding the financial benefit of maintaining or increasing its value. This is just plain foolish.

The Smartest Things You Can Do Before You Sell Your Practice

Most orthodontists do not understand how a practice valuation is performed and do not realize that the valuation will take into account numerous factors and metrics about the practice over the last 3 years. So it’s imperative not to let up as your retirement draws near. The smartest thing an orthodontist can do is to maintain and build value in the practice prior to offering it for sale. This should be addressed beginning 5 years prior to the sale. I advise practices to adopt a plan that addresses the final 5 years of their practice as follows:

Five years prior to sale…

Invest in basic technology and staff, and streamline all major practice systems. Those systems include scheduling, marketing, case presentation, financial management of the practice, financing, and customer service. Sufficient technology, well-trained and long-standing staff, and well-run systems will make your practice attractive to buyers and may even increase the offers that are made.

Four years prior to sale…

The practice should be maintaining or increasing the patient base and maintaining a high level of collections. Many practices that are for sale have lost patients in the last few years, experienced a decline in the number of new starts, and do not pursue collections as aggressively. This is simply due to a lack of focus. This unfocused approach can lead to a decrease in the sale value.

Three years prior to sale…

Update or upgrade the interior decor. You want to show your patients, staff, and future potential buyers a modern look but not one that you did the month before you offer the practice for sale. Take the time to update your office sooner rather than later.

Two years prior to sale…

Begin researching practice transition experts. At this point you may want to spend a few dollars to get a preliminary evaluation and understanding of the process. Be sure you select a dental industry expert and not another type of advisor or the likelihood of maximizing practice value will decline.

One year prior to sale…

The valuation should be completed and a well-thought-out plan should be crafted so that you can begin offering the practice for sale approximately 12 months prior to the desired sale date. It can take up to a year to sell a practice, but if it sells faster, appropriate accommodations can always be made.

Making smart decisions prior to sale could literally represent the difference between making tens of thousands of dollars and hundreds of thousands of dollars in profit. I have seen both losses as well as gains of these amounts. Orthodontists who have a sense of when they would like to retire but don’t have a plan are making a big mistake. By following these recommendations and getting the right expert advice along the way, you will have the best opportunity to maximize the value of your practice and complete a sale in the desired timeframe. OP

Roger-Levin_062016_croppedRoger P. Levin, DDS, is a third-generation general dentist and the founder and CEO of Levin Group Inc, a dental management consulting firm that has worked with over 26,000 dentists. Levin, an internationally known dental practice management speaker, has written 65 books and over 4,300 articles. He is also the executive founder of Dental Business Study Clubs—Dentistry’s only All-Business Study Clubs, the next generation of dental business education.