Many oral surgeons come out of residency not knowing whether they can own their own practice. They have spent many years training to do surgery as opposed to studying accounting, finance and law. While it may be financially necessary to take on a salaried position for the first few years out of residency, the prospect of owning and operating a successful specialty dental practice can appear to be more attractive as a career advances. Similarly, established oral surgeons looking to retire often do not know how to transition their practice to the ownership of another surgeon. At OMS Partners, we help aspiring business owners’ transition to owning their own practice, as well as helping experienced business owners transition out of their practice when the timing is right.
Whether it’s an oral surgeon’s goal to provide their own superior service to patients, create a comfortable living for themselves and their family, or simply the pride of their name being attached to a dental practice, successful practice transitions can turn visions into realities. There are many factors that go into practice transitions, and the team at OMS Partners is here to ensure the entire process goes smoothly for all parties involved.
Proactively Planning Leads To Successful Practice Transitions
Here are OMS Partners, we build a customized plan to advise on the financial viability of a practice purchase, and the post-note pre-tax & post-tax cash effects the practice will have on your personal life. Additionally, one must consider the bank note terms, & what tax code sections are utilized for the practice purchase as these have material effects on the owner’s cashflow. Transitioning a practice is analogous to doing complex surgery. Given that purchasing a practice is one of the most important and financially influential events of your career, ask yourself is it wise that I pursue this “surgery” alone, or seek the advice of those who have done this “surgery” many times? The answer that one would give to a new resident should be the same answer for your practice purchase.
I knew that I was ready to see patients when I finished my training. I didn’t know how to run the practice. I was immediately struck by the complexities involved in managing a busy oral surgery practice.
Types of Practice Transitions
There are two main types of practice transitions: external transitions and internal transitions. In an external transition, the sale of the practice goes to another individual or entity outside of the current practice. An internal transition involves working with an associate currently employed by the practice.
Internal Practice Transitions
The main benefit of internal practice transitions is not having as much uncertainty with the process. Since the current business owner is familiar with the other party, there is a comfort factor that is always present. Of course, there will be some ups-and-downs throughout the negotiation process, but the respect factor between both parties typically makes the practice transitions much easier.
External practice transitions
External transitions typically occur when an internal transition isn’t possible. The process of an external practice transition is usually a little different since there are confidentiality concerns, due diligence practices, financial disclosures and more. Many of the contractual documents in an external transition aren’t created until the prospective buyer shows serious interest, including but not limited to making an offer.
How OMS Partners Can Help With Practice Transitions
Going through practice transitions alone can be overwhelming, no matter what side an oral surgeon is on. Working with OMS Partners can provide you with a valuable and trustworthy resource to ensure the transition goes smoothly and no important step is overlooked. We will work with consultants, appraisers, financial professionals, attorneys, and other resources to support the transition and make it successful.
Frequently Asked Questions
How Do I Propose to Start an Internal Practice Transition?
Internal practice transitions are big decisions. However, you do not have to navigate them alone. OMS Partners helps you navigate the negotiation process so that both you (the current practice owner) and the other party (the potentially new practice owner) feel like the transition and negotiations are fair and equitable.
How Far Ahead Should I Plan Ahead for a Practice Transition?
Practice transitions can take a long time due to the various elements that come into play. Therefore, the earlier you start your practice transition process, the better.
The best way to prepare for a practice transition is to get all of your documents in order, including:
- Organized financial statements that are ready for review
- Pre-approved letters from lenders for the buyer
- Associate contracts on behalf of the hiring doctor
- Clear business objectives from the incoming associate
The longest part of the transition can be finding the right oral surgeon who fits your transition goals. That is where OMS Partners comes in — we handle the vetting process on your behalf. We help identify motivated, high-quality candidates who are not only ambitious but eager to take their next step.
How Would a Practice Transition Factor into My Financial Plans?
Practice transitions can have various financial implications that you must keep in mind. It is important to note that every business’s financial situation is different, and the financial situation surrounding every practice transition is just as distinct.
You should also keep tax rates in mind during practice transitions. While neither party can control the tax rate, if they negotiate the purchase price correctly, both parties can save significant tax money throughout the transition.
For example, during a transition, both parties must determine whether they want the sale to be an asset sale or an equity sale. In an equity sale, your profit would be considered capital gains and taxed as such. However, in an asset sale, the profit would be a mix of capital gains and ordinary income.
At OMS Partners, we specialize in analyzing your specific financial plans so we can provide you with an estimated cost for the transition. We can also help you balance or reduce the associated costs so you receive maximum profits.
Start Your Practice Transition Today
Whether you are looking to sell your practice or buy a new one, our goal at OMS Partners is to set you up for a successful business endeavor you can be proud of. We are eager to help you throughout the process, so contact our office online or at (713) 961-2723 to talk to us about practice transitions.