Many oral surgeons come out of residency not knowing what to expect. 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. Whether it’s a dentist’s goal to provide their own superior service to patients, create a comfortable living for themselves and their family or just having the pride of their name being attached to a dental practice, successful practice transitions can turn visions into realities.
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. There are many factors that go into practice transitions, and we are 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.
THE VALUATION PROCESS
No matter if a dentist is looking to move on from their practice or obtain their own practice, the valuation process is critical. The emotional aspect is one that’s difficult to overcome with any practice transition. If a dentist is selling their practice, they may feel an emotional attachment and think it’s worth more than it is. If a dentist is looking to buy and own a new practice, they may think the price should be lower than it is for various reasons.
The beginning of any valuation process is to get an appraisal. Without this appraisal, there are no grounds for starting the negotiation process. The current business owner can use the appraisal to view all the available transition options, including selling the practice outright or other strategies. The aspiring business owner can also obtain information about the most valuable aspects of the current practice as it stands, how it can be improved and what the long-term strategies may involve to boost its value.
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.
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 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 a dentist 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 a successful one.
Whether you are looking to sell your practice or buy a new one, our goal 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 at (713) 961-2723 to talk to us about practice transitions.