All too often, succession planning is a step that dentists put off because of the more immediate concern of running the practice. And no question, keeping up with patient care, managing staff, and overall practice management is a full time job in itself. However it is important to find the time to develop and implement a succession plan. By not planning, you may limit the value you receive for your life’s work.
Getting Started
Getting started with succession planning is the hardest part. Asking three key questions will help: 1) What is important to me and my practice? 2) How much do I need to retire? 3) When is a preferred time to leave? With answers to these questions, your advisors can fill in the succession plan details, and determine how to maximize the value of the practice.
Realizing the value
Once a value has been determined, you can then develop a strategy for tapping into it. A successful succession plan is one that allows you to make the transition out of a business management role while maximizing your personal financial security. Several routes are open to you. You can sell the practice and invest the proceeds elsewhere, or sell a portion of your interest to achieve a greater diversification of assets. You must also then decide whether you want to continue practicing dentistry upon the sale of your practice. Many dentists grow tired of the human resources aspect of owning a practice but continue to enjoy practicing dentistry.
Who will take over?
Grooming an associate and familiarizing him/her to the staff and patients at the right time can create a strong successor. Typically this scenario results in the lowest amount of patient loss. A sale to an outside third party can also be successful. Patient attrition can be minimized with a well thought out transition plan. Some potential strategies include an introductory letter to patients signed jointly by seller and buyer, an open house to introduce the purchaser, and lastly having the seller available for a short time to assist in the transition. Corporate dental firms can be another potential buyer as these entities look to buy and accumulate practices. Make sure you understand each possibility before choosing.
Who can help?
It is critical you use a team of experienced advisors who understand the dental industry and the various aspects of formulating a sound succession plan to transition you through the successful sale of your practice. This team should include the following professionals: an accountant, banker, financial planner, insurance advisor, investment manager, lawyer and practice valuator.
While doing nothing for succession planning is an option, you essentially have little control should an unforeseen circumstance such as a loss of life, incapacitation or disability occur. Ultimately the value of the practice will likely suffer if a suitable buyer is not found quickly. A succession plan can then also serve as a bit of an insurance policy and can preserve the value of the practice until a sale occurs.
With the sale of your practice perhaps the greatest financial decision of your life, it is prudent to develop a sound succession plan in order to help maximize all of your objectives. It will provide greater financial security while giving you comfort knowing the practice is well positioned to continue to serve your employees and patients.
Note: The opinions, estimates and projections, if any, contained in this article are those of the author and may differ from those of other BMO Harris Bank employees and affiliates. BMO Harris Bank endeavors to ensure that the contents have been compiled or derived from sources that it believes to be reliable and which it believes contain information and opinions which are accurate and complete. However, the author and BMO Harris Bank take no responsibility for any errors or omissions and do not guarantee their accuracy or completeness. These articles are for informational purposes only.
