Preparing for the Sale of Your Dental Practice (E.142)

“Ninety-five percent of dentists cannot retire and maintain their standard of living, which is sad. It’s not fair.”  ~ Dr. Victoria Peterson

Join Investment Grade Practices Podcast host Dr. Victoria Peterson and Dr. Bruce B. Baird (host of The Productive Dentist Podcast) in this raw and candid discussion about seller readiness in the dental profession. The landscape of dentistry is always evolving amidst morphing economic conditions and shifting industry dynamics, which is why it is so important for dentists to prepare themselves for the financial challenges and opportunities that lie ahead.

Dr. Peterson and Dr. Baird emphasize the importance of proactive planning and strategic decision making to ensure that dentists can retire comfortably and maintain their standard of living. Your hosts provide valuable insights into the timeline and considerations for selling a dental practice, how soon you should begin the conversation about selling, and offer practical tips for maximizing practice value and profitability.

Finally, your hosts introduce a new program that is designed to help dentists navigate the complexities of seller readiness, and enhance the value of your practice. In this ever-changing economic climate, this is one episode you do not want to skip.

As you immerse yourself in this episode, consider these key reflections:

• How can you begin strategizing for the sale of your practice now to ensure a smooth transition and maximize its value in the future?
• What steps can you take today to lay the groundwork for seller readiness?
• What strategies can you implement to enhance revenue, reduce expenses, and improve the financial health of your practice?
• What reliable sources of information can you consult to educate yourself about the process of selling your practice and avoid falling prey to industry hype or misleading advice?

EPISODE TRANSCRIPT

[00:00:00] Announcer: The Productive Dentist Academy podcast network.

[00:00:02] Dr. Victoria Peterson: This is a conversation you should start having eight to 10 years before you actually sell. If you want to build an Investment Grade Practice, if you want to maximize your leverage in the transaction.

[00:00:17] Announcer: Welcome to Investment Grade Practices Podcast, where we believe private practice dentists deserve to get the lifestyle today while building an asset for tomorrow. Join your host, Victoria Peterson, to design the practice of your dreams and secure your financial independence. Let’s get started.

[00:00:40] Regan Robertson: Doctor, what would an additional 219, 000 mean for your practice? I mean, really think about it. 219, 000. What would you do with it? That’s what PDA clients generated on average in just the last 10 months alone. You too can take control of your future today. Register for the 2025 PDA conference to get the five key frameworks. So you can accelerate your productivity, align your team for accountability and elevate patient care like never before. If you want case acceptance that skyrockets and stress that’s evaporated, this is the event for you. If it’s time to stop spinning your wheels and instead get the predictable growth you deserve. Go to productivedentist.com right now and register for PDA’s 2025 conference, March 13th to the 15th in Frisco, Texas. We look forward to seeing you.

[00:01:23] Dr. Victoria Peterson: Hey Bruce, it’s great to see you again.

[00:01:25] Dr. Bruce B. Baird: Good to see you too, Victoria.

[00:01:26] Dr. Victoria Peterson: Hey, we just spent two weeks together, which is a treat for us. Me living in Hawaii, you in Texas. Anytime we can get together, it’s, it’s just fantastic. Thanks for joining me here today. I thought we would take a moment and let our PDA alumni and podcast listeners in on some of the great stuff we’ve been talking about over the last couple of weeks.

[00:01:47] Dr. Bruce B. Baird: Yeah, it’s been a great time. I mean, it’s been a whirlwind, you know, um, I, I have to say I’ve learned an enormous amount over the last month, you know, in dealing with a lot of things, you know, from private equity to, uh, seller readiness to sales across the board, things are changing in the dental industry and I, I really want everybody to, to know what’s going on. It’s, it’s important for you to understand.

[00:02:10] Dr. Victoria Peterson: I love it. So why don’t we dive into that? And I love what you said, things have changed, things have changed since pre COVID, but they’ve also changed even in the last year, what’s happening with interest rates going up and things like that. So I guess we’ll dub this little episode, seller readiness. Are you prepared for the financial cliff? And I don’t mean guys, I don’t mean like the whole world is going to stop but one of the things you and I talked about passionately, Bruce, is that 95 percent of dentists cannot retire and maintain their standard of living, which is sad. It’s not fair. You give everything to your dental practice and to get to the end of a, a 10, even 10 or 15 or 20 years of doing something and it all comes down to one number, one pass or fail. And then you got to figure out, can I retire or not retire? It just seems like there ought to be a better way.

[00:03:00] Dr. Bruce B. Baird: Yeah, and the pressures of inflation. I mean, we’re seeing that with wages, we’re seeing that with equipment, we’re seeing that across the board and which starts to eat into profitability, which causes stress, which, you know, just in the last two weeks, we’ve talked to probably 25 different offices and everybody’s feeling that pinch and we’re talking to docs who have committed to moving forward with not selling their practice, but partnering their practice into a practice group, which is one topic, but what’s really important is for people to understand is when do you need to be ready to sell? I mean, when do you wait in this environment? Do you wait till you’re 65 and hang the shingle up like my grandfather did back 60 years, 70 years ago? I don’t know, but things are changing and with interest rates going up, DSO model has changed quite a bit. You’ll hear a lot of marketing online from brokers saying, oh, it’s still great, you know, because they still want to buy you, but when you need to be ready to sell and. I think something that’s very interesting when I started Compassionate Finance years ago, uh, people asked me the question, “what’s your exit strategy?” And I said, “I want to build a great company that takes great care of people, takes great care of the patients, takes great care of our doctors, and the exit strategy will show up. It will appear.” And it did and my philosophy was that, you know, I want to build a great company. Well, many of you have built great companies and you’re feeling this pinch from inflation and you’re not really sure what to do. Maybe the stresses of day to day management of the business, which, you know, those are all things that we can help with but when’s the time to start thinking about these things is today. One reason in particular is we’re in a period that’s going to go on for maybe another seven or eight years consolidation of dentistry. “Hey, Bruce. I just want to work. I just want to do my thing. I just want to, you know, and then when I’m ready to retire, I put enough money away and I’ll be fine.” That’s great. That’s a whole different animal. You’re in the 5%. What about all of you that maybe haven’t done that or don’t know what the future holds? And we’ve, we’ve learned a lot about that just in the last couple of weeks.

[00:05:09] Dr. Victoria Peterson: Yeah, I would say. You know, across the board, a lot of doctors that we work with that are thinking about selling them. This is a conversation you should start having eight to 10 years before you actually sell. If you want to build an Investment Grade Practice, if you want to maximize your leverage in the transaction. So the average age of the selling doctor is now forty?

[00:05:32] Dr. Bruce B. Baird: It’s like 40, 41.

[00:05:34] Dr. Victoria Peterson: Yeah really 41. I was thinking 42, 46, but this is not grandpa Lampa’s, uh, retirement plan.

[00:05:43] Dr. Bruce B. Baird: No, it’s not and, and, you know, things are changing. Uh, consolidation is going to continue to happen and most of you guys know, I sold a hard one and you know, I wasn’t really part of anything. I mean, I was in it. I was being paid to continue to work, but I just didn’t feel like I was necessarily part of a group. I didn’t feel like I was a partner, even though they call them partners. I think there’s, there’s other ways of going about doing things and being ready to sell is maximally important because if you’re not, then you’re going to get somebody to tell you something, you’re going to believe it. And then you’re going to walk down that path and you’re going to find out maybe it wasn’t a rosy path as you thought it was going to be.

[00:06:20] Dr. Victoria Peterson: I love that. perspective. We wanted to just take a moment. If you’re a PDA alumni, you’ve probably heard us talk about this for a while, but there’s a couple of things that can really help you combat the higher interest rates, the effective presidential elections, the corporate consolidation, all of that macro economics, it has some impact on your practice, but it’s really the micro economics of what you’re doing today that will make a difference. So we have actually created an entirely brand new program. We have a workshop that comes along with it and a very short six month advisory program and, and if you are experiencing this, if you have kind of peaked and plateaued in your practice, if you’ve had your practice valued, let’s say, and the number doesn’t quite hit what you need for financial funding, Well, did you know that if you raised your collections by 10 percent and you cut your expenses by 10 percent. So in this case a 1.2 million dollar practice You’re you’re just trying to find twelve thousand dollars a thousand bucks a month if we can help you find a thousand bucks a month and we can help you grow a thousand bucks a month. Did you know that your take home pay would increase by 40 percent? There’s little small things that you can be doing today to get your practice ready so that when you do get devaluation, you’re going to be happy with that number. So growing 50 an hour means 76, 000 thousand dollars in revenue, a hundred bucks an hour and most of you have done this. Uh, maybe you’ve plateaued, you had a lot of team turnover. That’s what we heard from our doctors. It was like, “Yeah, yeah, yeah. I used to produce more, but then, you know, COVID and the team, and we had some turnover.” So now’s the time to think, what am I going to do? for the next phase. So think about becoming seller ready as my next decade. What do I do now to take advantage of the trends that are happening? How do I improve my profit margin, cause that’s the name of the game and how do I take better care of my patients along the way? Those are the doctors I’m seeing that are getting the best multiple for their practice because the multiple is right, the money is right, they have an easier time focusing on what does life look like after the transaction.

[00:08:38] Dr. Bruce B. Baird: Yeah, no question. I mean, the thing is, seller readiness means getting ready to sell whether it’s 5 years or 25 years because you’re going to enjoy the benefits of being ready, because your profits are going to go up, your take home goes up, and you may decide, I don’t want everyone to, again, I keep saying that, but great, because we don’t care one way or the other, we just want you to get to that five percent that are able to retire and enjoy their life and travel and do all the things that they’ve always done, and they’re going to get to do it in the future when they don’t have that revenue you. I mean, and so I think, you know, just to kind of highlight what’s going on in, in the world of dental service organizations and everything else. I mean, this consolidation again, it’s going to last about seven to eight years, and then it’ll go back to, you’re not selling private equity groups. You’re probably not even selling to DSOs. You’re selling to another dentist and the difference between selling at 65 percent of your previous year’s collections, or 75, and selling your, and selling at six or seven times your EBITDA or profit is a very different number. Uh, in other words, opportunity is extremely high right now. And we want you to understand that but what I also want you to understand is, whether you sell or not is, it’s not the point. Whether you sell or not doesn’t really matter if you’re following a growing business model. If you’re growing your business and you’re doing those things, and then you might find that, gosh, you know, I’m at 300, 000 in EBITDA, and if I could grow another hundred thousand EBITDA or 200,000 EBITDA, I might get a $3 million check and have more money coming at the back end of that deal and so what you would’ve sold for, again, a million dollars or a million too, now you’re have opportunities to sell for 5 million and I always say, you know, I sold my practice. I did very well, but it’s the long term effect that paid me in. with stock values and those types of things. So, uh, we just want you to understand that we’ve done a course now that will help you do that. I implore you to go. I think it’s, now’s the time. If you haven’t, uh, first of all, most of you have thought of it because you’ve gotten 50 unsolicited offers for your business.

[00:10:48] Dr. Victoria Peterson: And now they’re starting to actually call your office.

[00:10:51] Dr. Bruce B. Baird: And they’re calling your office and here’s something extremely important is the game of EBITDA is just that. It’s a game. The game of multiples is just that. It’s a game. We had one doctor that had 10 evaluations done, 10. Their EBITDA was different in all 10 and their multiple was different in all 10. So what, when somebody says, “Well, I got a six and a half. Well, I got a 6.8 and and I got a six point or a four point,” whatever it is, you may get an eight and get totally screwed because they gave you an eight, but they gave you an EBITDA of 200,000 when your EBITDA really was 450,000 and you would’ve made a whole lot more money. So don’t listen to the height you guys have come to us. You trust us, and we are so appreciative of that. We’ve always looked out for our docs and I’ll be honest. Um, there needs to be a level playing field and that’s really what PDA has done. We’ve leveled the playing field. We’ve tried to give you all the information to understand what EBITDA really is, so that you’re making sure we’re counting everything that counts into that.

[00:11:54] Dr. Victoria Peterson: As we just peel back the onion and go deeper and deeper and deeper in our own understanding, we wanted to come to you guys, let you know, if you’ve been through the PDA workshop before, and you’re looking for that next level, we do have another course, it’s called Seller Readiness. Um, you don’t have to go into full coaching to take advantage of that, but it’s going to help you get organized. So, you know, where all your financial documents are, you understand how to read your P and L’s. You understand what it could mean in this environment. It also helps you get ready. Whether you’re selling or you get hit by the Bud Light truck, you know, all your contracts are, do you know how to onboard an associate and have a solid agreement? Would your spouse be taken care of? Do you have life insurance? All the things that can decrease your risk as a solopreneur or partner and maximize your value. So seller readiness does it for you. It, it decreases your risk by getting you organized and it increases the value. So Christine Nguyen is heading this up for us and her number one thing is, I want to give you peace of mind. I want to help you get organized and give you peace of mind and certainty that you can make great choices.

[00:13:06] Dr. Bruce B. Baird: Dentistry, obviously, we all know is very stressful, but I can tell you one way to reduce stress, is to have predictability and to have the security knowing that all your stuff is spoken for. You know where everything is and further, you are now have the opportunity to even grow more. So when you’re not stressed, what happens? We grow. So those are all super positives and so I’d love to see you guys in March. I just feel like this is a must listen to for the future. I hope you can make it.

[00:13:38] Announcer: Thank you for tuning in to this episode of Investment Grade Practices Podcast. If you find value in this episode, help us spread the word by passing it along to a dental friend, subscribe, and give us a like on iTunes or Spotify. Learn more about building your Investment Grade Practice at productivedentist.com today.