With a significant percentage of the workforce heading towards retirement it might help to know what one practitioner has experienced as they move towards finishing their practicing life as a dentist. Being a member of the Guild/ADA Liaison Group and working toward retirement it is my lot to relate this issue.
Being a dental practitioner is harder than most of the community understand. The pressures are great to meet complex diagnostic presentations and consistently produce high quality technical/restorative results. This must be matched with motivation and enthusiasm to see through the long stressful hours. As a practice owner we must also be on top of the increasing burden of bureaucracy, administration and the employment of staff.
The decision to retire
A couple of years ago I decided I would like to commence winding up full time practice at about 65. I wished to finish my dental career whilst I was still able to do the work at a standard which my long standing patients had come to expect. Whilst it is satisfying and rewarding to be a dentist, the postural rigours of the decades, the endless pressures of time lines and the patience required with our work, all take their toll and there is no doubt that burn out is real.
To drop a day or two a week seems a good start but as a partner in a multi partner practice with fixed overhead obligations, such a cut back would generally make it non viable to remain as a partner.
In order to cut down I must offer my partnership share to the remaining partners or to someone new. Our multi partner practice has mostly employed assistant dentists but only some of these wish partnership.In addition it is imperative that they are compatible with the ongoing partners.
Finding the right partner
Our practice required an experienced dentist who was ready to commit to practice ownership, who could see the attributes and viability of the practice into which they were buying and who was acceptable to the other partners. Ideally they would work for a time as an assistant dentist working in parallel with myself. They would gradually take over patients who wished to stay within the practice, as my “slow down” occurred.
Communication through a network of dental colleagues resulted in an initial contact with an interested practitioner 12 months prior to my intended target for change over. Informal meetings commenced with discussions about work styles, expectations and timelines for entry. Once the other partners had agreed to the dentist’s suitability we moved to open exposure of the financial reports of the practice over recent years.
The financial details
Valuations of property associated with the practice were obtained as well as a valuation of the practice itself from a very well known practice advisory group. These tangible and professional valuations under pinned the worth of the practice and whilst values are often in the eye of the beholder they were broadly sustained by the potential new partner’s independent assessments.
Copies of all Partnership and associated structure Contracts/Agreements were progressively offered as well as ongoing financial figures as the months progressed.
Whilst unencumbered property ownership provides a tangible asset to the practice and is a visible part of the purchase, “goodwill” or “opportunity cost” as some accountants term it, still has significant worth. There is wide variation on the value of goodwill but there are formulae related to annual income from all practice sources that can be applied with some validity. Factors such as location, financial indebtedness and judgements of underlying “soundness” will influence the purchaser’s confidence that the cost is reasonable.
Getting the right advice
It appears to me from colleagues who have recently been involved in exiting dental partnerships that purchasers have upper limits and a practice with too high a price will not attract interest. It is also related that some accountants to dental practitioners have not offered advice that is attuned to the sale of a dental practice. Dental practices are a little unique in their value.
The new Partnership in turn needs to review the currency and adequacy of its formal Contracts and Agreements.
The costs of legal and accounting advice and documentation is appreciable but is essential to ensure that the process obeys the law and accounting rules and protects the interests of all parties. Capital gains tax liabilities are triggered as well as various transfer duties. Overall the process is quite complex but necessary.
The handover process
The opportunity for the prospective partner to work within the practice prior to partnership occurred and this has proved valuable in enhancing the confidence of both parties that the change over will work. The presence of the future partner will also facilitate the transfer of patients.
A meeting of the prospective new partner and myself, along with our respective advisers occurred to iron out any sticking points and then letters of “Offer” and “Intent” were exchanged. Subsequent to this, lawyers were engaged to draft a formal Sale/Purchase Agreement to cover every detail of the transfer of ownership of the Partnership Share. In association with this a timetable of the processes essential to the transaction was produced.
This move towards retirement has had its stresses as each stage proceeds. The prospect of working fewer hours is looking quite attractive. The eventual cessation of private dental practice is a little more daunting but it is inevitable.
Every dentist’s pathway to retirement will differ but sometimes it is good to know what others have done as you consider your journey.
Good luck and good health to all my colleagues who are on that similar journey.
By Bruce Noble – General Dental Practitioner, (Member Guild/ADA Liaison Group)