The bulletproof dental transition timeline for buyers

A dental transition is a daunting task for any buyer, let alone first-timers who make up the majority of buyers out there. Being a first time buyer, you’ve cut your teeth on the clinical side of dentistry and, through your Associateship, have hopefully picked up a thing or two on the business side of running a practice, but what about the transition? Where do you start? Who do you talk to? When? Not everyone has the luxury of associating with an aging Dr. looking to transition to them so for many, the process begins with the search.

Dental transitions can be confusing for buyers
You’ll first want to start assembling a team consisting of a lender (as you’ll likely need financing), an attorney, a CPA, an insurance agent, and a practice management transition consultant. We recommend targeting team members who are dental specific and begin reaching out sooner rather than later. Even if you’re in the market but haven’t yet found the practice you like, these folks will be able to help guide you and can tap their networks to assist your search. If you’re a GP, it also doesn’t hurt to reach out and connect with specialists in your desired area too. After all, specialists have some of the largest networks of GPs around and may know of some referring docs looking to sell.

Once you’ve found that practice which appears to align with your clinical and personal goals it’s time to put your team to work on their respective areas of expertise. Understand however, that you will be the field general responsible for monitoring progress and ensuring execution. This requires you to have a general understanding of the timeline and various tasks at hand. While you surely can’t be prepared for every detail of the transition because in reality, every deal will be different, it’s best not to leave it to chance and assume your team will handle everything as miscommunications will be had and things will surely fall through the cracks.

You’ve found the practice. You’ve begun assembling your team. Your path to a successful transition awaits!

path to a successful dental transition

Phase 1: Initial Analysis (“Kick the tires”)

I like this practice. How much should I pay? How much will I take home after overhead, debt, and taxes? Does it make sense?

Your Tasks

  • Finalize selecting your team
  • Obtain loan prequalification from your lender
  • Begin developing a business plan
  • Calculate your monthly budget and begin memorializing your long-term goals (how else will you know if the practice will make enough money for you?)

At this point, the lender, attorney, and CPA of your choice should be willing to help you for little or no fees.

Attorney Tasks

  • Draft and submit Letter of Intent or “LOI”

CPA Tasks

  • Analyze profitability of the practice
  • Assess the reasonability of the asking price
  • Project after-tax cash flows

Phase 2: Due Diligence (“Take a look under the hood”)

 Is the practice as strong as advertised? Do I need to adjust my offer? If so, by how much?

Your Tasks

  • Perform clinical due diligence: determine whether schedule and production mix mesh with your clinical capabilities, inspect the office, patient chart audits, etc.
  • Inspect equipment for any necessary repairs in the near term – equipment reps will be glad to help free of charge
  • Consider engaging a transitional practice management consultant
  • Obtain loan agreement and if the lender requires, begin working with an insurance agent to secure collaterally assigned life and disability insurance policies

Attorney Tasks

  • Complete and submit documents of incorporation, federal and state
  • Review and negotiate building lease (or building purchase) agreement
  • Review and negotiate purchase contract
  • Review any other contracts which would impact you as the buyer (this is especially important if the transition is a stock purchase)

CPA Tasks

  • Work with attorney to review tax and financial implications or articles of incorporation, lease, and purchase contract
  • Review loan agreement
  • Perform due diligence over collections, production, accounts receivable, payroll, facility costs, and other areas of financial significance
  • Negotiate the purchase price allocation with the seller’s CPA if an asset purchase
  • As needed, assist you in negotiating purchase price based on findings


Phase 3: Finalize and Execute (“Sign the paperwork, take the keys, and drive off the lot”)

Is the bank ready to lend? Are agreements finalized? Am I prepared to run the practice?

Your Tasks

  • Set up payroll system
  • Work with seller to finalize and send out transition letter to patients
  • Meet and greet the current staff and associates, assure them they will remain employed with the practice and their benefits will remain unchanged (if that is the plan, of course)
  • Finalize an employee handbook
  • Ensure proper licensing
  • Begin Credentialing process with insurance providers you plan to accept (begin this process immediately after you’ve obtained your Tax ID)
  • Transfer utilities and supplier accounts

Insurance Agent(s) Tasks

  • Finalize placement of: Life*, disability*, contents, malpractice, worker’s comp, facility, and commercial liability policies.

*If the bank requires collaterally assigned life and disability policies, we recommend getting two of each. One which meets the bank’s demands and one to protect your family’s interests.

Attorney Tasks

  • Finalize all legal documents and obtain signatures

CPA Tasks

  • Set up on-going accounting system
  • Establish Tax IDs and S-election with the IRS
  • Review sufficiency of insurance policies

-Paul Lipcius, CPA, CFO Advisor at PracticeCFO

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