No matter how fast you want to get there, you shouldn’t take short cuts to get to the finish line of your dental practice sale to officially become the owner.
Not only do you need to think about the transactional pieces of the sale, but there are also a number of operational responsibilities to ensure the practice is ready for new ownership. This includes a range of items, from creating a new business entity, transferring existing systems into the entity’s name, initiating business-related insurance vendors and assessing and adjusting any employee benefits.
Ensure you’re prepared for the first day of ownership by reviewing and completing these major operational items. As every practice and dental transition is unique, some of these items may already be in place, some may be completed in a different order, and some may not be applicable to your situation. You will also have a different list of items if you’re entering or creating a partnership.
Note that while these tasks are the buyer’s responsibility, a seller will have to participate and assist to ensure a smooth transition.
As this list may appear lengthy, the first step is simply understanding the potential need for these tasks and how they relate to your unique situation.
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Your dental transition advisor, certified public accountant (CPA) and legal team may need to be involved and can assist in the execution of these tasks. A solid transition team consisting of dental-specific people you trust will help educate you on the critical items and keep the process in motion.
Entity Creation: Create a new entity, which will be used to purchase the assets of the practice. Your attorney will be able to assist with the appropriate legal entity type, while your CPA can help with any elections (S corporation) and obtaining your employer identification number (EIN).
If you are also purchasing the practice real estate, there are different considerations involved. Work with your attorney and/or financial planner to discuss which entity and elections are the most beneficial when buying the real estate.
Lending: As you explore different lenders, they will have a list of items needed in order to fund the purchase. Gather the materials required and ensure the lenders have all the necessary information.
If you receive multiple offers from different lenders, review and compare those. You can also bring in your transition advisor to review and offer insight.
Attorney Representation: Engage a dental-specific attorney who you feel comfortable with. It is advised to interview at least two attorneys before engaging.
Your attorney can not only help set up your entity, but they will also review important legal documents, such as the practice purchase agreement and the lease agreement or real estate purchase agreement.
Practice & Real Estate Legal Documents: If you’re purchasing the real estate, you’ll need a purchase agreement. If you’re leasing, you’ll need a lease agreement/assignment.
Typically, the first draft of legal documents starts with the seller, and then your transition advisor can review based on industry and negotiation terms. Your transition advisor can also work with your attorney to facilitate any negotiations.
Bank Accounts & Business Credit Card Accounts: You want to know where the patients’ payments will go on day one. Set up new bank accounts associated with your new practice entity EIN. You may get a new bank account as part of the lending process, and some buyers choose to have more than one account (one for cash deposits, savings, etc.). With credit cards, your choice depends on the rewards and rates that best fit your needs and wants.
Payroll Processing & Merchant Services (Credit Card Processing): As credit card payments by patients are trending higher, it’s important to have the ability to take that payment. Determine which companies you will use for payroll and merchant services, and ensure they’re set up under your entity. If you choose to use the same companies that the seller has in place, you’ll still need to set up your entity with them.
Business-Related Insurances: Initiate insurances for the practice entity (i.e., contents insurance or business personal property insurance, general liability insurance, malpractice insurance, business overhead or disability insurance) and any other lending insurance requirements. It’s recommended that these insurances are initiated at least six weeks prior to closing the sale.
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As you work through this list, you’ll want to be mindful if the staff isn’t aware of the transition yet. Typically driven by the seller, the announcement to the team can be a sensitive and pivotal conversation, and you don’t want to act prematurely if they haven’t been informed yet.
Practice Management System: Work with the seller to transition the practice management system into your entity name, or establish a plan for a new practice management system. This should be ready to go on day one of ownership.
Employee Benefits: Review the current employee benefits offered by the seller (i.e., health, dental, paid time off, sick time, retirement), determine what you will offer and contact the appropriate third parties to ensure they’re set up with your entity. If you decide to make any changes, create a plan to address them, while being considerate of the current employees’ perspectives.
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These tasks don’t have to completely fall on your shoulders. A dental transition advisor can offer insight and resources to help you in your progress.
Patient Insurance Credentialing: If applicable, evaluate insurance plans accepted by the practice, and determine which plans you’ll participate in. Ensure you’re set up with those insurance plans.
City, State, Board & Other Credentialing: Verify that city, state, board and other credentialing agency requirements have been met. This includes items regarding address notifications, business permits, the Drug Enforcement Administration, etc.
Accounting / Bookkeeping / Financial Planning: When growing the practice, it’s imperative to efficiently manage the practice finances, understand trends and be knowledgeable about your business. Work with a dental-specific team, such as Cain Watters & Associates, to help you reach your financial goals and support you in accounting, financial planning and tax preparation.
Other Services/Contracts: Transition over services and contracts in relation to utilities, security, website, computer servicing, advertising, etc. Some of these items can be completed closer to the closing date, but understanding these ahead of time can help ease the transition.
Vendor & Overhead Management: To enhance your practice’s efficiency and optimize cash flow, it’s important to leverage dental-specific solutions. This can lift the weight of certain business responsibilities and save you money on supplies and services. Utilize a vendor-management resource, such as Elite Dental Alliance, to receive exclusive rates on supplies, equipment, patient financing, advertising and more.
Through Every Step of the Way
It’s not uncommon to feel overwhelmed with the various details and moving pieces involved in a practice sale. A full-scope dental transition advisor like NDP can guide you from the initial phases of exploring the practice opportunity to the final steps of closing the deal. Reach out to our team for a complimentary call.
