Why Wait When The Time Is NOW!?
Imagine you are running a 40K marathon and you slip and fall in the first 100 yards – it is possible, if you are good enough, to get up and still win the race. Now imagine that you are winning the race but you slip and fall in the last 100 yards – in this case, it is much less likely that you could get up and still win the race. The point being that the risk of success or failure becomes much greater the closer you get to the end of the race.
If you are thinking about selling your practice, or if you should be thinking about selling your practice, you are close to the end of the race. Once you are within the appropriate range, waiting only begins to increase your risk of loss. Here are a few reasons that should encourage you to act sooner rather than later.
- Professional practices tend to grow during the owners’ 30’s and early 40’s, they coast during the professional’s remaining 40’s and 50’s and decline during the professional’s 60’s and beyond. This happens to dentists, lawyers, accountants and almost all other professionals. The reasons for this are simple. When you first start your career, you work hard to make your practice grow, when you start to achieve good success you work a little less hard in order to enjoy that success. Ultimately, working less hard catches up with you and your practice starts to decline, and in some cases the professional finds themselves out of gas with a declining practice – not good. The objective is to sell your practice when you are relatively close to the top and certainly before you are out of gas with a declining practice. If you are over 60 you are moving toward the slope and should seriously consider selling sooner rather than later.
- Both the Federal and Provincial governments are looking for money and have decided that dentists are a great place to look. To date the “new” Federal Government has made unfavourable changes to your tax liabilities and only a fool would think that they are done attacking your income. Of concern, should be the treatment of the “free” portion of a capital gain. Currently one half of a capital gain is tax free. Prior to the last Federal Budget, one of the items considered by a good number of tax specialists to be targeted for adjustment was that “free” portion of a capital gain. Increasing the taxable portion of a capital gain from 50% to say 75% would have a huge impact on the sale of most dental practices. Whatever the Federal and Provincial governments end up doing will almost certainly not be to your advantage and could be materially to your detriment.
- The Market is hot NOW. Most good practices are selling quickly and often for premiums above appraised value. This has not always been the case, nor does anyone expect it to last forever. We’ve been riding this bubble for quite some time, so if selling is something you have been thinking about, now really could be the best time to get off the bubble and sell your practice.
- At the present time, there are a lot more buyers than there are sellers which makes values skyrocket and attaining your ideal transition strategy a very real possibility. This means that your options for a transition strategy have never been better. If you are ready to slow down but not quite ready to retire, you can sell and stay on as a part-time or full-time associate. Alternatively, if you are ready to fully retire and move on to your next venture, then you can sell and leave. The point is, in a seller’s market you are more likely to get the transition strategy that you want, whatever that may be for you.
- Running a dental practice is stressful. Interestingly, In 2007 Randy Lang DDS., D.Ortho published a very insightful article entitled “Stress in Dentistry – It Can Kill You” (Randy Lang DDS, 2007). On its own, the article is certainly worth the read however, it also speaks volumes about the risks associated with waiting too long to sell you practice. A few of the highlights and I quote:
- “Coronary disease and high blood pressure are over 25% more prevalent among dentists than in the general population.”
- “Dentists suffer psycho-neurotic disorders at a rate of 2 1/2 times greater than physicians.”
- “Emotional illness ranks third in order of frequency of health problems amongst dentists, while in the general population it ranks tenth.”
- “The #1 killer of dentists is stress-related cardiovascular disease.”
Unfortunately, it is not uncommon for us to get a call from a dentist (or their spouse) who is sick and has no choice but to sell his or her practice. This is a situation which, at its best, means that you will sell your practice for less than if you were healthy. Sometimes this means that you will not be able to sell your practice at all.
We understand that selling your practice is an emotional decision that will affect many individuals. We also know that there is no concrete formula for determining the right time to sell. It is important to understand that all the factors which are currently working in your favour, will not last indefinitely. Don’t miss out on your best opportunity which is probably right now.
Randy Lang DDS, D.Ortho (2007, September). Stress In Dentistry – It Can Kill You. Oral Health. Retrieved from http://www.oralhealthgroup.com/features/stress-in-dentistry-it-could-kill-you/