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BIG Idea: Transitions Conference helps dentists plot their futures

August 23, 2019

By David Burger

 BIG Idea 2019 speakers

Quartet: Four experts in their fields shared their insights at the 2018 BIG Idea conference at ADA Headquarters Aug. 9. From left, Kirk Dewart, Dr. Roger Levin, William Prescott and Allen Schiff.

Kirk Dewart had a simple answer for when dentists should start planning for retirement.

The right time to formulate an exit strategy, he told the crowd assembled at ADA Headquarters, is the first day they start treating patients after graduation from dental school.

It’s never too early, said the director of U.S. health care programs within BMO Harris Bank’s Metropolitan Banking Group.

The BIG Idea: Transitions Conference convened Aug. 9 with about 110 attendees to focus on dental practice transition options and strategies.

Key topics at the conference, which the ADA Council on Dental Practice hosted, included helping dentists identify the right time to start thinking about transition planning — including retirement and buying or selling a practice — and identifying factors that drive the value of a practice.

The conference covered when and how to start transition planning; structure, ownership, practice valuation, agreements and legal compliance of dental transitions; and how asset allocation can minimize taxes and maximize value when selling a dental practice.

 “Thanks to this conference, I now have the information and tools I need to develop a plan that will enable me to sell my practice and retire on my terms,” said Dr. Julia K. Mikell, a CDP member and solo practitioner.

Along with Mr. Dewart, the speakers included William P. Prescott, author and attorney; Allen Schiff, certified public accountant and founding member of the Academy of Dental CPAs; and Dr. Roger Levin, thought leader, chairman and CEO of the Levin Group and third-generation dentist.

The takeaways from Mr. Dewart’s presentation “Plan Your Exit Strategy” included:

• An exit strategy is important to increase practice value and earnings potential; serves as a road map that keeps you focused on goals and objectives; gives you confidence in evaluating practice needs; allows you to proactively interview associates and potential partners; and ensures the legacy of your work.
• In regards to preserving your legacy, take an honest assessment of what key characteristics in your personal practice are non-negotiable, what keys are negotiable and what likely needs to change. Leave openness and flexibility for the buyer to add value in their own way, observe interactions with patients and make note of any fresh approaches that seem to add to the patient experience.

The takeaways from Mr. Prescott’s presentation “You’ll Need a Lawyer” included:

• Always maintain a current valuation report or buy-out formula. Sell when you're ready versus during a catastrophe and maintain advance instructions and coverage agreements.
• The order is important in determining the right exit strategy for you. The restrictive covenants, confidentiality agreements and letters of intent will be applicable to all exit strategies. Finally, the practice valuation for any complete sale or associate buy-in will always be necessary along with a mechanism or formula to determine the value of a future buy-out.
• What are the two most important factors affecting practice value? The most recent year's collections and profit in all forms has the greatest impact.

 Dr. Roger Levin at 2019 BIG Idea conference

Center stage: Dr. Roger Levin discusses “15 Ways to Increase Practice Value ASAP” in front of the Aug. 9 BIG Idea Conference.

The takeaways from Dr. Levin’s presentation “15 Ways to Increase Practice Value ASAP” included:

• The four phases of a successful transition are:
• Build practice value.
• Create consistent results.
• Prepare for change.
• Execute a successful transition.
• Find a broker — before you are ready.
• Determine targets for growth. What practice production is necessary for a sale?

The takeaways from Mr. Schiff’s presentation “Considering a Sale of Your Dental Practice? How to Make it Tax Efficient” included:

• What is the purchaser actually purchasing? Continuity of the referral sources and continuity of the team. If any of these two get tainted, the value decreases.
• Across the country, practices are generally valued at 60-80% of the prior 12 months’ collections. Practices collecting under $600,000 are desirable because they are affordable and can grow.
• Most sellers are shocked to learn the tax burden of the sale of their practice. It’s mostly due to the sale of fully depreciated assets or assets with zero tax basis. The problem is even more painful if the practice is incorporated as a C corporation.
• If you are a buyer or a seller, don’t leave yourself open to any questions. Complete all the due diligence and ask all of the necessary questions. If you don’t know what questions to ask, engage a dental CPA who does.

The conference was recorded and will be available later on The ADA News will run a notice to readers when it becomes available.