Closing Costs: Selling A Practice to Supplement Retirement

Are you counting on your practice sale to fund your retirement?

If so, you may need a backup plan. Typically, after taxes and closing expenses, the profit from selling your practice is roughly equivalent to what you would take home from the practice after working an additional 1.5 – 2 years. As a result, many dentists fail to plan their finances for retirement.If you are considering retirement in the next ten to fifteen years, now is the time to start planning.

To start, ask yourself: How much will it cost to live once I retire? If you can’t answer that question, it is time to start calculating. Use your credit card statements and check register. You will need to include taxes, health insurance, medications, mortgage, travel, gas, insurance, repairs, maintenance, phone, clothes, gifts, entertainment, hobbies, food, utilities, and cable. Then, determine a monthly and annual cost of living.

Now is the time to get totally out of debt. Banks place liens on your practice when you borrow money or open a business line of credit. If you have borrowed money, the debt will have to be paid off before, or at the sale of your practice.

What investments and other assets do you own? Do you own stocks, bonds, fixed assets, cash, or money market accounts? How much income will these assets provide after retirement — and is it enough? Currently, social security is still viable, but will likely only fund a small portion of your retirement needs.

Determine whether your future total income from investments, social security, disability insurance, and any other sources will be enough to cover your future budget. If not, then you will either need to reduce your current and future standard of living, or lengthen your timeline for retirement.

The most common solution dentists see as the answer to retirement income is to sell their practice. If that’s your plan, you should probably be looking at other options to supplement your retirement.

If you haven’t started planning yet, now is the time.

• Jennifer Furey, CPA

Dental Financial Wellbeing

Are you a dentist just out of dental school with a practice to run and you’re not prepared for the business aspects? You might be making financial mistakes every day and not even know it. You could have major financial problems coming your way and won’t know it until it’s too late.

Across the country dentists are struggling. The percentage of dentists who describe themselves as “not busy enough” is increasing all because of a growing supply of working dentists and shrinking demand. If you find yourself with more time than patients, you could be in trouble. With dental care among adults decreasing and the continuing changes in dental insurance, it’s harder and more important than ever to get control of your finances.

Financial decisions – For some dentists, every financial decision causes panic, even the routine ones. If you don’t have sufficient cash flow, you won’t have the money to confidently spend on the things you need to grow your practice. Some of this can come from poor management of overhead. As a percentage of your revenue, you should be running your practice at about 55% to 60% overhead. Anything higher than 60% can mean you are heading for disaster.

Debt – If you’re afraid of debt, this can only make the problem worse. When you try to pay cash for everything, it means you don’t have cash things that come up, and this puts you in a position where your problems feed one another and send your finances into oblivion.

Retirement – Poor cash flow also leads to poor long-term savings, which can delay and dramatically reduce the quality of your retirement. If your money is sunk into overhead costs and tax bills, you won’t be able to adequately save for retirement. To maintain your current lifestyle after retirement, you need to manage your money intelligently today.

Are you spending more time managing your practice than seeing patients? If so, you need help, before it’s too late. Seek financial guidance now, and get your practice back on track.

Are you a Strong Dental Practice Leader?

A leader builds trust by considering the “good of all” when making decisions. Leaders do not abuse their power, but build trust by using it properly. Trust fosters unity, which contributes to openly sharing information and creates a solid team that supports each other. Trust is based on the respect and expectations of a leader who cares and acts with compassion in a most positive way. With trust there is: honesty, integrity, fairness and compassion which produces good relationships.

Essentials to ensure strong leadership:

Lead by example — Pay close attention to the reactions of your staff to what you say or do, how you treat others, and how you react to things. You will notice that you have a great impact on total team performance, for better or worse.

Create and share a vision statement — Having a vision of where you want the practice to be in three to five years will help you get there. Putting it in writing and share it regularly with team members.

Delegate— Letting go is essential! It will free your time for income-producing dentistry and team members will respond positively, as long as you provide the needed training and tools to succeed.

Training — As practice leader, you must make sure that everyone on the team has the skills they need. Use a combination of shadowing to train or cross-train staff members, and role-play with scripts, on and offsite training days, and continuing education courses.

Demand excellence — Ensuring success in the dental economy requires setting your practice apart from others by excelling in all aspects of patient care and customer service.

Communication – As a leader, your team looks to you for advice and guidance. It’s imperative that you communicate with them openly and often. Communication is the key to success.

If you strive to excel at these principles of leadership, you will be on your way to being a great leader. With great leadership comes great rewards….