By Stan Goff, Senior Managing Editor
With a long history of working in dental IT and dental real estate, Henry Schein’s Dan Van Eps has looked to help dentists from a variety of angles over the years.
In his current role as Senior Director of Transition Services at Henry Schein Dental Practice Transitions, Van Eps helps dentists prepare for retirement and sell their practices, while also advising clinicians and DSOs looking to acquire new ones. He and his team are dedicated to helping dentists optimize their performance and grow their practices, ultimately for the benefit of both their patients and their own future goals.
“Whether you’re selling or scaling, it’s vital to understand the solutions available to you,” says Van Eps. “With an eventual sale in mind, you need a clear grasp of how all the different moving parts of the dental industry fit together.” These days, dental practice owners have a lot to think about before selling a practice. How soon should they begin to think and plan for the transition? How long might they want to continue performing dentistry before and after a sale? Should they sell to a private practitioner or a DSO?
These are all critical considerations, and Van Eps and his team have the experience and know-how to help.
It all starts with the practice valuation, and from there, you as the practice owner can determine if there’s a need to improve the practice and figure prior to a potential sale. But just as important is making sure your practice doesn’t decline before a transition process is considered. This happens all too often and can be the result of a clinician unwisely decreasing production (for whatever reason) prior to a sale – almost senioritis before retirement.
The First Step
“The best starting point is to uncover the true value of your practice. Many doctors may have a guestimate, but they don’t really know fully what their practice is worth,” he says. Some of them are anticipating a sale price that’s higher than what they want and they build that into their expectation/“need” for retirement. Sometimes owners don’t realize that it’s worth more than what they think. This is a direct result of unsophisticated review (e.g. multiples of gross collections) or just anecdotal conversation of what something may have sold for, but without true comparative analysis.
“The valuation is crucial because it provides more than just a price baseline; it allows us to identify pitfalls that could hinder a sale,” Van Eps explains. “Obtaining a valuation early, allows for plenty of time to address those issues. For example, if the overhead is too high or if there are lease problems that would make a transfer difficult for the buyer, we can handle those things early.
“Often, doctors plan to sell in 5 years but start slowing down too soon. Moving from 4 days a week to 3 without compensatory efficiency and productivity can put the practice in decline, and unfortunately, it’s hard to sell a declining practice for any ‘full’ value. Many owners don’t realize that it’s difficult to secure a loan for a buyer when the practice’s numbers are trending downward.”
These are exactly the areas a consulting team like Henry Schein Practice Transitions can address. By helping clinicians plan effectively, they ensure a smooth transition and a maximized valuation, allowing the owner to exit on an upswing.
Plan Ahead
Van Eps says it’s ideal to plan for a transition at least 5, if not 10 years in advance, but circumstances can arise that require a much quicker sale.
“Ideally, we start 5 years out to put things in motion for a solid, maximized sale price. This creates a practice that buyers want because it’s efficient and trending upward,” he says. “Even if a doctor needs to sell much sooner, the core process doesn’t change. We begin with a valuation to establish the right price point before going to market.” While the Henry Schein Dental Practice Transitions team most often represents sellers, Van Eps knows that if there isn’t a good team around the purchaser, these deals can fall apart. Buyers should have a team that includes a good, experienced, dental CPA and reputable dental specific lender that can give them the market specific terms that they generally cannot find from a traditional bank. Later, buyers need a quality attorney, ideally familiar with dental practice transitions (not just general business or some other law) that can represent them through the transaction.
“If a doctor doesn’t already have an ‘A-team’ in place, we feel it’s vital to help them build one. This ensures they are set up for success and that the entire transition moves smoothly,” Van Eps adds.
One often overlooked item in transition that can completely derail a transaction is the practice’s lease. Important points, including the remaining length of the lease, and whether it may be assignable (and on what terms!), can make all the difference when an owner is working with a purchaser and lender. This is just one point. With so many factors playing their parts in the sale and subsequent transition, planning is important. Contacting experts like Van Eps and his local representatives is a must to ensure a seller gets the most out of this big move.
“It’s about making sure the doctor understands the, and their, plan. Some want to sell in 5 years and just move on, but they might be leaving money on the table,” he says. “For example, selling to a DSO has the potential to bring in a higher price, provided the doctor is willing to stay on for a while. If they plan for that transition early, they can maximize the sale price today and still have the security of working for the next 3 to 5 years.” The planning ahead of time creates all these avenues that, if they’re in a situation where they’re worried about what’s going to happen and needing to move quickly, sometimes those are tougher deals to sell, he explains.
Additionally, “we can’t always predict the timing of a sale, which is why we believe so strongly in what we call an ‘emergency exit plan.’ We provide this service because we’ve seen the alternative: when a doctor passes away without a plan in place, the practice can become nearly unsellable within a few months,” Van Eps says. “Without a doctor in the office, momentum is lost. We recommend that every doctor includes a contingency plan in their preparation. By having a completed practice valuation on file, the family can go to market immediately. In these situations, the best chance to preserve the practice’s value is to secure a buyer within the first 30 to 45 days.”
Expert Advice
There are many options available, and every seller’s situation is unique. That’s where Henry Schein’s experience makes a significant impact. “We are unique in that we don’t push a doctor in any one direction. We want to understand their specific goals and what they want their legacy to look like,” Van Eps explains. “Often, the best thing we can do for a doctor is bring multiple buyers to the table—including both individual practitioners and DSOs. This allows the doctor, their spouse, and other advisor, as well as their Henry Schein Dental Practice Transitions consultant, to evaluate the pros and cons of every offer, ensuring we achieve the highest possible result, or what aligns with the owner’s personal goals.” Unfortunately, some doctors approach a single DSO and accept an offer without realizing that, without competition, that DSO had no incentive to provide their best price. Or the doctor doesn’t know their practice’s value in the first place so has no point of comparison. Having representation is critical, not only to maximize the sale but to protect the seller’s interests. He estimates that in almost 50 years, Henry Schein has had more than 5,000 successful transactions across the country. Van Eps says the company loves to hear from happy customers.
“Not only do we love it when we get a seller testimony, but a lot of times we’ll get the buyers as well, even though we didn’t represent the purchaser,” Van Eps says. “When they’re both very happy about the transaction, it’s great to hear. We even host seminars where we invite past clients to speak directly to prospective sellers. It allows doctors to hear firsthand how a transition works from a peer’s perspective, rather than just hearing it from a consultant.”
For more information about Henry Schein Dental Practice Transitions, click here.
Connect with Dan at [email protected]
