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5 Items To Consider When Planning Your Dental Practice Transition

Posted by Brogan Baxter on Tue, Mar 3, 2015


One of the biggest trends in dentistry today is the logjam that’s been created from many baby boomers still practicing dentistry. The number of dentists per 100,000 people grew from 59.8 in 2008 to 62.0 in 2011*.

The trickledown effect that this glut of practices needing to be transitioned is creating is changing the face of dental market today. Unknown to most, the issues from too many dentists holding onto their practice is only worsening the dental market in general by allowing for opportunities of corporate dental companies to take a larger hold of the market by acquiring practices on the cheap that couldn’t be transitioned otherwise due to lack of in strategy and/or buyers.

Further compounding this issue, many anxious new dentists coming out of school cannot locate a suitable, appropriately priced practice so they seek the structure and safety of the corporate practices, even though their long-term goal is to eventually own their own practice.

Read the Guide: Financial Planning for Dentists

As a result, this growing hold of the corporate movement in dentistry is pressuring the solo practitioner into taking more insurances, but that’s another article for another time. So how can you prevent this trend from continuing to happen and reverse them altogether?

The short answer is better transition planning, but let me expound on this idea more to help add clarity to this issue. Each dental transition should be as unique as your practice is—there is no one single way that is best for a dental transition. Anyone that tells you otherwise is dead wrong. It is not a square peg, round hole situation, but there is a great deal of planning that is needed in order for it to be done correctly. Here are 5 things you need to look at in your practice prior to your implementing your custom transition process.

  1. Timeframe—this seemingly simple idea can dramatically sway, if not even dictate, the type of transition you can implement in your practice. According to a 2010 survey done by the ADA, dentists under 40 plan to retire at age 61, however when dentists over age 40 were asked the same question, the average drifted up to 67**. That example is a microcosm of what we see on a daily basis of our firm. Once dentists really start thinking about what it actually takes to retire and what must happen before getting to the point of a transition, they realize a great deal of planning needs to go into a proper transition strategy and some smaller practitioners just give up altogether and close the doors. We like to tell everyone to do it the right way, you will need to start laying out the plan 10 years in advance. If you’re inside your 10-year window, your options are becoming limited with each passing day.
  2. Ideal type and logistics of your transition—a statistic I’ve seen in numerous venues over the years is that 75% of associates do not turn into partners and whenever I speak and mention that statistic, the crowd typically says it should be higher. Regardless, we think that is a real travesty and that things could be much improved with better planning. Be sure to ask yourself: “what type of transition to I envision for myself?” Basically there are 3 types of transitions: #1—A tiered transition—this is where portions of the practice are sold over a period of time (i.e. 50% now and the second 50% in 4-8 years, etc). #2—A “walkaway sell”—this is when the heir apparent is brought in, the transition done, and the host dentist leaves all occurring within a 12 month period typically. #3—A combination transition—this is basically a combination of the previous two options. Monetarily, the tiered option mentioned above will net you the most for your retirement, but most cannot afford this type of transition, wait too long to plan for it, or simply do not have the personality for it, but if this is done correctly, the goodwill of your sticking around will pay dividends for the transition value. Whichever type of transition you plan, you’ll want to consider what both you and the associate are looking for. The associate needs some guarantees on the front end (i.e. salary, contract, a strategy up-front for the transition, etc)—handshake deals are not okay when dealing with transitions, so that cannot be part of your plan. There needs to be specifics and it needs to be written down. Once the associate needs are covered, you need to make sure your concerns are dealt with appropriately (i.e. price, when you stop working, making sure your patients are taken care of, etc). Make sure you mention your ideal way to unwind from the practice—are you a “cold turkey” or a “phasing-out” kind of person? Whichever it is, I will give you this one bit of advice: make sure you have a plan on what you want to do once you are retired. Whether that is philanthropy, family, hobbies, etc, one of the worst mistakes I’ve seen in my 12 years of experience is a dentist retiring without having a plan to fill their time. Also, while you’re thinking about this question, you’ll want to have a pre-determined plan on the real estate if you own your practice location…that has to be part of the deal and considered as part of your transition plan.
  3. Business model—once you have a timeframe and a general idea of the logistics and type of transition plan you want to implement, you’ll need to make sure your business model can accommodate your ideal scenario. One of the first items to consider with your practice is your production level. If you produce $600k, your practice is too small and you can’t afford an associate for a transition. There is not any one dollar amount that translates into bringing in an associate, but it is an amalgamation of multiple different factors: production, overhead, schedule, etc. Another consideration is the location size as well. Typically for an appropriately producing practice, having at least 6 total operatories is ideal—this would allow both dentists to work out of 2 chairs each plus have hygiene running at least 2 chairs. Well before the business model portion of the evaluation process and ideally during the Timeline section above, you’ll want to objectively identify if your practice is “transition ready” or if you need to prepare the practice to be able to sell it. No different than when you are having a baby and preparing the nursery, you need to make sure that your practice is ready to accommodate an associate. If you don’t have digital, get it—it’s not cheap, but many associates will look right past your opportunity if you don’t have it. Having a practice that is ready to walk into from an associate’s standpoint will allow you to command a higher price for your practice because it is more transition-ready. This is exceedingly important for dentists in rural locations as most younger dentists are looking to stay in suburbia as opposed to a more rural location. It also signals to the associate that you are dead serious about your transition and want to make sure they are comfortable when they come in. There is a happy medium to this however because it is not necessary to have all new equipment in your practice. Generally speaking, in your 50s you should only be adding equipment that is necessary to transition and/or are critical to your daily production levels.
  4. Overhead—this is one of the most misunderstood and often overlooked portions of a transition based on my experience. Though this really goes under the Business Model section above, it merits its own discussion. The overhead value will make or break your transition plans because overhead is inversely related to your cashflow and cashflow is the #1 determining factor in a formal appraisal of a dental practice value. The lower your overhead, the higher the income you make from the practice—and the more you make, the more your practice will be worth. From a planning standpoint, the lower your overhead is, the easier it will be able bring in an associate at an appropriate salary without cannabalizing your income while also lowering your relative risk to bring them into your practice. As a host dentist, you have to offer some sort of a base salary to compete for the top talent available because your competition is and those associates need some sort of guaranteed income to deal with their six figure student loan debt. To help offset the cost of bringing in an associate to be a partner, look at expanding your schedule and spreading your costs over a 5-day workweek. To have 2 dentists in a practice and not be open 5 days is not an efficient use of your business model. To compensate for this, stagger your schedule so you work one day by yourself, they work at least a day or two alone, and have the other days be the ones where you work together.
  5. Personal monetary stability—if you covered the first four items above, you’ll already be way ahead of the curve when it comes to your transition, but all of this is for naught if you can’t afford to retire, so considering your personal retirement situation is a huge factor in this as well. A statistic was real was released by the ADA a few years back stating that 96% of dentists under save for retirement to support their current lifestyle. It doesn’t have to be that way because you still have control over that as you plan for your retirement. If you think you’ll be hitting the lottery with your transition, I’m sorry to inform you that you will not. An appropriately-priced practice typically sells for 60-70% of the previous year’s revenues, so unless you live in geographically desirable area like Hilton Head, you won’t get much above that without gouging the associate. Also remember too that the price you sell for (as well as how it is allocated for tax purposes) will dictate how the transition is taxed. At a minimum, you’ll be looking at 15% and as high as 45% all in to be paid to Uncle Sam so pay close attention to ideally structuring the deal as an stock sell if you are selling or an asset sell if you are buying. Most importantly, don’t sweat the small stuff if the cashflow works for both sides and you really like the transition plan in place. After all, cashflow does trump everything and unfortunately, I’ve seen too many transitions blow up on something as meaningless as a percent of classification applied to goodwill.

They say that negotiation brings out the worst in people, but if you haven’t saved enough to retire comfortably, it will be even worse and the new owner will absolutely pick up on it which can jeopardize the deal altogether. Treat the transition as icing on the cake to supplement what you have already saved and make sure you start saving way more now so you don’t have to hold out of top dollar and ultimately have the practice decline in the process.

If you’re not on pace to hit your retirement now, you need to start looking in that mirror and start figuring it out with your team of advisors. Though it is loosening up now, this is what has happened over the last 7 years as 2008’s performance in the market led to most portfolios to be cut in half. Focus on saving more and taking less risk in the market so you don’t repeat these mistakes. If you can implement these 5 ideas in your practice transition planning it should be able to put you well ahead of the game and allow you to transition on your terms. Keep in mind, this is a transition not a transaction and you’ve worked too hard to create your livelihood to haphazardly hurry into a poorly designed transition.

*M. Vujiic and B. Munson. Despite Economic Recovery, Dentist Earnings Remain Flat. American Dental Association Health Policy Institute, Research Brief. October 2013.
**2010 Survey on Retirement and Investment. American Dental Association. www.ada.org. August 2010.

Brogan Baxter is the Chief Operating Officer and senior analyst at Four Quadrants Advisory Companies, a national accounting, financial planning, and advisory firm with only dentists as clients. They are the only dental advisory firm in the nation with a money back guarantee on their services. To learn more or put your current team to the test, contact Brian Wilson at 877.720.6213 or bwilson@4quadrant.com.


 

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Topics: Practice Transition

Growing to Serve You Better

Posted by Brogan Baxter on Tue, Jun 10, 2014

FQA_Email_Stat2Four Quadrants Advisory has undergone a lot of changes recently, and all for the better. In the last two years, we've grown from a staff of three to eight full-time professionals filling roles from prospecting and sales to accounting to strategy and management. And with our growing team, we now have more and more hours to put into helping our clients grow their practices and build the retirement they dream of.

It’s not just that we have more employees at our disposal. We’re bringing in people with experience – people who have spent years and years working in finance, building up businesses and dental practices to be stronger, bigger, more profitable, and more efficiently-run.

That includes people like:

Kathy Collins, CPA

Bryce Woodyard, CPA

Mathew Ryan, Financial Planner and Analyst

Brian Wilson, Sales

Jason Wager, Sales

Ryan McLaughlin, Accountant

We’ve always been confident in our ability to help successful dentists turn their practices into wealth-building machines. We’ve always been confident that our advice will lead dentists to be able to retire earlier and more comfortably than they could otherwise. We’ve always been confident that we can help dentists transition their practices to their successors, while preserving their legacies and helping them profit.

But we’ve never been in a better position to do all that than right now. We’ve never done it better. And we’re certainly not finished growing. We’re excited about today, and even more excited about tomorrow. If you think you and your practice are ready to take the next step, let us know. Because we are.

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Topics: dental advisor, business of dentistry

What Happens to Your Practice When You Sell?

Posted by Brogan Baxter on Sun, Apr 27, 2014

SoldIf you do everything right, what happens to your practice immediately after you sell it and retire is up to you, for the most part. You can have a custom transition process, and ensure that everything is executed to your liking. That allows you to find the partner who’s best suited to carry on your legacy, and to protect the parts of your practice that you most value.

The problem is that not every practice can handle the requirements of a custom transition. Do you have enough production, a large enough facility, and low enough overhead to be able to take on an associate? If not you may be forced into a walk-away sell – zero to six months of preparation, then you hand over the keys and leave. That probably doesn’t sound like what you want, so your priority should be to get your finances in order so that you can transition properly. You’re preparing the nursery for the baby, so to speak.

If you have done that, what’s your ideal transition look like to you? What’s most important to you, what do you want to dictate? Don’t try to ask for too much – there will be a lot less interest in joining up with you if you’re perceived as a meddler. Nobody wants to run a practice if they won’t actually be running it.

But there are things that you can do to give you peace of mind. Be up front with your successor, both with your philosophy as a dentist and with what things are important to you. You need to find the perfect successor to your practice, not just the first person who’s willing to come in that’s willing to give you a check.

Finally you need to evaluate the way in which you want to unwind yourself from the practice. Are you going to quit cold turkey? Are you going to phase yourself out, and gradually sell the practice to your new associate? If you’re asking my advice, what’s best for all involved is for you to leave gradually, based on my experiences over the last decade. You get to keep working until you feel totally ready to leave. Your patients get to meet your new partner, and see you work together as a team. And your associate gets the increased goodwill that creates, and will end up keeping more of your current patients – earning you more value for your practice.

In the end, a custom transition isn’t just best for you. It’s best for everyone. Remember, it’s a transition, not a transaction.

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Topics: dental advisor, Practice Transition, dental retirement

When Growing Your Dental Practice is a Bad Thing

Posted by Brogan Baxter on Fri, Apr 25, 2014

jengaGrowth can be good or bad for a dental practice, just like for any other business. Growing simply for the sake of it is not smart. Growing at a rate that’s well-thought-out, strategized, and steady is far better.

Many dentists grow their practice just because they want more production. But why? Because you want to make more money? Here’s a little-known fact – many times increasing production can actually cause you to make less money. That’s because in a rush to grow fast and make money, overhead skyrocketed, and now you’re stuck with a little more income and a lot more money going out the door.

There are three ways to increase your revenue.

  1. Increase your production and maintain your overhead
  2. Maintain production and reduce your overhead
  3. Increase your production and reduce overhead

To grow your income, you have to have a good financial team on your side. You need quickly reported numbers, you need to have your pulse on your finances, you need fast interpretation of your situation. If a negative trend begins, you need to know so you can act fast to counteract it. Is overhead popping up five months in a row? Know fast, so you can nip it in the bud.

This applies both to your production and to your overhead. You need solid numbers on both no later than two weeks into the next month, and the numbers need to be reconciled and analyzed by your accountant. To identify trends compare them to the same month last year, and also to the past few months of this year. That way you can see in real time what’s happening in your practice’s financials, and whether it’s a seasonal effect or something new.

Even if you grow intelligently, you can still run into issues. For example, you might get a good news/bad news call from your accountant. “Good news! You made a lot more money this year than we were expecting. Bad news is that means your tax bill is well into the five figures.” Without timely and frequent tax estimates, you can end up with a nasty tax surprise at the end of the year. And that will certainly put a damper on your booming business.

When managed poorly, growth will actually hurt your dental practice. But when you do it right, growing your practice will do nothing short of changing your life.

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Topics: dental advisor, dental financial planning, Financial Planning, business of dentistry

How Dentists Should – And Shouldn’t – Invest

Posted by Brogan Baxter on Sun, Apr 20, 2014

crashLast time we discussed the best ways to build a framework that allows you to invest in ways that will help you build wealth from your dental practice. But once you’ve done that, what should you actually do with the money that you invest?

The short answer is, “invest conservatively.” Chasing big returns can be a hard temptation to resist, though. There’s a direct correlation between increased risk and increased potential rate of return, and many dentists feel the pressure to make large sums quickly to try to build a floundering retirement plan. According to the ADA, the average dentist only saves about 10% of their income – around $21,000 – and at that rate, they won’t be able to hit their retirement goals. To try to make up for it, they get forced into investing aggressively to get the big returns, and many get bitten by risky investments that eventually turn south. Anyone remember 2008?

At Four Quadrants Advisory, we recommend a more conservative investment strategy that concentrates on savings first. You don’t need to chase that high rate of return when your practice finances are structured so that you can save $100,000 a year rather than $20,000. To get that kind of money from investing alone, you need a 500% rate of return.

Focus on what you can control – your savings, not stocks – and avoid extreme risk. In 2008’s financial crisis, those who were heavily invested in risky stocks lost between 30 and 40% of their value. Those who were more conservative in their investments lost much less.

Finally, as a dentist you really shouldn’t be investing your own money. You are trying to run a million-dollar dental practice, you’re seeing patients, you’re running a staff, you’re raising a family. You don’t have the time to give your accounts the attention they need to grow the way you need them to. Get a team of qualified advisors to help you, and your money will be in much better hands.

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Topics: dental advisor, Practice Transition, dental retirement, dental financial planning, dental accounting, Financial Planning

Fee-only vs. Commission Investing: Which is Best?

Posted by Brogan Baxter on Fri, Apr 18, 2014

wallstreetIf you’re looking on advice for investing, and all you want is a few hot stock tips, you’ve come to the wrong place. What we will talk about is how to build a comprehensive investment plan that will build wealth in your dental practice and home accounts. There are two main things you need to keep in mind when building the framework of that plan.

The first is that you must do your best to invest in a fee-only environment, as opposed to one where your broker or manager is being paid on commission. The vast majority of people – up to 95% – use commissioned advisors. What’s the difference?

Look at the kinds of investments each type of advisor makes. A commissioned advisor will have you invest more in mutual funds that have commissions or “loads” attached to them. Do you have investments in mutual funds that end the description of the fund with “Class A”, “Class B”, or “Class C”? If so, you are in a commissioned investment. All make your advisor a commission in different places – class A will have a 3-5.75% charge at the front end, class B will have the same charge at the back end, and class C has a back end charge that’s a bit smaller. In other words, if you invest $100, only $95 will actually go into the market if it’s an A share. The rest goes to your advisor and the company they work for. And these fees pile up.

A fee-only advisor is much cheaper in the long run, and much of the time will also make you more money, since investment returns are eroded by these higher commissions. In a relationship like this the advisor is paid only on the value of your accounts rather than by the transaction, meaning that there’s a much closer correlation between the performance of your investments and the amount that you’re paying your advisor.

That’s all important because of the second thing to keep in mind when building an investment strategy – minimizing cost is crucial. There are a lot of hidden costs associated with investing, especially for a commissioned advisor. Administration fees, management fees, 12b-1 fees, the commissions themselves – again, they all add up. Together, they could eat up 5-6% of your return. You have to look at the net returns to see if your investments are really earning you what you need them to earn.

A difference in rate of return of only 3% can change your final values by up to 16% over ten years. In 20 years, the difference grows to 41%. By boosting your rate of return only slightly you can earn nearly twice as much over two decades. That’s a lot of money.

Any book on investing will tell you that a fee-only advisor is the way to go as soon as possible. But most fee-only advisors will only work with accounts that are already over $500,000 or more. That’s why you need to get your practice and personal finances in order generally, so you can take advantage of this and other useful wealth-building strategies.

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Topics: Practice Transition, dental retirement, dental tax, dental financial planning, dental accounting, Financial Planning

It’s Not Too Late to Save for Your Retirement

Posted by Brogan Baxter on Wed, Apr 16, 2014

piggyIt’s never truly too late to start saving for your retirement. Starting early is certainly better. A person who saves $20,000 a year for 25 years will, at the end, have $1.46 million saved. But to get that same amount in only 15 years, you’ll have to save $54,000 a year. In ten years, it’s $101,000 a year.

But if you’re already 50, 60, or even 70 years old it’s too late for that now. Now, it’s more about ambition. It’s about wanting to fight to better your situation, to be in a better place than where you are. If you don’t want to settle, you don’t have to. But the margin of error shrinks considerably. According to the ADA, only 4% of dentists will retire to a lifestyle similar to that which they had while working. Most dentists under 40 years old think they’ll retire at 61, but after 40 reality sets in and most say it won’t be until age 67.

Read the Guide: Financial Planning for Dentists

To get back ahead of the game, everything has to work harmoniously. You need a comprehensive approach that is focused only on building wealth. No new debt, unless it’s crucial to your practice’s operation. You can no longer overstaff just to keep things comfortable. Overhead has to be cut. An older dentist can’t just work more to make more – your practice has to get leaner and more efficient. You need to know your financial numbers, and know them fast so you can react quickly to any issue that comes up.

After your general finances are squared away, you’ll need to prepare to sell your practice. You’ll get 60-70% of your previous year’s revenue as a sale price, most likely. If you’re in a geographically desirable area you may get more than that. But remember that this should supplement what you’ve been saving already – less than a year’s revenue won’t get you very far on its own.

But if you’ve taken these steps and built your practice into a lean wealth-building machine, you shouldn’t have any problems. Even if you start late, you’ll still be able to retire very comfortably.

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Topics: Practice Transition, dental retirement, dental financial planning, Financial Planning

How Your Practice Can Survive a Few Slow Months

Posted by Brogan Baxter on Fri, Mar 28, 2014

tortoisePut simply, the secret to making it through slow times as a dentist is great planning. If you have a good idea of what’s coming, and you have a plan in place to deal with it, you’ll be able to get through short periods of low production with relatively low financial impact.

Your most potent weapon is thorough information on historical financial trends for your practice. Four years of data or more will get you the best results but use what you have. This will give you a good idea of when production drops tend to happen, and will help you determine why. For example, if your practice is located in a vacation area and you tend to have less production in the summer months, you can safely bet that’s going to be a trend. You’ll be able to plan for that drop occurring on a yearly basis.

There are a few ways you can use that information.

  1. Schedule vacations: If you know a specific month or season is your slow time, close the practice for a week. You and your staff can have a vacation, and then you can condense four weeks of work into three, and avoid spending on overhead when you don’t need to.
  2. Cut hours: You don’t need to schedule at full capacity if you know that you’re going to be light on work. Lighten the load of hours during slow periods – maybe only have one assistant work each day, for example – and then when production ramps up again, you can go back closer to capacity.
  3. Reactivation campaigns: Do you have patients who haven’t been in for a while, and have fallen through the cracks? Get in touch with them, and get them in for a cleaning and a checkup, or schedule them for the operative work they’ve been putting off or haven’t scheduled yet.
  4. Run promotions: Things like giveaways and discounted procedures can bring in patients who might otherwise have avoided a trip to the dentist.

More than anything else, you must have an adequate safety net in place. If you don’t, you’ll be tempted to cut your pay or adjust your cash flow to make up for slow times, and that’s not advisable. It’ll hurt your home finances and lead to stress. Instead you should have 1 to 1.5 times your typical practice monthly expenses in your accounts at all times. You should have access to a line of credit that can cover between ¾ and 1.5 times your monthly practice expenses as well.

You need to be proactive with your taxes and expenses as well. Use your practice’s trends to shape your tax payments and your purchases. You should be adjusting tax estimates on at least a quarterly basis. Not only will this account for the fluctuations that happen when a slow month does happen, but it protects you from a nasty tax surprise. And a five-figure tax bill will hurt a lot more if you’re fresh off a dip in production.

That goes for expenses as well. Boring cash flow is a lot better than “lumpy” cash flow – in other words, paying off a large expense all at once is not ideal. When lean times hit, you’re going to be a lot happier paying off four months of $10,000 checks rather than one for $40,000.

Proactive planning – in taxes, in expenses, in savings, and in reactions – goes a long way towards helping your practice get through a lean month or two without suffering too much.

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Topics: dental advisor, dental financial planning, dental accounting, Financial Planning, business of dentistry

How Much Do You Need to Save for Your Retirement This Year?

Posted by Brogan Baxter on Fri, Mar 21, 2014

savingretirementCommon sense and logic tell us that the earlier you start saving for retirement, the better off you are. Interest compounds, so money saved at age 30 ends up worth more than what you save at 50. For example: a person who saves $20,000 a year for 25 years will, at the end, have $1.46 million saved. But to get that same amount in only 15 years, you’ll have to save $54,000 a year. In ten years, it’s $101,000 a year.

You probably don’t want to save $101,000 every year, so start now. But how much should you be saving?

That’s a loaded question, because the real answer is that it depends. Helpful, right? Beyond your age, there are several factors to consider. They include your retirement goals, how much you make, and how much (if anything) you’ve already saved.

At Four Quadrants, we plan for our clients to have the same income in retirement as they do while working, if not better (after adjusting for inflation). You’ve probably never been told this, but it is possible for a dentist to retire with between $8 million and $13 million in retirement savings. And we’ve had clients do even better.

Read the Guide: Financial Planning for Dentists

To determine what you’ll need in retirement, think about your current expenses. If you’re making around $400,000 a year, your personal expenses are likely to be around $20,000 a month right now. In five years, because of inflation, you’ll need $22,000 instead to meet that same value. In 15 years you’ll need $31,000 a month. In 25 years it’ll be $54,000 a month.

To plan for a thirty-year retirement (including inflation), that $400,000-a-year dentist must save about 27% of their gross income in order to hit their retirement goal. That amount doesn’t take into account any profit from selling the practice or any related real estate deals – but you can’t put all your eggs in that basket when it comes to the transition. Those sales won’t net you more than 60-75% of your revenue from the previous year and that’s not enough to maintain your lifestyle. Even if you take the above example and plan for a net $1 million to be invested around the retirement age, that only drops the savings percentage from 27% to 23%—hardly the game-changing difference that many dentists think it will be. One only should count on that inflow as supplementary income alongside years of savings.

For a younger dentist, somewhere from 20-30% of your gross income should be saved for retirement. If you’re older – say, within ten years or so of retirement – you should be saving closer to 30-40% of your gross. That way, your retirement won’t be filled with financial worry, and you’ll be able to continue in your current quality of life.

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Topics: dental advisor, dental retirement, dental financial planning, dental accounting, Financial Planning

Reducing the Risks of a Partnership Failing: Part 2

Posted by Brogan Baxter on Sun, Mar 16, 2014

handshakeLast week I talked about the preparation that needs to be done before hiring an associate to make sure your partnership works out. After all, 75% of them end up failing, so it looks like dentists need some help. Once you’ve made the hire, though, the work isn’t over. You need to plan for what happens after the hire is made and the buy-in is triggered, and you need a plan for what happens when you’re ready to call it a career.

You’ll be coexisting with your new partner hopefully for several years at least, before you ride off into the sunset. Your practice will not function in the same way it did when you were the only executive in charge. You’ll have to work together to make things work. Communication is key, and regular management meetings are a necessity.

Decisions must be made about how decisions will be made when you’re working as partners. How will you develop strategy as a team? Who decides when new equipment is needed, what equipment you should buy, and how? What will your schedules be – will you work together, or trade off shifts? What happens if one of you wants to run a personal expense through the practice but the other partner does not? You need answers to these questions before the situations come up.

Another thing that’s helpful is finding a new corporate accountant. This should be someone who hasn’t worked with either you or your new associate before – any accountant who’s associated with either of you might have more loyalty to one than to the other, and because of that, one of you will be favored. That’s a bad way to start out a partnership.

And since that partnership won’t last forever, you need to plan for how you’ll dissolve it once you’re ready to retire. Phasing out slowly is the best option for all involved – it helps your long-time patients get comfortable with your partner and with the idea of you leaving, your partner gets to ease into being totally in charge, and you don’t have to give up working all at once.

Any plan should be focused on making sure that you don’t have to stop working before you’re ready. You created this practice and it’s your life’s work – it’s yours as long as you want it, and as long as you’re an asset rather than a liability. But at some point, your 50% stake will need to be passed on to your associate. The deal should be fair and also flexible. It benefits all parties involved.

Whatever happens, don’t fall into the trap of thinking there’s one right answer that works for everyone. The only right transition is a custom transition. Your situation is unique, and so is your associate’s. Your plan needs to reflect that, and serve the unique individual needs that each of you have.

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Topics: dental retirement, dental financial planning, business of dentistry, Tax Advisory