Planning for Retirement: Part 3 of 3

by Philip Evenden; Dr. Sean Robertson


Two, Four, Six, Eight! Maximize and Appreciate!

In our previous two articles of a three-part series, we shared the two most common ways in which a dental practice is sold, the four ways to maximize your practice’s value, and six critical themes that create a framework to maximize your wealth and minimize your risk. In the final article of this three-part series, we review the eight keys to a smooth transition when it comes time to sell your practice.

EIGHT… There are EIGHT keys to a smooth transition

Sometimes the decision to sell one’s practice is to a specific buyer. This may be to an existing associate or a family member. Many dentists have children who follow in their parents’ professional paths. Whether the purchaser is known to a seller or not, the transition plan remains vitally important. In a recent survey of Canadian business owners, 38% of business owners planned to transition their family business to their children. Of these, 45% had no formal transition plan in place. It’s a challenging yet rewarding process that business owners (and practice owners) are often reluctant to take on.

The most successful transitions come about through careful and patient planning. And although each transition can have its own complexity and unique challenges, there tend to be common areas of consideration that emerge through the planning process of a generational transfer or sale to an associate. The following are eight keys to a smooth family business transition that also apply to a practice being sold to an existing associate.

  1. Documented Business and Transition Plan
    Development and execution of a thorough plan is crucial to the success of passing the business to new management or ownership. Details of the plan should include the current status of the practice, as well as where it wants to be in the future. Identifying future goals will illustrate needs in capital, technology and human resource requirements to meet those goals. Most practice owners do not take the time to fully explore the road ahead and cannot see the potential pitfalls along the way. The plan should be revisited on a regular basis, to see if any adjustments are necessary.
  2. Defining Expectations
    Even though a buyer may be part of your family or has worked for some time in your practice, the next generation should not come into the business with a sense of entitlement. Working in your practice is an opportunity; to avoid giving employees the wrong perception, it’s important to have clear definitions around the buyer’s new role in the practice.
  3. Building a Solid Corporate Structure
    A professional management system is the cornerstone of any successful organization. During the transition, transfer of the management from the previous owner to the new owner needs to support the transfer of goodwill from both patients and the team. Drawing on the knowledge and experience of other trusted professionals, such as practice consultants, can take the emotions out of the decision-making process.
  4. Shareholder Obligation
    In the case of a practice sold to a family member, showing economic commitment to the company is important as the baton passes between generations. Some vendors feel that they should give their children shares of the company as a gift. Others expect the children entering the business to purchase their practice shares. A hybrid model featuring a combination of both can be a good compromise in certain instances.
  5. Exit Strategy
    A successful plan defines the condition of the seller’s exit. This can be one of the most emotional pieces in a transition plan. Whether they remain with the practice in an associate or an advisory capacity, a clear outline of the vendor’s role after closing will help the new owner and the employees move forward with clarity and purpose.
  6. Transfer of Responsibility
    In the case of selling a practice to a family member or existing associate, it’s not enough to transition the business by simply naming the buyer as the new owner. There are several reasons that the percentages of multi-generational family businesses drop from second to third generation. One of the main ones is a lack of ensuring that the new generation is trained to lead the business. Once competent leadership is established, the timing is right for the final phase of transition to be activated. If needed, professional management can be hired until the associate or family member is ready to take over complete control of the business.
  7. Conflict Resolution
    It is vital to minimize interpersonal conflicts from daily interactions within the business and develop strategies for the family to resolve differences. Although in the initial planning stages it may seem unimportant, conflicts can destroy not only pre-existing relationships but have serious impact on the goodwill of the practice. Transparent and effective communication, possibly with the help of a business advisor, will smooth the road ahead.
  8. Family Transition Documents
    Along with the myriad of paperwork and documents required to ensure that the transition process moves smoothly, there are specific generational change documents that are part of a well-executed plan when a practice is sold to a family member. They include a family pact, wills, and a power of attorney that effectively communicates all aspects of wealth distribution if a shareholder passes away, and a code of conduct with rules of behaviour for family members within the DPC.

Keeping these factors in mind as you begin the process of transitioning your practice to a family member, existing associate or even third parties will be valuable and potentially spare the retiring business owner additional stress and transition implementation costs.

It’s a Process That Takes TIME and The Right TEAM

No matter where you are in your professional life cycle, it’s never too early or too late to begin the planning process. Considerations about practice sale, maximizing practice value, creating a plan for financial wellness, and supporting your transition goals involves many moving parts and the need for a team of professionals to help along the journey. A clear vision of your goals, a comprehensive plan, and a long-term strategy will net you the best financial and emotional outcome possible when you decide it’s time to hang up the handpiece.

About the Authors

Philip Evenden is a Director with the Wealth Management practice at Farber. His focus is on advanced financial planning for the successful – active or retired –entrepreneur.

Dr. Sean Robertson is a licensed dentist and founding partner of The Dental Broker Team, a full-service appraisal, sale and transitions firm for dentists. Reach him at