Articles

Selling Your Practice Someday? What To Fix Five Years Out — And What Buyers Actually Check

In Chris Webb’s household, “potential” is a bad word. You can dream on potential, talk about potential, spend potential — and until something actually happens, that’s all it ever is.

He’s watched the same thing play out in practice sales. A dentist carries the idea of retirement around for years, comfortably theoretical — and then Webb sends over the intake paperwork, the request for financials and staff details and practice reports, and it stops being an idea. “That’s the first dose of reality,” he told us. “I’ve had doctors get me that report in a week. I’ve had them take months, because they just weren’t ready to pull the trigger.” The second dose arrives with the letter of intent and a 60-to-90-day closing clock.

Webb is the Founder and Broker of Harvest Transitions, the Michigan practice-transitions firm he launched after starting his career in commercial healthcare real estate — a path that crossed ours years ago. He made the jump, he says, because real estate felt transactional and transitions are the opposite: he’s with a seller through the most emotional professional decision of their life, and with a buyer at the very start of theirs, and the relationships outlast the closing. We had him on the Dentelligentsia podcast for the seller’s playbook — and the transition mechanics most people learn the hard way.

Get back into your own numbers

Webb’s first prescription for any owner even vaguely contemplating an exit: get thoroughly involved in the financials of your practice again. Too many doctors have fully delegated — the CPA handles the books, the office manager handles the software — and can’t say what their production, collections, or overhead actually are.

Overhead is the number that quietly kills sales. “You can have a $2 million practice in Grand Rapids, which you’d think would sell within a week,” Webb said. “But if the overhead is so high there’s not enough income to cover the debt service on the loan, you’re never going to sell that practice.” He’s seen overhead reach 80 to 85 percent of collections — sometimes with staff members out-earning the late-career owner, who shrugs because he doesn’t need the income anymore. The buyer needs the income. A buyer with half a million in student debt who would lose money owning your practice isn’t a buyer.

The fix isn’t slashing staff pay on your way out the door — that just torches goodwill. It’s steady control: watch the numbers, keep fees negotiated with the insurance companies that will negotiate, and turn your reps into teammates. Webb’s supply advice is a small masterclass — consolidate most of your ordering with the rep you trust, tell them you want supplies held to a set percentage of collections, and deputize them to flag it when someone’s over-ordering stock that expires on the shelf.

The five-to-eight-year runway

Like every transitions expert we’ve had on this show — and it’s become a chorus — Webb wants the retirement conversation started five to eight years out. His real estate background gives him the right word for what he’s looking for: deferred maintenance, in the practice as much as the building.

The specifics buyers check first, in his experience: digital X-rays are now effectively mandatory — not film, and for many buyers not even phosphor plates. Computers in every operatory. Digital charts, because scanning paper is a misery no buyer wants to inherit. None of this requires the most advanced office in town; it requires not being a project. “Every item a buyer sees that they’ll need to replace, they’re mentally knocking down the price of the practice.” And the corollary he’s careful about: don’t panic-spend six figures modernizing in the final year, because that investment rarely comes back at closing. Time is what makes these upgrades pay — five years of using the equipment, then selling a practice that shows well.

One more from the real estate corner of his brain, and it’s the most overlooked item in the episode: if you own your building, pay yourself market rent. CPAs push back — on paper it’s money moving pocket to pocket — but Webb’s argument is about how the practice reads at sale time. When he presents cash flow to a buyer, a practice that’s been paying real rent already has the real estate cost baked in; the buyer’s debt service on the building doesn’t carve a surprise hole in their living. Market rate, though — inflate it and you’ve helped no one; underpay and the cash flow lies in the other direction.

What your practice is actually worth (and what EBITDA has to do with it)

When sellers start hearing “EBITDA” and “multiples,” Webb asks one clarifying question: are you selling to corporate, or to a private doctor? Because the math is different.

EBITDA multiples are DSO language — and in his experience the pattern is a conservatively calculated EBITDA, a headline multiple, and then a negotiation that chips the price down. Private-doctor sales run on a simpler ruler: a percentage of collections, and the ceiling is set by what a bank will finance — typically up to about 90 percent of collections, and that envelope has to cover the practice price plus working capital plus, if real estate is involved, the down payment on the building. Push your asking price toward the ceiling and you’ve squeezed out the buyer’s working capital; push past 100 percent of collections and you’ve made the practice unfinanceable, full stop. His valuations weigh profitability, location, and the condition of the office, the equipment, and the staff — and his framing for sellers who want to coast into the sale is gently unsparing: work three days a week if you want, he’s all for the lake and the Tigers games, but understand that a slowing practice sells slower and for less. (The exception proves the rule: he has a three-day-a-week listing collecting $1.3 million with tiny overhead. That one will do fine.)

Underneath all of it sits his biggest-fear observation: sellers are terrified no buyer will come, and the doctors most at risk are the ones whose entire retirement depends on the sale. “It’s like car salesmen — you can feel desperation, and it’s off-putting.” Start the financial planning decades early, so that when the time comes you’re ready to sell, not required to.

The handoff: staff, patients, and one horror story

Webb’s transition mechanics are worth printing. Don’t introduce a buyer to staff until the asset purchase agreement is signed — introducing a maybe just manufactures fear. When it’s real, the seller tells the staff first (never the day before, never the day of), takes their questions — the unspoken one is always is my job safe — and then the buyer comes in and breaks bread. Literally: Webb’s hundred-percent recommendation is food at that first meeting, plus a buyer prepared to talk about their family, their hobbies, and the technology and procedures they plan to add — staff light up at new capabilities they’ll get to be part of. Keep every staff member you can; move fast on the genuinely toxic one, because everyone else in the building already knows and will thank you.

For patients: the doctors should have met several times before anything binds — philosophy of dentistry first, deal terms later — so the seller can honestly champion the buyer to every patient in the chair. Then the letter goes out. About that letter: Webb once had a closing where the seller’s introduction letter was, it turned out, never printed. His buyer’s first patient arrived for four extractions with no idea the dentist he trusted was gone. The recovery became Webb’s new standard operating procedure: the buyer personally called patients ahead of their appointments — I’m the new doctor, I’ve heard wonderful things about you, I can’t wait to meet you — and the response was so warm it generated Google reviews. What started as damage control is now his advice for every buyer’s first months.

Webb filters buyers, too — a former teacher’s instinct for who’s patient-first and who’s production-first — because most sellers keep receiving care at their own practice, and every seller cares who inherits the families they’ve treated for four generations. His measure of a job done right: “If we get to the closing table and you’re just as excited as you were at the first introduction, I’ve done my job. The right person makes the whole process less scary.”

His dad — a truck driver who worked sixty-hour weeks until he passed at 63, before retirement ever came — gave Webb the line he runs his business on: anything worth doing halfheartedly is worth doing wholeheartedly. It’s also why he pushes doctors to actually take the retirement they’ve earned. “Every action has a reaction. Slow down if you want to — just know the trade. And then go enjoy the life my dad didn’t get.”

The full conversation with Chris Webb, “Secrets to a Smooth Dental Practice Transition!,” is on the Dentelligentsia podcast; his firm is Harvest Transitions. And for the building side of the exit — the lease renewal timed right, the market-rent question, the real estate sold or held well — talk to us.

And follow Chris Webb on Linked In or check out the Harvest Transitions website.