So You Have an LOI for Your Practice - Now What?

Important Considerations For Your Time and Money

Picture of by Dr David Phelps

by Dr David Phelps

In working with many business owners, predominantly in the healthcare industry of dentistry,

I wanted to address a point in your career that is incredibly important – the sale of your business.

In working with many business owners, predominantly in the healthcare industry of dentistry, I wanted to address a point in your career that is incredibly important – the sale of your business.

There comes a point in one’s career as a practice owner where you begin looking for the potential to transition out and sell your practice. Seek a buyout for your business. The time and work you put into your business creates a great opportunity to get the most out of the sale and move on to other things.

There are a lot of ways to sell a business or practice today. The optionality is great. The problem is there are also a lot of minefields in selling your business.

Exposing yourself to guidelines – what’s worked before and the pitfalls to avoid – and people with experience in selling a practice is critical for owners to formulate their best game plan. This is something that we, at Freedom Founders, help owners navigate and maximize.

What to Do Once You Have an LOI From a Buyer

Many people come to us already with an LOI, a letter of intent, in hand. They are excited, of course. Typically, private equity is the buyer – we call them DSOs or dental service organizations – bringing offers to the table. Private equity has been doing so in our field, predominantly, for the last five or six years.

The transition landscape in the dental practice sales arena is changing rapidly which is something you need to keep in mind when navigating your sale. As an aside, you can hear more about those changes and why they apply to you here.

But when you have an LOI from a private buyer, DSO, or whoever it may be, the excitement is in the money. It is a huge lump sum of money that is probably larger than you have ever seen in your life. This may become distracting and usually allows the buyer the leverage to “sneak” some unrealized agreements and contingencies into the contract. 

You have worked hard for years to build up a high net worth over time. Now you have the opportunity to take the fruits of your labor and harvest them into a chunk of equity. All this to say, the money you could get from the sale weighs heavy on your mind. It is the drive behind the sale. BUT, during the sale, you need to keep some other crucial aspects in mind in order to maximize your price and time going forward. Again, more details can be explained in the above link to my podcast episode.

Something You Should Consider Before Selling Your Practice

This next tangent is important to think about before selling and sitting on a significant amount of cash – What will you do with all that equity you are about to liquidate?

When you own the business or practice, your equity is in that business. It is being put to work by you for profit until you decide to harvest it. While it's there, you have the utmost control over it whether you like it or not.

You have the opportunity to adapt and create more revenue, more profit, and deal with challenges in the environment. You get to make those decisions right then and there. It is your best source of navigating your future and creating financial freedom.

But the time comes for us all when you want to take your foot off the pedal. When you reach that point of, “I need space. I need time. I deserve it.” And you do deserve it. But how do you create financial security in this new stage?

You need to use that equity from your business and have it produce without you being as involved. How can you make that money work as hard as you did to get it? This is assuming you don't want to be actively involved in making that money anymore. You have earned the right to not work as hard. This is where passive investing comes into play.

The issue that I see is that most will take that capital and put it into the financial markets based on a brief recommendation from a financial advisor or an article that states “This is the next big thing!”

Now while the market is on a bull run, an upside, everything looks like it is working out. Everybody looks like a genius, including your financial advisor.

But what happens when we go through a correction, which occurs in a typical business cycle? We have seen this over and over again. We can look back at history for evidence. In 2000, it was the dot com bubble that burst. Back in 2008, it was the Great Financial Crisis. We are long overdue for another. 

Every time we have a market correction (Again this is a part of every market cycle – the key word is “cycle”. It repeats.) equities across the board drop.

Most financial advisors tell their clients, “You'll be okay as long as you don't have a significant market correction in your first two or three years outside of active income.” That occurrence destroys all their “algorithms”. 

That is one of the many reasons why I, and the people I work with, don't use that model. We use a model based on sustainable cash flow. Cash flow that is earned from the profit of our money being put to work, NOT the drawing from the money pool you have spent years gathering. We do not operate on a depletion model.

It is Now Your Responsibility

So while having an LOI in hand is exciting, you need to slow down. Think about the terms of any potential sale and the motivations involved AND what to do with the capital you are going to receive.

It is very scary to just give that money over to a financial advisor. I would be afraid because most don’t know what to do with it. Most financial advisors have not seen the market changes we are dealing with right now. My suggestion is to look for guidance elsewhere.

This is what we teach our members in Freedom Founders. We educate, we create game plans (blueprints) and we create the resources to implement those game plans. 

We empower you to be the best steward, the best advocate for your own financial future. This is the key in my opinion that will define your success over the next decades. Do you know how to invest your money and secure your future?

If you are not able or willing to navigate your own financial future then you are leaving it in the hands of other people, even if it is just the market. And that is a dangerous thing to do right now.

You did not work hard for so long, taking so many risks along the way, to get to where you are now just to hope and pray you don’t lose it all. You do not have to gamble it in the marketplace or any place that does not have a proven track record.

Learn How To Invest

Step up. Learn how to invest your money safely. Learn how to invest in a way that will provide you with the cash flow to reach lasting financial freedom.

We do it well in Freedom Founders. We have a track record. If you are interested in earning back your time, in selling your practice, and/or orchestrating your investments towards financial freedom, I suggest you reach out.

We work with high-caliber people who are at the right stage in their careers. People who we know can make a difference in their lives.

You can schedule a call with us to clarify where you are and how we can help here.

To your freedom!

– David


P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :


1. Schedule a Call with My Team:

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest.

2. Become a Full-Cycle Investor:

There are many self-proclaimed genius investors today who think everything they touch turns to gold. But they’re about to learn the hard way what others have gained through “expensive” experience. I’m offering a free report on how to become a full-cycle investor, who knows how to preserve and grow capital in Up and Down markets. Will you be prepared when the inevitable recession hits? Get your free report here.

3. Get Your Free Retirement Scorecard:

Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Click here to take the 3 minute assessment and get your scorecard.

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