August 1, 2022
How to Get the Most Out of Your Dental Practice Transition
Recently, Professional Transition Strategies Founder and President Kyle Francis sat down with Dr. Victoria Peterson for her “Investment Grade Practices” podcast to talk shop. They laid out the reasons for understanding your options when it comes to getting the most out of your dental practice transition. Here, we outline the highlights from their conversation.
What’s the right way of doing a transition?
“Options are key,” Francis said, noting dentists should understand those options sooner rather than later. “It’s a simple but effective concept: begin with the end in mind.” Whether it’s bringing on a partner or affiliating with a dental service organization (DSO), it’s always better to have time on your side. The best way to do this is to start with a practice appraisal so the selling dentist can understand what’s the right way to move forward. Rather than thinking of it like a real estate–based transaction in which the seller finds a buyer that will offer the best price, you’ll be able to pick the best option for you, your patients and staff.
How do I get multiple offers?
Private equity in the industry opens up all new avenues to a seller, from selling to one of the more than 350 DSOs currently out there to entering a joint venture. Maybe it’s the competition that’s driving you to grow faster than what you can handle. No matter the situation, if you put your practice out there to all the different groups and individuals, there will be a bidding process. “You’re not going to get top dollar if you only consider one seller,” Francis said, adding with multiple offers, your purchase price will be leveraged up to the market price it deserves.
What can a selling dentist do to prepare for a transition?
If you started your practice from scratch or bought an existing business, eventually, you will have to transition the ownership when you’re ready to retire or release managerial responsibilities. Francis pointed to “founder’s syndrome” in which a business owner can get tied up in the emotions of selling their dental practice, which is why hiring a dental practice broker makes financial and emotional sense. Deciding whether you want to work three, five or 10 years then working backward will help evaluate which transition options will be available to you, as well as what improvements need to be made to your practice in order to get it market ready.
What about this consolidation wave?
“Fifteen years ago, dentists didn’t have the option to consolidate,” Francis said. “Fifteen years from now, the industry will be consolidated and not have this option … since we’re at 30% consolidated now. After that, it won’t be as dramatic of an exit.” Thinking in terms of risk and reward, a dental practice typically sees growth and provides a return on investment, but you’re still betting on one company and need to weigh the options of diversifying, which is easier to do now that you don’t need to be tied to an investor geographically. Rather than being on the same equity platform, sellers are able to align with buyers that support the same company culture.
Contact the experts at Professional Transition Strategies to learn what transition options are available to you.