Is Now the Time to Sell Your Dental Practice? Insights from Kim McCleskey on The DrBicuspid.com Podcast

Professional Transition Strategies Consultant Kim McCleskey recently joined The DrBicuspid.com Podcast to discuss the current economic climate and its implications for dentists interested in selling their practices now or in the future. With 30 years of experience in the industry, McCleskey provided valuable insights into the evolving landscape of dental practice ownership. Here’s a summary of the podcast conversation.

Understanding the Current Economic Climate

McCleskey highlighted the current state of the dental industry, noting that it is approximately 35% consolidated, which is about halfway through the consolidation wave taking place. Consolidation is projected to reach the full 60-70% within the next 5-7 years, signifying a paradigm shift in the industry’s investment dynamics. With a growing number of practices falling under private-equity backed DSOs, the influx of investor capital will eventually slow. McCleskey emphasized the significance of this shift, as it will fundamentally alter the ownership landscape of dental practices.

Urgency in Decision-Making

With the impending wave of dental consolidation, there is a sense of urgency for dentists to consider their options. McCleskey discussed the pressure on dentists to sell now versus potentially waiting. Your options in the next three to four years following the peak of consolidation are going to decrease and change, she noted. She also stressed the importance of dentists understanding their options and making informed decisions to navigate this evolving landscape effectively.

Treating Dental Practices as Businesses

McCleskey underscored the importance of treating dental practices as businesses and understanding their profitability and value. The first step down this path is to get dialed into conversations about profitability. Working with experts like PTS to create a prospectus can help you understand your business and options, whether you’re selling to an individual or a DSO. This business-oriented approach ensures dentists make informed decisions that enhance the financial health and marketability of their practice.

Preparing Your Practice for Sale

The dental industry consolidation wave is nearing its peak, with only one to two rounds of recapitalization events likely remaining. Translated for your practice: This is a limited-time opportunity to maximize your wealth through a sale. For instance, for a practice valued at $2 million with $500,000 EBITDA (earnings before interest, taxes, depreciation and amortization), it can be a difference between selling for $2.75 million vs. $3.25 million for the same deal with two recapitalization events. Don’t miss out on the chance to capitalize on a strong seller’s market.

In preparation to sell, it’s imperative to build the profitability of your practice and its infrastructure now. McClesky advises that if you want to use your practice as an investment vehicle, now is the time to make sure your practice has the kind of value that will help with your personal and professional goals. She advises that it’s never too early to have an understanding of where your business is and to have a valuation done to understand what you can do differently to move the needle in your favor for when it comes time to sell.

Exploring Alternative Options

Selling to a DSO is a great option for many dentists, especially for those with practices that aren’t currently profitable and are considering retirement. Instead of closing up shop and walking away with nothing, DSOs offer an alternative that can help improve profitability and secure a better outcome for your practice.

McCleskey emphasized the importance of understanding the range of deal options DSOs provide. DSOs provide various deal structures tailored to meet different needs and goals. These include outright sales, equity rollovers, joint ventures, 100% buyouts and hybrid options. Each type of deal offers unique benefits, such as maintaining some level of ownership, receiving ongoing income or benefiting from the DSO’s resources and support to enhance practice profitability.

DSOs can help transform an unprofitable practice into a more valuable asset, offering a practical and profitable exit strategy for dentists close or ready to retire. By leveraging these options, dentists can find a deal structure that aligns with their personal and professional objectives.

What’s Next?

McCleskey’s insights shed light on the current economic climate of the dental industry and its implications for dentists. With the industry poised for significant consolidation in the coming years, dentists must understand their options and make strategic decisions now to secure their future success. 

Listen to the recent episode of The DrBicuspid.com Podcast featuring McCleskey to gain insights on the pressing market dynamics and understand if now is the right time to consider selling.

Contact the experts at Professional Transition Strategies for guidance on practice valuations, profitability consulting, and exploring the best transition options for your unique goals.