How Dental School Debt Compares to Medical School Debt

dentist looking at x-ray

It’s no secret that dentistry is the number one job in America for debt. This puts even more pressure on dental school graduates to pick the proper transition route when entering into a practice, whether that’s buying an existing dental practice or starting from scratch. However, when it comes to your return on investment, the differences between dental and medical school debt are night and day. Here, we present the data and explain why taking on dental school debt pays off in the long run. 

The average debt for a dental student was $292,169 in 2019 while medical students owed about $215,900 in 2018, the last year data was available. 

New dental school graduates are in a good position to establish a startup with profitability projected between six and nine months. You’ll have full control over the design and aesthetics of your practice to the types of patients and procedures you attract, as well as the scale of your practice based on your skill set. There is also an attrition rate of between 15% and 20%, compared to an existing practice in which you can expect a profit from day one but an expected 7% to 10% of the existing patient base to leave after the transition.

Rather than taking the safer route of working as an associate or for a dental service organization (DSO) that will only provide a commission for the work you do, owning your own practice will only maximize the investment of your dental degree because you’ll receive not only a commission, but also a profit component, most notably in an area where there is demand. Though counterintuitive, taking on more debt will pay off as your investment is typically paid back within eight years of practice. Yes, your debt rate will be high before you even see your first patient, but so is the success rate. You should expect a couple of lean years since it can take a while to get the same revenue as if you bought an existing practice. 

The average cost of a four-year dental education was $205,019 for public schools and $335,536 for private schools in 2019–20, the last year data was available. The average yearly cost of medical school for non-residents in 2019–20 was $61,620 for public schools and $60,305 for private schools. 

It may be surprising to know that lenders are not necessarily worried about student loan debt. The reason is that it is widely acknowledged that dental school graduates have a significant amount of student loans so the default rate for dental practices is low. What the banks will look at is if the doctor can afford the payments on the student loan debt and the practice debt.

Compared to a small business owner whose average salary is approximately $70,000 a year, as of 2016, the average dentist’s salary is $173,000, the average orthodontist’s salary is $228,000, and the average oral and maxillofacial surgeon’s salary is $233,000. Due to the higher-than-average annual salary and the 0.3% failure rate of dental practices, the dental industry has the lowest default rate and some of the highest cash flow.

Average dental student debt was $58,603 in 1980, adjusted for inflation, and $292,169 in 2019, the last year data was available. Average medical student debt was $84,300 in 1988, adjusted for inflation, and $215,900 in 2018, the last year data was available.

There are seemingly endless options for refinancing your dental school debt, all worth exploring related to your personal and professional financial situation. Then, start any new business opportunity with the end in mind by knowing what types of transitions are available to you. What’s more, even once you’re established in the practice, you’ll want to brush up on your skills or learn new ones, not limited to dental classes to better your business opportunities. 

What’s next?

Contact the experts at Professional Transition Strategies to guide you through the dental practice ownership process. 

Should I Sell My Dental Practice by Myself?

dentist looking at x-ray

It’s no secret that dentistry is the number one job in America for debt. This puts even more pressure on dental school graduates to pick the proper transition route when entering into a practice, whether that’s buying an existing dental practice or starting from scratch. However, when it comes to your return on investment, the differences between dental and medical school debt are night and day. Here, we present the data and explain why taking on dental school debt pays off in the long run. 

The average debt for a dental student was $292,169 in 2019 while medical students owed about $215,900 in 2018, the last year data was available. 

New dental school graduates are in a good position to establish a startup with profitability projected between six and nine months. You’ll have full control over the design and aesthetics of your practice to the types of patients and procedures you attract, as well as the scale of your practice based on your skill set. There is also an attrition rate of between 15% and 20%, compared to an existing practice in which you can expect a profit from day one but an expected 7% to 10% of the existing patient base to leave after the transition.

Rather than taking the safer route of working as an associate or for a dental service organization (DSO) that will only provide a commission for the work you do, owning your own practice will only maximize the investment of your dental degree because you’ll receive not only a commission, but also a profit component, most notably in an area where there is demand. Though counterintuitive, taking on more debt will pay off as your investment is typically paid back within eight years of practice. Yes, your debt rate will be high before you even see your first patient, but so is the success rate. You should expect a couple of lean years since it can take a while to get the same revenue as if you bought an existing practice. 

The average cost of a four-year dental education was $205,019 for public schools and $335,536 for private schools in 2019–20, the last year data was available. The average yearly cost of medical school for non-residents in 2019–20 was $61,620 for public schools and $60,305 for private schools. 

It may be surprising to know that lenders are not necessarily worried about student loan debt. The reason is that it is widely acknowledged that dental school graduates have a significant amount of student loans so the default rate for dental practices is low. What the banks will look at is if the doctor can afford the payments on the student loan debt and the practice debt.

Compared to a small business owner whose average salary is approximately $70,000 a year, as of 2016, the average dentist’s salary is $173,000, the average orthodontist’s salary is $228,000, and the average oral and maxillofacial surgeon’s salary is $233,000. Due to the higher-than-average annual salary and the 0.3% failure rate of dental practices, the dental industry has the lowest default rate and some of the highest cash flow.

Average dental student debt was $58,603 in 1980, adjusted for inflation, and $292,169 in 2019, the last year data was available. Average medical student debt was $84,300 in 1988, adjusted for inflation, and $215,900 in 2018, the last year data was available.

There are seemingly endless options for refinancing your dental school debt, all worth exploring related to your personal and professional financial situation. Then, start any new business opportunity with the end in mind by knowing what types of transitions are available to you. What’s more, even once you’re established in the practice, you’ll want to brush up on your skills or learn new ones, not limited to dental classes to better your business opportunities. 

What’s next?

Contact the experts at Professional Transition Strategies to guide you through the dental practice ownership process. 

What to Consider Before Selling Your Dental Practice

Deciding to sell your dental practice can arguably be the most challenging step in the transition process. With the right team of advisors in place, it can be a financially and emotionally fulfilling experience. But where do you start, and how is the value of your dental practice determined? Whether you’re ready to begin planning your transition strategy or you want to learn more about your options, it’s important to understand what impacts the sale of your dental practice. Here are the top five considerations before selling your dental practice.

Know the facts

It’s easy to talk in hypotheticals when thinking of selling your dental practice, but there are a lot of considerations to get on your radar sooner rather than later. You’ll want all the information available to make the best decision for your dental practice. 

Before entertaining offers, you’ll need to have a prospectus in place for both an individual buyer and a group to assess the fair market value of your dental practice as this can vary based on a range of factors. A prospectus includes practice and patient demographics, practice location, staff, insurance, facility, equipment, production summary by category, financial analysis, practice valuation and return on investment

This will help determine if your practice is healthy enough to bring on a partner, whether you should consider affiliating with a dental service organization (DSO), or if you need to make some drastic changes so your practice is more appealing to potential buyers. The most common transitions include:

  • Buy-out: Purchasers buy a practice within a relatively short time period. On average, this takes about three to six months and is the quickest transition route.
  • Buy-in: A specific buyer purchases a defined portion of the dental practice. This is a longer-term approach that can expand the value of your practice over time.
  • Affiliation: You sell a percentage of your business to another entity, typically a DSO, with the intent to slowly transition out of the practice and give up clinical control to the group. This is an excellent way to maximize the practice’s value.
  • Associate to buy-in: A group of associates will court a potential buyer to purchase over a period of time. This process ensures compatibility and a smooth transition to map out the future of the practice. Division of power is the biggest decision that needs to be made with this method. While this is the longest approach — taking at least five years — it’s also the most flexible.
  • Associateship: Yes, you can sell to associates while maintaining full control, but in this method, not everything is agreed upon upfront, leading to a mere 20% success rate.  
  • Merger: Two existing dental practices combine into one entity, and owners often stay on as equal partners after merging. Mergers offer great benefits, like the net income remaining constant or even increasing because there is no loss of business.
  • Roll-up: You purchase multiple dental practices and combine them under one entity to maximize economies of scale. This can boost the value of your practice when it’s time to sell. A roll-up transition is the most lucrative if you have the time and capital to dedicate to this plan.

Make a plan

No matter the reason for your transition, starting the process as early as five years out will give you ample time to identify and make changes to your dental practice to improve the valuation. A good broker will make suggestions on how to amplify your marketing efforts, increase production, and streamline costs and efficiency, including dental supplies, lab costs and even payroll in an effort to increase profitability

Starting the transition process early also gives you the flexibility to be more discerning with the offers you receive. If you’re in a pinch to sell your practice, you may be forced to take one of the first offers and leave money on the table. Being in the driver’s seat of the sale affords you the time to evaluate offers and choose the best one for you, your staff, and your practice, as well as making your practice more attractive to DSOs looking for an affiliation.  

Stay the course

Maintaining your production is one of the best things you can do to obtain the highest valuation possible for your practice because the financials from the most recent years will weigh the heaviest when determining the practice’s value. Slowing down your production can have a massive impact on the price you can get for the practice.

The same holds true for your practice’s specialty. Gearing up for a transition is not the time to focus on a new niche specialty or even make the move toward a multispecialty practice. By opening the practice up to a new specialty — like going from a general practice to a periodontics practice — you decrease the potential buyer pool, which can negatively impact your sale options.

Keep an open mind

Thirty years ago, one of the only transition options was taking on an associate who would hopefully buy your dental practice one day, but today, there are so many more possibilities. Working with a qualified broker will only open your eyes to a dental practice transition you might not have otherwise considered. 

Your options are really only limited by your imagination. Do you want to start the process early so you can affiliate with a DSO before you retire? Or are you ready to get out of the business with a buy-out option so you can move into the next phase of your life? Asking yourself these questions and more will help you narrow down your choices so you can better prepare for the next steps. 

What’s next?

Contact the experts at Professional Transition Strategies to get the ball rolling on the sale of your dental practice.

How to Manage the Dental Hiring Market

dentist looking at x-ray

It’s no secret that dentistry is the number one job in America for debt. This puts even more pressure on dental school graduates to pick the proper transition route when entering into a practice, whether that’s buying an existing dental practice or starting from scratch. However, when it comes to your return on investment, the differences between dental and medical school debt are night and day. Here, we present the data and explain why taking on dental school debt pays off in the long run. 

The average debt for a dental student was $292,169 in 2019 while medical students owed about $215,900 in 2018, the last year data was available. 

New dental school graduates are in a good position to establish a startup with profitability projected between six and nine months. You’ll have full control over the design and aesthetics of your practice to the types of patients and procedures you attract, as well as the scale of your practice based on your skill set. There is also an attrition rate of between 15% and 20%, compared to an existing practice in which you can expect a profit from day one but an expected 7% to 10% of the existing patient base to leave after the transition.

Rather than taking the safer route of working as an associate or for a dental service organization (DSO) that will only provide a commission for the work you do, owning your own practice will only maximize the investment of your dental degree because you’ll receive not only a commission, but also a profit component, most notably in an area where there is demand. Though counterintuitive, taking on more debt will pay off as your investment is typically paid back within eight years of practice. Yes, your debt rate will be high before you even see your first patient, but so is the success rate. You should expect a couple of lean years since it can take a while to get the same revenue as if you bought an existing practice. 

The average cost of a four-year dental education was $205,019 for public schools and $335,536 for private schools in 2019–20, the last year data was available. The average yearly cost of medical school for non-residents in 2019–20 was $61,620 for public schools and $60,305 for private schools. 

It may be surprising to know that lenders are not necessarily worried about student loan debt. The reason is that it is widely acknowledged that dental school graduates have a significant amount of student loans so the default rate for dental practices is low. What the banks will look at is if the doctor can afford the payments on the student loan debt and the practice debt.

Compared to a small business owner whose average salary is approximately $70,000 a year, as of 2016, the average dentist’s salary is $173,000, the average orthodontist’s salary is $228,000, and the average oral and maxillofacial surgeon’s salary is $233,000. Due to the higher-than-average annual salary and the 0.3% failure rate of dental practices, the dental industry has the lowest default rate and some of the highest cash flow.

Average dental student debt was $58,603 in 1980, adjusted for inflation, and $292,169 in 2019, the last year data was available. Average medical student debt was $84,300 in 1988, adjusted for inflation, and $215,900 in 2018, the last year data was available.

There are seemingly endless options for refinancing your dental school debt, all worth exploring related to your personal and professional financial situation. Then, start any new business opportunity with the end in mind by knowing what types of transitions are available to you. What’s more, even once you’re established in the practice, you’ll want to brush up on your skills or learn new ones, not limited to dental classes to better your business opportunities. 

What’s next?

Contact the experts at Professional Transition Strategies to guide you through the dental practice ownership process. 

Why Start Planning Your Retirement Now

dentist looking at x-ray

It’s no secret that dentistry is the number one job in America for debt. This puts even more pressure on dental school graduates to pick the proper transition route when entering into a practice, whether that’s buying an existing dental practice or starting from scratch. However, when it comes to your return on investment, the differences between dental and medical school debt are night and day. Here, we present the data and explain why taking on dental school debt pays off in the long run. 

The average debt for a dental student was $292,169 in 2019 while medical students owed about $215,900 in 2018, the last year data was available. 

New dental school graduates are in a good position to establish a startup with profitability projected between six and nine months. You’ll have full control over the design and aesthetics of your practice to the types of patients and procedures you attract, as well as the scale of your practice based on your skill set. There is also an attrition rate of between 15% and 20%, compared to an existing practice in which you can expect a profit from day one but an expected 7% to 10% of the existing patient base to leave after the transition.

Rather than taking the safer route of working as an associate or for a dental service organization (DSO) that will only provide a commission for the work you do, owning your own practice will only maximize the investment of your dental degree because you’ll receive not only a commission, but also a profit component, most notably in an area where there is demand. Though counterintuitive, taking on more debt will pay off as your investment is typically paid back within eight years of practice. Yes, your debt rate will be high before you even see your first patient, but so is the success rate. You should expect a couple of lean years since it can take a while to get the same revenue as if you bought an existing practice. 

The average cost of a four-year dental education was $205,019 for public schools and $335,536 for private schools in 2019–20, the last year data was available. The average yearly cost of medical school for non-residents in 2019–20 was $61,620 for public schools and $60,305 for private schools. 

It may be surprising to know that lenders are not necessarily worried about student loan debt. The reason is that it is widely acknowledged that dental school graduates have a significant amount of student loans so the default rate for dental practices is low. What the banks will look at is if the doctor can afford the payments on the student loan debt and the practice debt.

Compared to a small business owner whose average salary is approximately $70,000 a year, as of 2016, the average dentist’s salary is $173,000, the average orthodontist’s salary is $228,000, and the average oral and maxillofacial surgeon’s salary is $233,000. Due to the higher-than-average annual salary and the 0.3% failure rate of dental practices, the dental industry has the lowest default rate and some of the highest cash flow.

Average dental student debt was $58,603 in 1980, adjusted for inflation, and $292,169 in 2019, the last year data was available. Average medical student debt was $84,300 in 1988, adjusted for inflation, and $215,900 in 2018, the last year data was available.

There are seemingly endless options for refinancing your dental school debt, all worth exploring related to your personal and professional financial situation. Then, start any new business opportunity with the end in mind by knowing what types of transitions are available to you. What’s more, even once you’re established in the practice, you’ll want to brush up on your skills or learn new ones, not limited to dental classes to better your business opportunities. 

What’s next?

Contact the experts at Professional Transition Strategies to guide you through the dental practice ownership process. 

How to Choose a Dental Practice Broker — A Comprehensive Guide

man holding up glasses

Selling a practice takes approximately 150 hours, which is why you’ll want to hire Professional Transition Strategies (PTS) to do the heavy lifting rather than attempting to add that task to your already-full plate. As a business owner, it may be instinctual to want to take the sale of your practice into your own hands rather than hiring a professional.

But hiring PTS to handle one of the largest financial transactions in your life will help you get the most out of your transaction in the long run. Likewise, both financially and personally, there are other considerations that can affect the outcome of selling your practice. After all, your time is money, and your time is better spent on keeping the value of your practice up.

Whether you are looking to sell your dental practice, bring on a partner or buy a dental practice, PTS makes the process easy, painless and seamless for general and pediatric dentists, endodontists, orthodontists, prosthodontists, oral surgeons and periodontists across the country.

However, not all dental practice brokers are created equal, which is why you’ll want to hire PTS to focus on the bottom line and vet potential buyers while alleviating stress for you.

As an aside, we’re also here to help you answer these questions along the way:

  • How do I find a dental practice to buy?
  • What should I look for in a dental practice?
  • How do I set up my own dental practice?
  • What is a dental practice broker?

Know the difference in dental practice broker services

Buyer representation

By having a dental practice broker act as your fiduciary, you can feel confident your best interests are being represented rather than just the interests of the group. PTS isn’t compensated by any group. While being your advocate in the transaction, we don’t have any other skin in the game.

PTS helps you answer all the important questions, such as: Should I take out a loan? How much will the loan cost me? Is this fair market value? We have the expertise to answer these questions and more. We even have a calculator to estimate what the monthly cost of a purchase would be.

Seller representation

Whether you want to sell a practice and leave, partner with another dentist to help carry the load, sell but stay on as an associate, or simply merge or affiliate with a larger practice or dental service organization (DSO) in your area, PTS will provide the dental practice broker services you need to make your transition successful.

The steps to selling a dental practice or merging a dental or medical practice are intricate. It includes not only the financial and physical challenges, but emotional ones, as well. We realize that every situation is unique, and we will help you decipher which option is best for you. And while it’s important to know the difference between buyer and seller representation, a dual-representation broker could never truly have the best interest in mind for both parties.

Single agency versus transaction broker 

Brokers who are single representatives can act on behalf of either the buyer or seller. A single agency broker tends to have fewer qualified buyers in their arsenal since they only work with one party. Unlike a transaction broker that acts as a referee throughout the process, a single agency broker has fiduciary toward the buyer or seller. Along with disclosure, confidentiality, accounting and reasonable care, a single agency broker also owes the client obedience and loyalty.

A transaction broker who represents both parties owes each party the promise of disclosure, confidentiality, accounting and reasonable care while having no fiduciary in the game. Acting as a mediator between both parties, a transaction broker ensures a smooth transition will take place. The transaction broker will help the seller determine a competitive list price, as well as help the buyer prepare an offer. They will help facilitate communication between both parties, including coordinating the transaction from the time the offer is accepted to the time it is closed. In addition to marketing the practice, finding qualified buyers, writing the contract to buy and sell, and assisting in negotiating terms, they will also assist with the closing entirely.

The PTS difference

Industry knowledge

Just like your patients come to you for your experience, dentists come to PTS for our expertise.

We are experts in the industry and have extensive market knowledge that will lead to a more seamless and possibly faster sale. When representing yourself, it can be hard to get to the bottom of each interested party while also negotiating the terms and running a successful practice at the same time.

For the buyer, our knowledge expands to medical or dental competition and patient demographics in your location of interest, along with expertise in practice appraisals to determine a fair market value. Our real estate, legal, accounting and strategic knowledge rounds out a complete transition service all in one place.

Industry experience

Along with industry knowledge comes experience. As with any team, you’re only as strong as your weakest link, so it’s important to choose advisors who have experience in the dental industry. The easiest route to a smooth transition is to hire PTS that is familiar with practices like yours. While we may not be in your geographic area, we have experience with the size and type of transition you are working toward.

PTS takes a proactive approach to finding the right fit for dental practices, ensuring fewer days on the market. Additionally, PTS has personal experience with the DSOs, making it easy to predict which way the transaction is heading and negotiate accordingly, whether simple or complex.

Leave the dental practice details to us

Appraisal process

Arguably, one of the most important steps during the beginning of a dental practice transition is to have a practice appraisal to determine where you are most valuable and where there is room for improvement in areas that are not as highly profitable. This includes the practice’s location, visibility, and population of city or town; type of medicine or dentistry, revenue sources and active patient base; growth potential; patient attrition and retention rates; reason for sale of practice; long-term trends of the practice’s revenue and profit margin; condition and age of medical and dental equipment based on wear and tear, as well as technical advancement; and even office decor and condition.

The extensive practice appraisal offered by PTS breaks down the current value of the practice and where the practice needs to go before the sale. The appraisal uses the most effective method of calculating your practice’s worth by looking at both attributes and challenges and how they have impacted the success of the practice. Best of all, PTS can perform these services at no charge with no commitment obligation.

Prospectus process

Whether you’re planning to put your investments toward retirement or another investment, you’ll want to ensure a smooth and lucrative transition. A prospectus breaks down the facts to ensure business owners are making an educated decision on their largest asset, which is when the work has just begun.

PTS offers a complimentary prospectus to assess the true value of your practice and which options are available. While many brokers say practice value is as simple as 70% of collections, it also includes applying a multiplier (including location of the practice, type of building practice is in, office itself, longevity of doctor and staff, and procedures performed) to a three-year weighted average of collections, seller’s discretionary earnings (SDE), and earnings before interest, taxes, depreciation, and amortization (EBITDA). And unlike other dental practice brokers, PTS doesn’t just sign with dentists to get the necessary information for you to make the right decision.

Contracts in place

PTS already has the contracts in place rather than hiring an attorney to draft documents for you, saving thousands of dollars, whether you’re planning a location, new startup, quarterly performance review or legal services. Our complete counseling starts from evaluating your practice to implementing the necessary changes through evaluation, strategic planning, implementation and consulting. PTS will be by your side through the entire real estate transaction process, managing the process with landlords, banks, general contractors, architects, city building and planning departments.

And speaking of contracts, don’t hire someone with a long-term contract, allowing the broker to be passive and wait for leads to come to them and limiting the number of offers you receive. Six months to one year is standard, but PTS has a 30-day contract with no penalty to cancel. Add this to the list of questions you’ll want to ask your broker before hiring.

Enlist the professionals at PTS

Dream team

Consider PTS part of your transition dream team, making sure all the agreements are in place and identifying ahead of time any issues that may arise. Avoiding a direct negotiation, PTS removes any emotions from the situation by providing a buffer between the two parties, ensuring the buyer-seller relationship doesn’t become strained during the process.

The rest of your dream team consists of an attorney who specializes in dental practices, a certified public accountant (CPA), investment and insurance advisors, and practice consultant to identify your current assets and perform a gap analysis before the sale goes through.

While many CPAs, real estate agents, and attorneys think they can sell a practice, only trust a professional transition broker, such as PTS, just like you won’t ask your chiropractor to perform a full arch fixed dental implant bridge.

Focus on your bottom line

Your primary focus during the selling process is to maintain the success of your practice. Both you and your buyer will suffer consequences if the value of your practice decreases with a decrease in production. Your time is better spent focusing on the well-being of your practice and its employees and patients before hanging up your proverbial hat.

Don’t go it alone!

5 Steps to Selling a Dental Practice

dentist office

Are you thinking of selling a dental practice? If so, you’re likely wondering how long it will take. You have put a lot of time, sweat and tears into building a successful practice. The fact that you are considering selling it can take a mental and physical toll. To prepare for your upcoming transition, here are five things you should know.

Start planning your dental practice transition early

One of the best pieces of advice is to start planning early. Planning early allows you more options than if you wait until the year you are ready to move on. These options are not only the type of transition you go with, but also which offers you consider. If you wait until the last minute to transition out of your practice, you may be stuck taking the first offer you receive. By starting early, you can be more discerning about offers that come in and move forward with the one with which you feel most comfortable.

Starting early gives you time to consider different transition styles. If your practice is large enough, you can sell half of your practice to a partner and continue to work for a few more years. When you determine the time is right, you can then sell the other half to either your current partner or someone else.

Getting a head start also allows you to consider affiliating with a dental service organization (DSO), which you most likely wouldn’t be able to if you needed to get out immediately. The reason for this is that DSOs tend to request the current doctor stay on for about two years.

By starting early, you can determine if you are happy with the value of the practice or if you need to get more out of it to clear any debts. This knowledge can help guide you when determining if you need a few more years to build up the value of your practice before taking that next step.

A transition period is a period between two transition periods. – George Stigler

Know the facts

Instead of living in the hypothetical, know your reality. Too many times, one can plan for a transition without knowing the facts. “Ignoring facts does not make them go away,” as businessman and Hall of Fame quarterback Fran Tarkenton once said. (1) It’s important to have a prospectus in place when determining the right transition type for you and your practice. By understanding the fair market value of your practice, you will know if your practice is healthy enough to bring on a partner, whether you should consider affiliating with a DSO or if you need to make some drastic changes so your practice is more appealing to a potential buyer.

To take this deep dive into your practice, look to a professional to create a prospectus. The knowledgeable experts at Professional Transition Strategies (PTS) will create a prospectus for you at no cost or obligation to work with us. We do this because we believe it is important to practice what we preach: Know the facts before you make any decisions.

The prospectus includes but is not limited to:

  • Practice demographics
  • Practice location
  • Patient demographics
  • Staff
  • Insurance
  • Facility
  • Equipment
  • Production summary by category
  • Financial analysis
  • Practice valuation
  • Return on investment

Don’t let the value of your dental practice drop

A common mistake made by dentists and dental specialists throughout the country is to let the value of their practice drop leading up to a transition. This honest mistake happens when doctors decide they are ready to scale back but they aren’t ready to “hang up their hat” just yet. By cutting back their schedules, only taking certain cases, reducing their hygienists’ hours, etc., they inevitably see their production and collections decrease.

Considering a practice’s value heavily depends on the average of the last three years. With the most recent year receiving the most weight, this reduction will result in a significant drop in value. As investor Warren Buffett once said, “Price is what you pay. Value is what you get.” (2) As much as one would like the practice’s value to be based on the “potential,” the truth is that a bank won’t lend on the hypothetical. Therefore, it is imperative to consider your plans before cutting back, because “cutting back” can dramatically cut the value of your practice.

Know your transition options

Without knowing all your options, how can you possibly choose the right one? One size does not fit all when you’re selling a dental practice. You cannot know you made the right decision without knowing the available options. Once upon a time, a dentist’s only options when transitioning a practice was to either sell to another doctor or close the doors. Times have changed. A dentist or dental specialist now has several options.

The most common transition types include:

Speak with a dental transition expert to determine the best plan for you and your practice.

How long will it take to sell my dental practice?

The most common question leading up to a transition is, “How long will it take to sell my dental practice?” Many factors can help gauge how long your practice will be on the market. One that will play a major role is the location of your practice. Is your practice in a metropolitan area? Is it in a rural community? Is your practice in a desirable area of the city? While it can’t be said for all practices, the offices positioned in “hot spots” of the country — such as Austin, San Diego or Denver — will move faster than those based in a smaller, more rural area. Sales can be as short as 22 days from the day your practice goes on the market to the day it closes or as long as two to five years.

Another variable that will play a part in how long it takes to sell your practice is your practice size. Practices valued between $750,000 and $1.2 million tend to be a sweet spot for most buyers. Practices collecting less tend to sit on the market longer. The reason is that smaller practices mean less revenue for the incoming doctor. This is especially true if the buyer is still paying off student debt.

What is a dental practice broker?

A dental practice broker has undergone training that makes them an expert in taking you through a dental practice transition. A factor in how long a practice takes to sell is the experience and knowledge of your broker. To ensure you are in the best hands, you should hire a broker who is familiar with practices like yours. This does not mean practices in your city, town or even state. It is more important that your broker has worked with practices of your size and in the transition capacity you are looking for — affiliating with a DSO, partnerships, straight buy-outs or even partnering with a private equity firm.

It’s also important to make sure your broker “pounds the pavement” on your behalf and be active when it comes to finding the right buyer. All too often, practice transition brokers post a marketing description on a few websites, sit back and wait for calls to come in. Work with someone like PTS that takes a proactive approach to finding the right fit for your practice.

What’s next?

If you are considering the possibility of selling a dental practice, contact the team at PTS. We will answer any questions and help prepare you in this exciting new stage of your life.

Resources

Webinar: “Returning To Your Practice”

person on computer with multiple screens

Every so often, Professional Transition Strategies (PTS) hosts a webinar for dental practices. On April 6, PTS President Kyle Francis hosted a webinar addressing the current state of affairs during the COVID-19 pandemic and how to return to your dental practice. Here are the key takeaways.

Stick to the facts

It’s easy to get carried away with predictions and speculations, but in trying times, it’s important to focus on what we know and how these situations compare to what we’ve already been through, such as the 2008 financial crisis and even natural disasters, as well as stay on top of news related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and your practice’s earnings before interest, taxes, depreciation and amortization (EBITDA).

Stay in the now

It’s impossible to predict what will happen in a month, never mind next week. Make changes to your office and staff that will impact your practice in its current state, whether that means laying off, furloughing or reducing staff hours, as well as “winterizing” your office with cerac, vacuum protocol and shocking your lines.

Communicate, communicate, communicate

Information is king right now, so be sure to keep your team, patients and referral networks all in constant open and honest communication, as much as weekly. Deadlines are a moving target at this point for all those involved, so just communicate with your group as you would want to be informed.

Be opportunistic and strategic

Above all, spend time thinking about what you want when this is over, come up with a plan and figure out what you can do at the moment to put the gears in motion, perhaps by ordering a prospectus. Also, think about if you are in the location that is best suited for your practice. Is an associate or partner in your future? Now might also be a good time to leverage debt for growth.

What’s next?

Learn more about the dental transition process in an upcoming webinar, then contact the experts at Professional Transition Strategies to learn about the next steps.

4 Reasons Confidentiality Is Important During the Dental Practice Transition Process

dentist talking to patient

It’s only natural to want to share your news with the world as soon as you decide to purchase or sell a dental practice, but there are more pros than cons when it comes to keeping the details of your deal under wraps. Here’s how and why confidentiality is important during the dental practice transition process.

Relationships

As a business owner, you’ll want to make sure the deal is finalized before notifying your staff and patients alike. Just as staff can get nervous and even start job hunting at the thought of insecurity with a new boss, patients can likewise start looking for other doctors if they find out you’re hanging up the proverbial hat.

Bottom line

Any drastic changes to your practice during the sale process can result in a decline in value, whether based on a change in staff or patient demographics. A “warm handoff” that is properly executed and conveyed will account for significantly less attrition, not to realize good faith in knowing both staff and patients will be in good hands.

Competition

If word gets out that you’re working on selling your practice, that opens the door for competing dentists to up their marketing game and try to steal patients and staff. Even if your pending departure isn’t for another couple of years, sale details shared too soon can be used against you and your business.

Associate

If you are currently an associate in a practice but in the market to purchase your own, leaked details can get back to your employer and result in the termination of your employment contract. For this reason, it’s worth repeating that associateships are typically only 20% effective due to not everything being agreed upon from the outset and different expectations not being met by both parties.

What’s next?

Whether you’re looking to buy or sell, contact the experts at Professional Transition Strategies to start and finish the dental practice transition process the right way.

3 Reasons to Start Your Dental Practice Transition Early

dentist working on patient

Dental practice transitions don’t happen overnight. In fact, a well-laid plan can take as long as five years if done properly. Even if you aren’t ready to hang up the proverbial hat, it doesn’t hurt to take a few steps in the right direction. Here are some suggestions to make sure your dental practice lands in the right hands. 

More transition options

Once upon a time, the only options for transitioning out of a dental practice were to sell to another dentist or close its doors. But today, the options are seemingly endless. You can choose to sell your practice in whole or a portion to a partner for a longer-term transition plan, sell your practice but continue to work as an associate, merge with another successful dental practice, or affiliate with a dental service organization (DSO), among others.

More offers

Your options aren’t limited to the type of transition but also the offers you receive. If you wait until the last minute to transition out of your practice, you may be stuck in a situation where you have to take the first offer you receive. By starting early, you can be more discerning on offers that come in and truly only move forward with the one with which you feel most comfortable.

Increase value

The necessary step of valuating your dental practice not only helps determine which type of transition would be best, but also tells you what upgrades need to be made before selling your business. If the value of your practice isn’t enough to clear your debts, you can decide if you need a few more years to build up the value of your practice before taking that next step.

What’s next?

Learn more about your transition options with the e-book “Strategies for Transition,” then contact the experts at Professional Transition Strategies to begin the process.