Tag: partnership

December 14, 2022

Corporate Dentistry vs. Private Practice: What Are the Differences

laser dentistry

All dentists who own their practice will eventually reach a point when they’re ready to make a career transition. The circumstances vary by individual dentist. A dentist may decide to sell because they want to retire or move to a new career path altogether. A dentist may assume their only options are to take on an associate — often with an eye toward partnering and an eventual buy-out — or a straight buy-out of their practice. Little do they know, there are more options out there.

Selling a practice to a dental corporation is another option, but if you are a dentist who has thoughtfully built a practice over a number of years, creating a patient-centered business and cultivating a caring team, you might have misgivings about that idea. You may worry that a corporation won’t ensure patients are treated with the same level of care or your staff might be asked to cut corners and short-change patients in the name of profit.

It’s not an unreasonable concern. Committed, highly trained health care providers, like dentists, act in the best interests of their patients, and they don’t like the idea of a bean-counter who doesn’t have the appropriate clinical training weighing in on care plans. That said, it’s important to know there’s a wide range of operating models used by dental corporations. Dental service organizations (DSOs) are an increasingly popular choice for dentists.

DSOs aren’t a monolith — there are many types of DSO arrangements, as they can provide staff and patients with more opportunities while offering financial benefits for doctors. So, it pays to keep an open mind and not write DSOs off as “corporate dentistry.” It’s a good idea for dentists who are planning a career transition to get a better understanding of what DSOs are, why they are gaining marketplace traction, and the pros and cons of working with a DSO. Here’s a closer look at DSOs that can help you make a more informed decision about private practice versus corporate dentistry.

Why more dentists are choosing DSOs

The American Dental Association (ADA) defines a DSO as “entities that dental practice owners contract with to manage the administrative, marketing and/or business sides of that dental practice.” Put another way, they are organizations that handle the non-clinical aspects of a practice. For many dentists, the non-clinical portions of managing the practice are exactly the part they’d willingly hand off to someone else so that they can focus more of their attention on patient care.

DSOs come in all shapes and sizes, ranging from teams that manage a handful of practices to large DSOs that manage more than 1,600 offices. The fact is that fewer dental practices are selling to individuals now than ever before. One reason behind the shift is the high debt load new dentists carry: The average dental school graduate owes more than $290,000 in student loans today, so they are less likely to be in a position to buy a practice.

In addition to the debt load, dental practices have historically been undervalued by banks and an individual dentist is typically beholden to what a bank is willing to lend.

So, why the move toward DSOs? For one, there are simply more DSOs operating today than in the past and their more differentiated than ever, which makes it more likely that a dentist who wants to make a transition will choose a DSO. Also, because DSOs offer a variety of arrangements, dentists are more likely to find a DSO offering terms that help them meet their objectives, such as an arrangement where the dentist stays with the practice to provide patient care but relinquishes management responsibilities. That option could be a good fit for dentists in a variety of scenarios, including those who are planning for retirement in a few years and those who are seeking a better work-life balance.

Another factor that is contributing to the rise of DSOs is that they have a funding advantage. Individual buyers typically rely on bank financing, which can be hard to obtain for some would-be purchasers, particularly in an uncertain economy when banks are tightening standards. DSOs are usually funded by private equity groups, so they can pay more to purchase a practice.

Available DSOs models

Although some dentists may put DSOs under the “corporate dentistry” heading and conclude that selling to a DSO is tantamount to selling out to a corporation, the truth is there are many different types of DSOs. Here’s a brief look at DSO models and how they affect the dentists who sell their practices under each type of DSO investment arrangement.

  • Joint venture: In the joint venture model, the dentist who is selling and the DSO investor both contribute capital in the form of money, equipment and other types of assets into a joint venture, and they share in the growth of the practice proportionally, according to the terms of the joint venture agreement. In this arrangement, the dentist maintains day-to-day clinical control of the practice, and a doctor will often sell between 60% and 70% equity in their practice.
  • Equity roll: This type of arrangement is a group affiliation as opposed to a partnership with a group. In an equity roll, the practice owner sells 100% of the practice and then trades in a portion of their equity into the DSO as a whole.
  • Sub-DSO: In this type of practice transition, the dentist who owns the practice exits the transition debt-free with a substantial upfront payment and typically retains 40% ownership and profit shares in a holding space outside the DSO or practice level. Returns can be made on a variety of levels, including equity, profit sharing and exit after parent DSO recapitalization.
  • Direct investment with private equity: In this model, your practice may be large enough that you don’t need a DSO. You can circumvent the DSO and go directly to private equity. That way, you become a founding member of a DSO.

The key point to keep in mind is that DSOs are not one-size-fits-all. That’s why it’s important for any dentist who is considering a practice transition to be aware of their options, preferably by discussing them with an objective party, like a dental practice broker. It’s not a matter of “corporate dentistry versus private practice” — the terms of the arrangement and the value the selling dentist realizes are the most significant factors.

DSO pros and cons

Dentists who are planning a career transition should think outside the “corporate dentistry versus private practice” box, and it starts by better understanding what a DSO offers. In some situations, DSOs can offer the most value and still enable you to maintain high standards of patient care. But not all DSOs are alike, and neither are dental practice transitions, so it makes sense to review the pros and cons of selling to a DSO, as well as pros and cons of selling to an individual.

For a dentist who is not yet ready to retire but is nearing the end of their career and wants to offload some of the hassles associated with running a practice, a DSO can be a great option. The right DSO can make daily operations easier by handling the business side while the dentist manages clinical decisions. The DSO can handle collections, supplies, marketing and more, increasing profits without the dentist having to focus on business operations.

DSOs typically pay more than individual buyers for a practice because of private equity investment rather than having to use traditional bank financing and can offer other advantages to dentists who are nearing retirement age, including the ability to cash out with a higher valuation. In some scenarios, the dentist works the same or fewer hours after the sale. This approach can accelerate the transition timeline and reduce uncertainty in the retirement planning process.

DSOs can also be a great option for mid-career dentists. Not every dentist enjoys the business side of running a practice, so they may opt for a DSO arrangement to offload the aspects of the operation they don’t want to handle, like human resources and marketing, and focus on what they do best — patient care.

Younger doctors can oftentimes make out better when working with a DSO, especially with a joint venture deal structure. A DSO should help make the practice more profitable; therefore, when the doctor sells the rest of their equity, the value should have increased significantly over the years.

Working with a DSO can help dentists achieve a better balance in their lives, so it may be a good option for doctors who want to spend more time with their families and friends but aren’t yet ready to hang up their white coat just yet.

That said, not all DSOs are a fit for everyone. Like any other category of organization, some are run well, and some are managed poorly. In addition, poorly run DSOs will only focus on the bottom line and not on patient care. They can push unnecessary procedures to benefit their own interests. It’s a good idea to ask a DSO for references, i.e., the names and contact information for dentists who have recently transitioned their practice to the DSO, so you can get an insider’s view of what it’s like working with them.

Exploring options and taking the next step

DSOs aren’t the only practice transition option — fewer practice sales between individual dentists are happening now than in years past, but it’s still an effective and fulfilling route dentists who are planning a practice transition can pursue. Bringing in an associate is still an option, though it has about a 20% success rate. A dentist who is planning to retire can also choose to see fewer patients and eventually just close their doors. It’s important to note that transition plan leaves hundreds of thousands — if not millions — of dollars on the table.

It’s all about finding the right option for the doctor’s transition goals,  whether it be selling to an individual or going the group route. Because finding the right option is important, it’s also imperative to know that the process takes time, and we recommend beginning the planning process up to five years in advance.

The corporate dentistry versus private practice conundrum can be complicated, so the best bet if you are thinking about a practice transition is to find a dental practice broker with the experience and expertise to help you explore the many options available to you. A dental practice broker like Professional Transition Services can help you achieve the best outcome, so don’t go it alone.

December 12, 2022

Why Most Dental Practice Associateships Fail

dental mold with braces

Of all the dental practice transition options, associateships have the highest failure rate. A natural first thought is to bring on an associate with plans to buy it at a later date out at a later date, but the numbers prove otherwise. When a practice simply brings on an associate with eventual plans to transition the practice at a later date, the results are predictable—a 20% success rate, in fact. So why do dentists continue to go this route? We break down the logic behind selling your dental practice to an associate.

The thinking

Bringing on an associate is about more than creating a plan to sell the practice to them in the future. Instead, a doctor wants to focus on increasing production. One way to get the most out of their space is by bringing an additional doctor in house. Another common reason to add an associate is because the doctor may want to lighten their load if they’re booking out for months. This can help relieve the bottleneck. 

The downside is that, if an associate is at the practice for a while, they begin to have patients on their calendar for weeks — even months — to come. When that happens, the associateship (predictably) doesn’t work and the practice will have an even bigger bottleneck and unhappy patients. 

Like in both of these examples, associateships are rarely successful since not everything is agreed upon from the outset and different expectations not being met by both parties. In a retirement situation, the retiring dentist brings on an associate to pick up managerial responsibilities to help ease the transition, and that’s why developing a transition roadmap is important to make sure it’s a successful transition. 

The roadmap to any dental practice transition can take many forms, but it starts by getting it in writing. By outlining all the details prior to the date of purchase, the process will be painless when it comes time to finally buy in. Conversely, the current owner should also have a writing plan in regard to scaling back their liability and chance the associate leaves because their expectations are being met.

Then, plan your timeline — and take your time. Part of the written outline should include when and how the buy-in will happen. The timeline could require the associate staying at the practice for a certain number of years before buying it or it could be set by predetermined growth benchmarks. Since the associate-to-buy-in plan takes a few years, it also gives all parties time to figure out their compatibility and working relationship. At the end, mapping out your timeline lets all doctors exit gracefully and with little financial impact.

Most importantly, before starting the associate-to-buy-in process, it’s essential to complete a practice valuation so you have a better understanding of the amount of growth the associate is responsible for to ensure the associate isn’t paying for their contribution to the increased value of the practice. A second valuation is also recommended on the day of the transition. The two valuations are averages so the associate doesn’t pay double for the work they’ve done and the seller is compensated for the risk of having a high-priced employee on board.

The numbers

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business. After the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

The timeline

Selling a dental practice to an associate typically takes around three to four years. On paper, taking on an associate is normally the fastest route as there are often a lot of prospects; however, with a one-in-five success rate, timing can be unpredictable in finding the best match for your dental practice. 

The buyer

While taking on an associate is risky from an owner’s perspective, it makes sense at times for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a DSO as an employee without an ownership benefit or management responsibility. This allows the associate to relocate or move among practices with ease and little stress since there is no real commitment on their end.

Another perspective to keep in mind as an associate is how the buyout price could change over time. Bringing in an associate should make the practice more successful because they’re able to increase production, collections and more. That said, they’ll likely be buying into the practice at a higher rate than they would if they would’ve developed a roadmap when the associateship began.

The truth

Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms. It’s also worth noting associates don’t receive the same type of tax advantages as the practice owner.

The current state

Now more than ever, dentists are in high demand, particularly associates in private practices and dentists in dental service organizations (DSOs), many of whom suffered income reductions or layoffs during the pandemic. Similarly, with increased hours from those who kept their jobs and a high rate of burnout because of the demands brought on by the pandemic, many independent dentists are turning toward DSOs to reduce management stress or pre-retirement associateships to continue earning.

The alternative

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, there are a lot of alternatives with higher success rates, such as partnering with a DSO or selling to an individual or a DSO. 

Bottom line

Selling to an associate can be profitable when making an informed decision based on facts. See if bringing in an associate makes the most sense for your practice, your staff and patients or if there’s a better option that will benefit you and your practice in the long run. Contact the professionals at Professional Transition Strategies to figure out which route makes the most sense for your dental practice.

September 19, 2022

How a Buyer Can Find the Perfect Dental Practice

dental mold with braces

Of all the dental practice transition options, associateships have the highest failure rate. A natural first thought is to bring on an associate with plans to buy it at a later date out at a later date, but the numbers prove otherwise. When a practice simply brings on an associate with eventual plans to transition the practice at a later date, the results are predictable—a 20% success rate, in fact. So why do dentists continue to go this route? We break down the logic behind selling your dental practice to an associate.

The thinking

Bringing on an associate is about more than creating a plan to sell the practice to them in the future. Instead, a doctor wants to focus on increasing production. One way to get the most out of their space is by bringing an additional doctor in house. Another common reason to add an associate is because the doctor may want to lighten their load if they’re booking out for months. This can help relieve the bottleneck. 

The downside is that, if an associate is at the practice for a while, they begin to have patients on their calendar for weeks — even months — to come. When that happens, the associateship (predictably) doesn’t work and the practice will have an even bigger bottleneck and unhappy patients. 

Like in both of these examples, associateships are rarely successful since not everything is agreed upon from the outset and different expectations not being met by both parties. In a retirement situation, the retiring dentist brings on an associate to pick up managerial responsibilities to help ease the transition, and that’s why developing a transition roadmap is important to make sure it’s a successful transition. 

The roadmap to any dental practice transition can take many forms, but it starts by getting it in writing. By outlining all the details prior to the date of purchase, the process will be painless when it comes time to finally buy in. Conversely, the current owner should also have a writing plan in regard to scaling back their liability and chance the associate leaves because their expectations are being met.

Then, plan your timeline — and take your time. Part of the written outline should include when and how the buy-in will happen. The timeline could require the associate staying at the practice for a certain number of years before buying it or it could be set by predetermined growth benchmarks. Since the associate-to-buy-in plan takes a few years, it also gives all parties time to figure out their compatibility and working relationship. At the end, mapping out your timeline lets all doctors exit gracefully and with little financial impact.

Most importantly, before starting the associate-to-buy-in process, it’s essential to complete a practice valuation so you have a better understanding of the amount of growth the associate is responsible for to ensure the associate isn’t paying for their contribution to the increased value of the practice. A second valuation is also recommended on the day of the transition. The two valuations are averages so the associate doesn’t pay double for the work they’ve done and the seller is compensated for the risk of having a high-priced employee on board.

The numbers

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business. After the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

The timeline

Selling a dental practice to an associate typically takes around three to four years. On paper, taking on an associate is normally the fastest route as there are often a lot of prospects; however, with a one-in-five success rate, timing can be unpredictable in finding the best match for your dental practice. 

The buyer

While taking on an associate is risky from an owner’s perspective, it makes sense at times for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a DSO as an employee without an ownership benefit or management responsibility. This allows the associate to relocate or move among practices with ease and little stress since there is no real commitment on their end.

Another perspective to keep in mind as an associate is how the buyout price could change over time. Bringing in an associate should make the practice more successful because they’re able to increase production, collections and more. That said, they’ll likely be buying into the practice at a higher rate than they would if they would’ve developed a roadmap when the associateship began.

The truth

Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms. It’s also worth noting associates don’t receive the same type of tax advantages as the practice owner.

The current state

Now more than ever, dentists are in high demand, particularly associates in private practices and dentists in dental service organizations (DSOs), many of whom suffered income reductions or layoffs during the pandemic. Similarly, with increased hours from those who kept their jobs and a high rate of burnout because of the demands brought on by the pandemic, many independent dentists are turning toward DSOs to reduce management stress or pre-retirement associateships to continue earning.

The alternative

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, there are a lot of alternatives with higher success rates, such as partnering with a DSO or selling to an individual or a DSO. 

Bottom line

Selling to an associate can be profitable when making an informed decision based on facts. See if bringing in an associate makes the most sense for your practice, your staff and patients or if there’s a better option that will benefit you and your practice in the long run. Contact the professionals at Professional Transition Strategies to figure out which route makes the most sense for your dental practice.

August 9, 2022

Should I Sell My Dental Practice by Myself?

dental mold with braces

Of all the dental practice transition options, associateships have the highest failure rate. A natural first thought is to bring on an associate with plans to buy it at a later date out at a later date, but the numbers prove otherwise. When a practice simply brings on an associate with eventual plans to transition the practice at a later date, the results are predictable—a 20% success rate, in fact. So why do dentists continue to go this route? We break down the logic behind selling your dental practice to an associate.

The thinking

Bringing on an associate is about more than creating a plan to sell the practice to them in the future. Instead, a doctor wants to focus on increasing production. One way to get the most out of their space is by bringing an additional doctor in house. Another common reason to add an associate is because the doctor may want to lighten their load if they’re booking out for months. This can help relieve the bottleneck. 

The downside is that, if an associate is at the practice for a while, they begin to have patients on their calendar for weeks — even months — to come. When that happens, the associateship (predictably) doesn’t work and the practice will have an even bigger bottleneck and unhappy patients. 

Like in both of these examples, associateships are rarely successful since not everything is agreed upon from the outset and different expectations not being met by both parties. In a retirement situation, the retiring dentist brings on an associate to pick up managerial responsibilities to help ease the transition, and that’s why developing a transition roadmap is important to make sure it’s a successful transition. 

The roadmap to any dental practice transition can take many forms, but it starts by getting it in writing. By outlining all the details prior to the date of purchase, the process will be painless when it comes time to finally buy in. Conversely, the current owner should also have a writing plan in regard to scaling back their liability and chance the associate leaves because their expectations are being met.

Then, plan your timeline — and take your time. Part of the written outline should include when and how the buy-in will happen. The timeline could require the associate staying at the practice for a certain number of years before buying it or it could be set by predetermined growth benchmarks. Since the associate-to-buy-in plan takes a few years, it also gives all parties time to figure out their compatibility and working relationship. At the end, mapping out your timeline lets all doctors exit gracefully and with little financial impact.

Most importantly, before starting the associate-to-buy-in process, it’s essential to complete a practice valuation so you have a better understanding of the amount of growth the associate is responsible for to ensure the associate isn’t paying for their contribution to the increased value of the practice. A second valuation is also recommended on the day of the transition. The two valuations are averages so the associate doesn’t pay double for the work they’ve done and the seller is compensated for the risk of having a high-priced employee on board.

The numbers

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business. After the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

The timeline

Selling a dental practice to an associate typically takes around three to four years. On paper, taking on an associate is normally the fastest route as there are often a lot of prospects; however, with a one-in-five success rate, timing can be unpredictable in finding the best match for your dental practice. 

The buyer

While taking on an associate is risky from an owner’s perspective, it makes sense at times for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a DSO as an employee without an ownership benefit or management responsibility. This allows the associate to relocate or move among practices with ease and little stress since there is no real commitment on their end.

Another perspective to keep in mind as an associate is how the buyout price could change over time. Bringing in an associate should make the practice more successful because they’re able to increase production, collections and more. That said, they’ll likely be buying into the practice at a higher rate than they would if they would’ve developed a roadmap when the associateship began.

The truth

Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms. It’s also worth noting associates don’t receive the same type of tax advantages as the practice owner.

The current state

Now more than ever, dentists are in high demand, particularly associates in private practices and dentists in dental service organizations (DSOs), many of whom suffered income reductions or layoffs during the pandemic. Similarly, with increased hours from those who kept their jobs and a high rate of burnout because of the demands brought on by the pandemic, many independent dentists are turning toward DSOs to reduce management stress or pre-retirement associateships to continue earning.

The alternative

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, there are a lot of alternatives with higher success rates, such as partnering with a DSO or selling to an individual or a DSO. 

Bottom line

Selling to an associate can be profitable when making an informed decision based on facts. See if bringing in an associate makes the most sense for your practice, your staff and patients or if there’s a better option that will benefit you and your practice in the long run. Contact the professionals at Professional Transition Strategies to figure out which route makes the most sense for your dental practice.

August 1, 2022

How to Get the Most Out of Your Dental Practice Transition

dental mold with braces

Of all the dental practice transition options, associateships have the highest failure rate. A natural first thought is to bring on an associate with plans to buy it at a later date out at a later date, but the numbers prove otherwise. When a practice simply brings on an associate with eventual plans to transition the practice at a later date, the results are predictable—a 20% success rate, in fact. So why do dentists continue to go this route? We break down the logic behind selling your dental practice to an associate.

The thinking

Bringing on an associate is about more than creating a plan to sell the practice to them in the future. Instead, a doctor wants to focus on increasing production. One way to get the most out of their space is by bringing an additional doctor in house. Another common reason to add an associate is because the doctor may want to lighten their load if they’re booking out for months. This can help relieve the bottleneck. 

The downside is that, if an associate is at the practice for a while, they begin to have patients on their calendar for weeks — even months — to come. When that happens, the associateship (predictably) doesn’t work and the practice will have an even bigger bottleneck and unhappy patients. 

Like in both of these examples, associateships are rarely successful since not everything is agreed upon from the outset and different expectations not being met by both parties. In a retirement situation, the retiring dentist brings on an associate to pick up managerial responsibilities to help ease the transition, and that’s why developing a transition roadmap is important to make sure it’s a successful transition. 

The roadmap to any dental practice transition can take many forms, but it starts by getting it in writing. By outlining all the details prior to the date of purchase, the process will be painless when it comes time to finally buy in. Conversely, the current owner should also have a writing plan in regard to scaling back their liability and chance the associate leaves because their expectations are being met.

Then, plan your timeline — and take your time. Part of the written outline should include when and how the buy-in will happen. The timeline could require the associate staying at the practice for a certain number of years before buying it or it could be set by predetermined growth benchmarks. Since the associate-to-buy-in plan takes a few years, it also gives all parties time to figure out their compatibility and working relationship. At the end, mapping out your timeline lets all doctors exit gracefully and with little financial impact.

Most importantly, before starting the associate-to-buy-in process, it’s essential to complete a practice valuation so you have a better understanding of the amount of growth the associate is responsible for to ensure the associate isn’t paying for their contribution to the increased value of the practice. A second valuation is also recommended on the day of the transition. The two valuations are averages so the associate doesn’t pay double for the work they’ve done and the seller is compensated for the risk of having a high-priced employee on board.

The numbers

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business. After the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

The timeline

Selling a dental practice to an associate typically takes around three to four years. On paper, taking on an associate is normally the fastest route as there are often a lot of prospects; however, with a one-in-five success rate, timing can be unpredictable in finding the best match for your dental practice. 

The buyer

While taking on an associate is risky from an owner’s perspective, it makes sense at times for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a DSO as an employee without an ownership benefit or management responsibility. This allows the associate to relocate or move among practices with ease and little stress since there is no real commitment on their end.

Another perspective to keep in mind as an associate is how the buyout price could change over time. Bringing in an associate should make the practice more successful because they’re able to increase production, collections and more. That said, they’ll likely be buying into the practice at a higher rate than they would if they would’ve developed a roadmap when the associateship began.

The truth

Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms. It’s also worth noting associates don’t receive the same type of tax advantages as the practice owner.

The current state

Now more than ever, dentists are in high demand, particularly associates in private practices and dentists in dental service organizations (DSOs), many of whom suffered income reductions or layoffs during the pandemic. Similarly, with increased hours from those who kept their jobs and a high rate of burnout because of the demands brought on by the pandemic, many independent dentists are turning toward DSOs to reduce management stress or pre-retirement associateships to continue earning.

The alternative

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, there are a lot of alternatives with higher success rates, such as partnering with a DSO or selling to an individual or a DSO. 

Bottom line

Selling to an associate can be profitable when making an informed decision based on facts. See if bringing in an associate makes the most sense for your practice, your staff and patients or if there’s a better option that will benefit you and your practice in the long run. Contact the professionals at Professional Transition Strategies to figure out which route makes the most sense for your dental practice.

July 25, 2022

How to Remain Profitable in Your Dental Practice

dental mold with braces

Of all the dental practice transition options, associateships have the highest failure rate. A natural first thought is to bring on an associate with plans to buy it at a later date out at a later date, but the numbers prove otherwise. When a practice simply brings on an associate with eventual plans to transition the practice at a later date, the results are predictable—a 20% success rate, in fact. So why do dentists continue to go this route? We break down the logic behind selling your dental practice to an associate.

The thinking

Bringing on an associate is about more than creating a plan to sell the practice to them in the future. Instead, a doctor wants to focus on increasing production. One way to get the most out of their space is by bringing an additional doctor in house. Another common reason to add an associate is because the doctor may want to lighten their load if they’re booking out for months. This can help relieve the bottleneck. 

The downside is that, if an associate is at the practice for a while, they begin to have patients on their calendar for weeks — even months — to come. When that happens, the associateship (predictably) doesn’t work and the practice will have an even bigger bottleneck and unhappy patients. 

Like in both of these examples, associateships are rarely successful since not everything is agreed upon from the outset and different expectations not being met by both parties. In a retirement situation, the retiring dentist brings on an associate to pick up managerial responsibilities to help ease the transition, and that’s why developing a transition roadmap is important to make sure it’s a successful transition. 

The roadmap to any dental practice transition can take many forms, but it starts by getting it in writing. By outlining all the details prior to the date of purchase, the process will be painless when it comes time to finally buy in. Conversely, the current owner should also have a writing plan in regard to scaling back their liability and chance the associate leaves because their expectations are being met.

Then, plan your timeline — and take your time. Part of the written outline should include when and how the buy-in will happen. The timeline could require the associate staying at the practice for a certain number of years before buying it or it could be set by predetermined growth benchmarks. Since the associate-to-buy-in plan takes a few years, it also gives all parties time to figure out their compatibility and working relationship. At the end, mapping out your timeline lets all doctors exit gracefully and with little financial impact.

Most importantly, before starting the associate-to-buy-in process, it’s essential to complete a practice valuation so you have a better understanding of the amount of growth the associate is responsible for to ensure the associate isn’t paying for their contribution to the increased value of the practice. A second valuation is also recommended on the day of the transition. The two valuations are averages so the associate doesn’t pay double for the work they’ve done and the seller is compensated for the risk of having a high-priced employee on board.

The numbers

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business. After the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

The timeline

Selling a dental practice to an associate typically takes around three to four years. On paper, taking on an associate is normally the fastest route as there are often a lot of prospects; however, with a one-in-five success rate, timing can be unpredictable in finding the best match for your dental practice. 

The buyer

While taking on an associate is risky from an owner’s perspective, it makes sense at times for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a DSO as an employee without an ownership benefit or management responsibility. This allows the associate to relocate or move among practices with ease and little stress since there is no real commitment on their end.

Another perspective to keep in mind as an associate is how the buyout price could change over time. Bringing in an associate should make the practice more successful because they’re able to increase production, collections and more. That said, they’ll likely be buying into the practice at a higher rate than they would if they would’ve developed a roadmap when the associateship began.

The truth

Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms. It’s also worth noting associates don’t receive the same type of tax advantages as the practice owner.

The current state

Now more than ever, dentists are in high demand, particularly associates in private practices and dentists in dental service organizations (DSOs), many of whom suffered income reductions or layoffs during the pandemic. Similarly, with increased hours from those who kept their jobs and a high rate of burnout because of the demands brought on by the pandemic, many independent dentists are turning toward DSOs to reduce management stress or pre-retirement associateships to continue earning.

The alternative

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, there are a lot of alternatives with higher success rates, such as partnering with a DSO or selling to an individual or a DSO. 

Bottom line

Selling to an associate can be profitable when making an informed decision based on facts. See if bringing in an associate makes the most sense for your practice, your staff and patients or if there’s a better option that will benefit you and your practice in the long run. Contact the professionals at Professional Transition Strategies to figure out which route makes the most sense for your dental practice.

July 18, 2022

How to Prepare for the Breakup of a Dental Practice Partnership

dental mold with braces

Of all the dental practice transition options, associateships have the highest failure rate. A natural first thought is to bring on an associate with plans to buy it at a later date out at a later date, but the numbers prove otherwise. When a practice simply brings on an associate with eventual plans to transition the practice at a later date, the results are predictable—a 20% success rate, in fact. So why do dentists continue to go this route? We break down the logic behind selling your dental practice to an associate.

The thinking

Bringing on an associate is about more than creating a plan to sell the practice to them in the future. Instead, a doctor wants to focus on increasing production. One way to get the most out of their space is by bringing an additional doctor in house. Another common reason to add an associate is because the doctor may want to lighten their load if they’re booking out for months. This can help relieve the bottleneck. 

The downside is that, if an associate is at the practice for a while, they begin to have patients on their calendar for weeks — even months — to come. When that happens, the associateship (predictably) doesn’t work and the practice will have an even bigger bottleneck and unhappy patients. 

Like in both of these examples, associateships are rarely successful since not everything is agreed upon from the outset and different expectations not being met by both parties. In a retirement situation, the retiring dentist brings on an associate to pick up managerial responsibilities to help ease the transition, and that’s why developing a transition roadmap is important to make sure it’s a successful transition. 

The roadmap to any dental practice transition can take many forms, but it starts by getting it in writing. By outlining all the details prior to the date of purchase, the process will be painless when it comes time to finally buy in. Conversely, the current owner should also have a writing plan in regard to scaling back their liability and chance the associate leaves because their expectations are being met.

Then, plan your timeline — and take your time. Part of the written outline should include when and how the buy-in will happen. The timeline could require the associate staying at the practice for a certain number of years before buying it or it could be set by predetermined growth benchmarks. Since the associate-to-buy-in plan takes a few years, it also gives all parties time to figure out their compatibility and working relationship. At the end, mapping out your timeline lets all doctors exit gracefully and with little financial impact.

Most importantly, before starting the associate-to-buy-in process, it’s essential to complete a practice valuation so you have a better understanding of the amount of growth the associate is responsible for to ensure the associate isn’t paying for their contribution to the increased value of the practice. A second valuation is also recommended on the day of the transition. The two valuations are averages so the associate doesn’t pay double for the work they’ve done and the seller is compensated for the risk of having a high-priced employee on board.

The numbers

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business. After the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

The timeline

Selling a dental practice to an associate typically takes around three to four years. On paper, taking on an associate is normally the fastest route as there are often a lot of prospects; however, with a one-in-five success rate, timing can be unpredictable in finding the best match for your dental practice. 

The buyer

While taking on an associate is risky from an owner’s perspective, it makes sense at times for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a DSO as an employee without an ownership benefit or management responsibility. This allows the associate to relocate or move among practices with ease and little stress since there is no real commitment on their end.

Another perspective to keep in mind as an associate is how the buyout price could change over time. Bringing in an associate should make the practice more successful because they’re able to increase production, collections and more. That said, they’ll likely be buying into the practice at a higher rate than they would if they would’ve developed a roadmap when the associateship began.

The truth

Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms. It’s also worth noting associates don’t receive the same type of tax advantages as the practice owner.

The current state

Now more than ever, dentists are in high demand, particularly associates in private practices and dentists in dental service organizations (DSOs), many of whom suffered income reductions or layoffs during the pandemic. Similarly, with increased hours from those who kept their jobs and a high rate of burnout because of the demands brought on by the pandemic, many independent dentists are turning toward DSOs to reduce management stress or pre-retirement associateships to continue earning.

The alternative

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, there are a lot of alternatives with higher success rates, such as partnering with a DSO or selling to an individual or a DSO. 

Bottom line

Selling to an associate can be profitable when making an informed decision based on facts. See if bringing in an associate makes the most sense for your practice, your staff and patients or if there’s a better option that will benefit you and your practice in the long run. Contact the professionals at Professional Transition Strategies to figure out which route makes the most sense for your dental practice.

April 26, 2021

Start Now: Why Dental Retirement Planning Can’t Wait

dental mold with braces

Of all the dental practice transition options, associateships have the highest failure rate. A natural first thought is to bring on an associate with plans to buy it at a later date out at a later date, but the numbers prove otherwise. When a practice simply brings on an associate with eventual plans to transition the practice at a later date, the results are predictable—a 20% success rate, in fact. So why do dentists continue to go this route? We break down the logic behind selling your dental practice to an associate.

The thinking

Bringing on an associate is about more than creating a plan to sell the practice to them in the future. Instead, a doctor wants to focus on increasing production. One way to get the most out of their space is by bringing an additional doctor in house. Another common reason to add an associate is because the doctor may want to lighten their load if they’re booking out for months. This can help relieve the bottleneck. 

The downside is that, if an associate is at the practice for a while, they begin to have patients on their calendar for weeks — even months — to come. When that happens, the associateship (predictably) doesn’t work and the practice will have an even bigger bottleneck and unhappy patients. 

Like in both of these examples, associateships are rarely successful since not everything is agreed upon from the outset and different expectations not being met by both parties. In a retirement situation, the retiring dentist brings on an associate to pick up managerial responsibilities to help ease the transition, and that’s why developing a transition roadmap is important to make sure it’s a successful transition. 

The roadmap to any dental practice transition can take many forms, but it starts by getting it in writing. By outlining all the details prior to the date of purchase, the process will be painless when it comes time to finally buy in. Conversely, the current owner should also have a writing plan in regard to scaling back their liability and chance the associate leaves because their expectations are being met.

Then, plan your timeline — and take your time. Part of the written outline should include when and how the buy-in will happen. The timeline could require the associate staying at the practice for a certain number of years before buying it or it could be set by predetermined growth benchmarks. Since the associate-to-buy-in plan takes a few years, it also gives all parties time to figure out their compatibility and working relationship. At the end, mapping out your timeline lets all doctors exit gracefully and with little financial impact.

Most importantly, before starting the associate-to-buy-in process, it’s essential to complete a practice valuation so you have a better understanding of the amount of growth the associate is responsible for to ensure the associate isn’t paying for their contribution to the increased value of the practice. A second valuation is also recommended on the day of the transition. The two valuations are averages so the associate doesn’t pay double for the work they’ve done and the seller is compensated for the risk of having a high-priced employee on board.

The numbers

Who better to sell to than someone you’re already working with? Most dentists take on an associate in hopes of potentially selling the practice in the future, so keep that in mind when looking for an associateship, while also taking into account the cost of acquiring a practice and the overhead of running a business. After the cost of acquiring a practice and the overhead of running a business, taking on an associate is typically not an affordable option. If going this route, make sure there’s a contractual “out” should the match not be a good fit so no time or money is wasted.

The timeline

Selling a dental practice to an associate typically takes around three to four years. On paper, taking on an associate is normally the fastest route as there are often a lot of prospects; however, with a one-in-five success rate, timing can be unpredictable in finding the best match for your dental practice. 

The buyer

While taking on an associate is risky from an owner’s perspective, it makes sense at times for a fledgling dentist to get their feet on the ground. With this option, you are working for a person or a DSO as an employee without an ownership benefit or management responsibility. This allows the associate to relocate or move among practices with ease and little stress since there is no real commitment on their end.

Another perspective to keep in mind as an associate is how the buyout price could change over time. Bringing in an associate should make the practice more successful because they’re able to increase production, collections and more. That said, they’ll likely be buying into the practice at a higher rate than they would if they would’ve developed a roadmap when the associateship began.

The truth

Associates typically only last two years at most because of unset expectations in regard to patient assignment, salary, and timeframe for branching out and buy-in related to value, purchase price, and buy-in/buy-out terms. It’s also worth noting associates don’t receive the same type of tax advantages as the practice owner.

The current state

Now more than ever, dentists are in high demand, particularly associates in private practices and dentists in dental service organizations (DSOs), many of whom suffered income reductions or layoffs during the pandemic. Similarly, with increased hours from those who kept their jobs and a high rate of burnout because of the demands brought on by the pandemic, many independent dentists are turning toward DSOs to reduce management stress or pre-retirement associateships to continue earning.

The alternative

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, there are a lot of alternatives with higher success rates, such as partnering with a DSO or selling to an individual or a DSO. 

Bottom line

Selling to an associate can be profitable when making an informed decision based on facts. See if bringing in an associate makes the most sense for your practice, your staff and patients or if there’s a better option that will benefit you and your practice in the long run. Contact the professionals at Professional Transition Strategies to figure out which route makes the most sense for your dental practice.

February 5, 2021

associateship Archives – Page 2 of 4 – Professional Transition Strategies

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!

January 28, 2021

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.

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