June 20, 2017
7 Types of Dental Practice Transitions
If you’ve decided you are ready for the next step of your life and dental practice, it may be time to consider retirement. There are many different kinds of transitions, so regardless of whether you are ready to completely stop working, we can help you find a transition that works best for you and your dental practice. Here are a few different transition options.
In a buy-out, the purchaser buys a practice for a negotiated price with a relatively short transitionary period, typically an average of three months. This may be the best choice for someone who wants to transition their practice quickly.
Associate to buy-in
In an associate to buy-in transition, a potential buyer is courted from a group of associates to buy in over a period of time. This ensures compatibility and allows time to figure out the future of the practice rather than making a decision from day one. Division of power tends to be the biggest consideration that needs to be made. This is a great option for someone who does not want to stop working immediately and wants to ensure certain aspects of the practice remain the same after they leave the practice. Typically, this type of transition takes more than five years to complete.
In buy-in, a specific buyer purchases a defined portion of practice for a negotiated amount from day one. In addition to practice analysis, we at Professional Transition Strategies (PTS) will perform a personality profile to ensure compatibility. This is typically a relatively quick transition compared to other options, lasting on average between one and four years.
Associates are easy to find, and this route allows you to maintain full control. However, it is important to note the success rate is only 20%. This is because not everything is agreed upon from the beginning. Therefore, everyone tends to have different expectations in the end. The time frame for an associateship transition greatly varies. It depends on the agreement that was originally established, as well as the associate that was selected.
A merger is a different kind of transition, one in which two existing dental practices combine to become one entity and normally as equal partners moving forward. This can take longer depending on the situation and owners involved. Typically, merging two practices takes more than two years.
An affiliation gives the majority of business control to another entity typically a dental service organization (DSO) or a group with the purpose of slowly transitioning out of your practice and giving up clinical control to that group. This is a moderate choice as far as time frame, normally taking less than three years.
In a roll-up, you purchase multiple dental practices to combine under one entity in a group and maximize economies of scale. Therefore, when your practice is purchased, you can receive a higher value. A roll-up usually takes more than five years to complete.
No matter which transition you choose, you should not let your net income, patients or revenue decrease. These are red flags to buyers and financial institutions.