January 8, 2020

Why Are Fewer Dental Practices Selling to Individuals?

It’s no secret fewer dental practices are selling to individuals than ever before. That’s not to discourage new or transitioning dentists but rather some encouragement to think outside the traditional transition box. Here’s what you need to know to get your dental practice transition on track.

Increased DSOs

With an increase in dental service organizations (DSO) comes more options available to dentists looking to sell. More doctors today are affiliating with DSOs than ever before because of the variety available. Selling to a DSO makes sense when the seller is looking to stay on with the practice but wants to release managerial responsibilities, such as in a retirement situation or anyone who is looking to maintain a work-life balance.

DSO funding

Since DSOs typically do not have to rely on bank financing because they are funded by private equity groups, they can pay more for practices than the standard individual. What’s more, you’ll get a higher valuation because a DSO won’t take hard assets into account but rather will focus on collections and other finances. DSOs also have private equity money, which is favorable to a bank over an individual buyer when it comes to securing a loan.

Transition options

More practices are forming private groups and are more interested in associates than bringing on partners than ever before. Most dentists take on an associate in hopes of potentially selling the practice in the future, and because the average dental school loans are close to $300,000, dentists typically need to take on an associate for a few years prior to buying a practice.

Experience

Simply put, new dentists are less specialized than older dentists who are selling their practices. As is the case with a general dentist who has practiced for more than 30 years and has now decided to specialize in TMJ or implants, a new doctor hasn’t practiced long enough to specialize in these aspects of general dentistry.

What’s next?

Contact the experts at Professional Transition Strategies to figure out which selling option is right for you and your dental practice.