A Profitable Dental Practice Exit Starts With A Plan

As we embark on a new year, we don’t know what lies ahead. But we know that fortune favors those who prepare. This wisdom holds in dentistry, especially when it comes to exit planning.

Your profession demands specific skills that require energy, focus, and attention to detail. Most people outside dentistry don’t understand the complexity of the procedures you perform in tight quarters. 

And while you’re finishing up another prep, you’re managing a business and the latest staff crisis. You’re learning about Section 508 and the Americans with Disabilities Act that creates new liability for your website, choosing a new digital sensor, and planning taxes with your accountant. You’re analyzing the strategy for multi-platform marketing and membership plans while preparing for a hygienist’s vacation coverage.

Dentistry demands your best, and you’re constantly handling a full slate. If you’re a few years from leaving the profession, your exit plan may seem like something for another day, month, or year. But the most successful dental transitions belong to those who put a plan in motion with plenty of time to manage the process. Every step shapes your next life stage.

It’s ideal when time is on your side, and you have 3-5 years before stepping out of ownership. But you may hope to enjoy the next phase sooner, and time allows a thorough approach to the off-ramp. Regardless, years go fast; you’re always in transition.

You’ve committed countless hours to serving your patients and adding value to their lives. And you’ve invested energy in strategic business moves that maximize profits. From here, detailed planning helps shape a transition that preserves the value, relationships, and legacy you’ve built. 

The Profession Is Changing.

Dentistry has enjoyed a relatively stable expansion over the years, but complex forces add pressure to the recent evolution. Consider these two revealing facts and how they could influence your planning:

  • In the past 15 years, the number of dentists under age 35 that own a practice contracted from about 50% to 30%.  This trend continues today.
  • Practice consolidation from DSOs and Private Equity purchases continues into the new year. Analysts expect DSOs to own 75-80% of practices in the next ten years.

The traditional practice buyer may become more scarce with these trends, and you may find that your transition changes, too. But the good news is that new opportunities come with change. Strong, prepared practices are choosing from more lucrative options than ever before.

Early practice transition planning gives you time to assess your goals and develop your business further. You’re less likely to feel pressured to accept a low offer or the wrong buyer. Instead, you’ll enjoy the opportunity to realize your full practice value and more capital to help fund your dreams.

Is A DSO A Threat Or An Opportunity?

Many retiring dentists look for a younger dentist to join the practice and take the reins over a short period. This scenario isn’t as likely as in the past, but precise planning helps set the stage for the exit you envision. A practice with tight operations, clear branding, and strong profit margins appeals to young practitioners who have debt obligations to service. But a long transition window creates more options for a match that fits you, your staff, and your patients. 

Early planning also takes the pressure off a quick decision, so you can analyze whether a DSO fits your overall plan best. DSOs don’t let you walk away once you sign; they often require that the seller stays in the practice for 3-5 years and helps it thrive. 

It’s not unusual for a DSO to offer 60-80% of the practice value at closing. But you can expect an earn-out agreement or equity rollover to capture the remaining value. During that phase, you’ll have less administrative responsibility, but you’ll actively support practice growth for several years. If this arrangement fits your time frame, a DSO can boost your finances, especially if it includes an equity rollover.

If you take time to attract and analyze DSO deals, the details around a final contract require due diligence. Since you’ll stay in the practice for a few years, you must consider each organization carefully before handing over future control. So, bring a proactive mindset with seasoned advice to create a deal on your terms.

You’re In A Dental Opportunity Zone

The winds of change in dentistry continue to blow, and that brings new complexities and landmines. It’s never wise to navigate a transition alone or expect a young buyer to appear with the first listing. You may get lucky, but it’s more likely that you’ll need the right team to support your efforts. 

A thriving healthcare business has many complex parts, and you’re focused on caring for patients today. But your practice may also be your largest asset and a significant catalyst in launching your retirement. Strategic management of every component can lead to a transaction that maximizes proceeds for you. And if you own real estate with the practice, detailed analysis helps design a transaction that considers the whole picture.

Start The Conversation

Maybe you’re a few years into practice, or you’ve been thinking about stepping away soon. Now’s the time to start reviewing with professionals that understand today’s market and how to consider each option. The more time you have, the better. If you’re asking, “When will be the best time to sell my dental practice,” we’ll help you gain clarity.  At DDSmatch, we support our clients with customized plans that fit the entire picture. 

Reach out and start the conversation today; we’re here to listen and help.