Financial Benefits (Scenarios) of Selling Your Dental Practice

You might be tempted to sell your practice thinking you can retire on the income from the sale.

And you probably can.

It’s mostly a matter of math and timing, and there are many things to consider before making such a big decision. We want you to have a clear understanding of the scenarios that are best when selling your practice.

We also want you to avoid having false expectations about how much you’ll walk away with once the ink is dry on your acquisition paperwork.

Before you jump into a transition, here’s some things to think about that will help you make an informed and wise decision.

Financial value of your dental practice

The first question you need to ask is, “What is the current value of my dental practice?”

There are two primary ways to look at the value that are extremely important to analyze.

1. Appraised value. Profit and cash is key and the appraised value is a value assigned by a professional who is certified to take into account these factors that contribute to the value of your practice. This is where profit, financial profitability, patient base, cash, and other criteria are assigned to the appraised value.
2. Market value. This is the price that’s most commonly paid for a dental practice. For a dental practice like yours, market value historically ends up being between 70% and 90% of collections.  Recently, due to a very competitive market, we’ve experienced over 100% of collections for very well-run, great location practices.  For multi-Doctor, multi-location practice, over 100% of collections is common and sometimes can approach 250% of collections.  The 250% of collections are rare, yet attainable for the very profitable group looking to exit to a larger group.

Scenario #1 in selling your dental practice

Now that you understand the financial value a bit more, lets unpack a couple of ideal scenarios we want to guide you in achieving.

First, this scenario depends on how long you want to work inside the practice once you sell it. On the outside, it’s fairly straightforward.

• You sell your dental practice.
• You replace yourself as the primary dentist in your practice.
• You walk away with cash, either lump sum, or paid out over time.

Replacing yourself with a “new” dentist is always tricky and there’s definitely some emotions that are involved, but it’s the cleanest way to leave your practice.

The payout is fairly simple with you taking a larger cash payout at close or getting paid over a period of time.

Scenario #2 in selling your dental practice

Scenario two is a little more nuanced, but common because it allows you to work inside the practice as a W-2 employee, rather than having the stress of being a business owner plus a full-time dentist. This scenario is when a Dental Service Organization (DSO) takes over the operations of the practice. You stay on board for a period of time, collect a paycheck and a retirement, and eventually get to retire.

You still have a vested interest, it’s just different as an employee versus the owner/CEO.

Both come with the pro’s and con’s, we can certainly entertain both scenarios to figure out which option is best for you. The best option for selling your dental practice.

The other answer we like to give is also ‘it depends.’

Many dentists and practice owners have unique situations and need a more custom approach tailored to fit their needs. The goal is always to yield the greatest wealth from your practice, but the path to get to this finish line is different for some practices.

In pursuing one of these options, remember that there are many forces that benefit economically if you sell your dental practice. Don’t be surprised if you are inundated with people who want you to sell.

You’ll want to think about things like dual representation from a broker, and whether or not this is the best situation for you.

Ideally, you should look for a scenario where one broker and practice consultant is supporting you only, not multiple parties. You should focus on making the best economic decision for you, your staff, your patients, your wealth, and your legacy.