Top 5 Dental Practice Transition Strategies

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By Rod Johnston, MBA, CMA of Omni Practice Group

Dentists are often so caught up in their day to day grind of running a dental practice that there’s no time to figure out an exit strategy. You do everything from manage the staff to negotiate the lease and, oh yeah, you also do dentistry in between. You’re just too busy to even think about your dental practice transition.

Until, one day, your back blows out, your spouse tells you to retire, or you just plain get tired of the responsibilities and stress. You decide it’s the time! Maybe you want to continue doing dentistry at some level, either part-time or full time. Maybe you want to be completely done. Here are the top five dental practice transition strategies you can think about before that time happens.

SELL AND DON’T LOOK BACK

This is the option for those who are completely done and ready to either find another career, a good fishing hole, or favorite golf course. You can either attempt to do it yourself or hire a dental practice broker to help you out. The pros are that you are done, you get your equity out of the practice and you do not have to worry about staff, insurance companies, or other problems again. The cons are that you do not know how your patients and staff will be cared for by the buying doctor.

SELL AND TRANSITION

This approach allows you to sell your dental practice and stay on for a short or long term practice. The “staying on” part can be a two-hour drop-in once per week for a couple of months, working back one or two days per week, or a more extensive two to four days per week for a year. It’s all negotiable and depends on the amount of production in your practice. This strategy is great for those who are closely tied to their patients and staff and want to see them well cared for after the sale. It also helps ensure patients will stay on with the buying doctor. The pros are that it allows for a very smooth dental transition. The cons can be that the staff is still allegiant to you and the patients still want to see you. You need to be an impartial observer and let the buyer be the owner and do his/her work.

SELL AND WORK BACK

If you decide that you still enjoy dentistry, but just don’t want to manage the practice anymore, this is the strategy for you. This can be done at an early age and does not mean you are retiring. I have several case studies where a 50-year-old dentist was tired of managing staff and getting his reimbursements cut. We sold the practice to someone who wanted a satellite practice. The buyer implemented marketing and other services to increase production and the seller is working back full time making more money than he ever made. Pros are that you no longer manage your practice and you may even make more money. Cons are that you may be selling your dental practice to an entity that requires you to implement systems and procedures you may not like. Be selective who you sell to. I have found that smaller groups tend to allow more freedom.

PARTIAL SALE – PARTNERSHIP

If your practice has enough production, you can sell a partnership in your practice and continue to work. There are numerous ways of structuring these deals. And, anytime you enter a partnership, I advise strongly you put everything in writing and have an attorney make it legal and fool proof. You sell a portion of your practice, say 1/3, to a buyer. You continue to work and grow the practice. You can then either sell another 1/3 to another buyer or continue to grow, or sell out completely. The pros of this are that you harvest some of your equity while continuing to grow your practice. You then grow the practice some more and then you sell another portion. The cons are that it is like a marriage. You will probably have disagreements with your partner. Be sure and structure it right up front to reduce disagreements and to remedy them if they occur.

DEFERRED SALE

Also called an associate-to-own sale. This is where you bring on an associate who works in the practice with an understanding to sell to the associate at an agreed-upon time. The price can either be determine upfront or at the time of the sale. The way we typically do a deferred sale is do a dental practice valuation in the beginning and agree upon the price. We then do a dental practice valuation in the end and the buyer and seller split the equity to determine the final price. This can be a good way to transition as the staff and patients get to know the new doctor. It can go very smoothly, but according to the ADA, these fail about 50% of the time. I typically see them fail when either party changes the deal in the middle of the process, one party gets jealous of the other, or personalities conflict. We structure these so there’s a “dating” period before we lock in the associate with a deposit.

EVERYTHING IN BETWEEN

We often get asked about how creative a dental practice transition can be. You can really be as creative as you want to be. The only challenge is finding a buyer who will be creative with you.

So, think about where you are today and what your end goals are. Speak to an NAPB dental practice broker to help determine which strategy is best for you. You can trust that we will come up with a plan that will work for both you and a prospective buyer to make your dental transition as smooth for everyone as possible.