Building a successful practice takes years of planning and hard work, not to mention countless hours of “sweat equity.” This means that a practice is not just a source of income, but an asset to be managed—and, possibly, bought or sold.
Selling a practice has been the traditional way that a dentist retires from the profession. But it is a transaction that is difficult to complete and fraught with risk. Thankfully, the past few decades have seen other business models arise that provide alternatives to selling a dental practice outright.
And unlike selling, which most dentists consider only at the end of their careers, these alternatives to selling a dental practice can be an active part of your dental career plans at any stage. And the sooner you plan, the smoother the transition will be.
Why Do Dentists Sell Their Practice?
Most dentists sell their practice as a way to transition to retirement. The idea is to hand the practice over to a capable younger dentist, securing a lump-sum “nest egg” for retirement. The younger dentist does not have to reinvent the wheel in establishing the practice and, in many cases, gets the benefit of mentorship from the outgoing dentist for a period of time after the sale.
In some cases, a dentist might simply want a career change. Perhaps he or she is more interested in research, or consulting, or teaching. Selling the practice is seen as a way to free up time for these activities.
Reasons Why You Might Not Want to Sell
It makes sense that dentists would, at some stage in their career, want to take a step away from the daily activities involved in running a practice. Selling the practice is an immediate way to do that...
...but there are also several reasons why selling a practice might not be such a good idea. These include:
Not knowing the market value of your practice. If you choose to sell a dental practice, it will need to be priced appropriately. Set the price too high, and the practice will never move. Set the price too low, and you’ll be leaving money on the table, even to the point of needing to establish another income stream in the future.
Dentists are not accountants, and vice versa. Selling your practice without the help of a professional that routinely deals with practices greatly increases the chance that your practice will be mispriced for the market.
Lack of advertising experience. Even if you know a fair price for your practice, you will need to advertise the sale. This isn’t just advertising to the general public, but to a very specific market with specific goals. Many times, a dentist will use a broker to reach this market. While there are many reputable and capable brokers, you will want to think through your commitment before engaging a third party.
Detrimental effects from news of the sale. On the other side of the coin, word will eventually get out that your practice is for sale. Your own staff might leak to your patients that you are looking to sell and/or retire!
When that happens, staff members will begin looking for new jobs, and patients will start looking for a new dentist. Too often, a practice begins to “bleed money” the longer it is on the market, making it less attractive for a buyer and less able to support you, the dentist.
Of course, selling a practice is still an option if you can determine a fair price, find and vet a buyer, and generate the necessary paperwork (including legal documents). Even if you do so through a broker, it can be worth your time to consider some other alternatives to selling.
3 Alternatives to Selling a Practice
Taking on partners. One does not need to sell a practice outright to take on partners, especially practitioners that are still in the early part of their career. By forming a partnership, a dentist can begin sharing some of the workload without giving up ownership or control of the practice. The downside? Your partners might want part ownership of the business, as well as a greater say in the management of the practice. You’ll need the correct partnership agreements to outline expectations and leadership structure.
Office sharing (with affiliation). Another alternative is to simply share space with another dentist, so you both achieve some economies of scale. The more established practice agrees to begin transferring some patient accounts to the newer practice, with the understanding that the older dentist will continue to get a portion of the profit from those patients (usually in return for some mentorship and consulting). Eventually, all of the patients have been transferred, and the retiring dentist is pulling down a modest income from consulting.
Affiliation with a Dental Support Organization (DSO). A good DSO will have experience with different transition strategies. By affiliating with one, you can both offload many of the day-to-day administrative tasks of running a practice and begin the process of stepping back from the practice when the timing is right. Affiliating with a DSO can also give you a more stable income, both before you transition and after you retire.
If you are interested in finding out more about affiliation with a DSO, we encourage you to reach out to us. We’re happy to field your questions!