Exit Strategy When Selling Your Independent Dental Practice

Melissa LuVisi
December 2, 2021 | 3 min read

If you’re considering retirement from your independent dental practice, don’t delay the process of designing your exit strategy. This helps ensure that the results of years of your hard work are in good hands. Meanwhile, you'll have a comfortable financial cushion for the future.

Besides getting your practice’s financials in order and compiling all the data to support a sale, you need an exit strategy to guide the sale of your practice.

Here’s what to consider:

Know the Amount You Need to For Your Next Chapter

Whether you’re retiring or planning to pursue other ventures, know the amount of money you need to sustain the lifestyle you want. Review where you’re now and where you want to be financially to design a plan. For example, how much do you need to pay off the real estate or other loans you have taken out for your practice? How much cash do you want to have on hand when you retire?

Define Your Potential Buyers

Identifying your potential buyers can help you make targeted improvements and set your practice up for a successful transition. Here are some options:

Younger Dentists

The new generations are more geographically flexible and look for opportunities that’ll allow them to achieve a work-life balance. They prioritize sustainability and technology. They also use online channels extensively to do their research.

To attract these buyers, you need to implement the right technologies, such as robust dental practice management software, to streamline workflows and automate manual tasks. You should also build an online presence to present a positive first impression to these buyers.

An Associate or Partner

This is a more traditional route of selling a dental practice. An associate or partner is already connected to and understands your practice. You can be confident that they can continue the culture and philosophies of care while providing the same high-quality services to your patients.

But this doesn’t mean you can skimp on the transition. Create a succession plan to ensure the continuity of the business. You can orchestrate a smooth transition by staying in the practice after the sale. Keep in mind that such a buyout process and gradual handoff can take a few years.

Group Practice or Dental Service Organization (DSO)

Selling to a corporate party means the buyer has ample experience running a dental practice, so your involvement in the transition will be more hands-off. Since these buyers typically don’t know you or your practice well, they’d go through your financial reports and internal processes with a fine-tooth comb.

Collect and compile all the M&A-related data  required to determine the valuation of your business. Clean up your dental practice data by collecting outstanding balances, updating fee schedules, closing out claims, verifying the contact information of inactive patients, and standardizing your systems.

Employee Stock Option Plan (ESOP) or Practice Pension Plan

With an ESOP, an employee or associate can build up equity in the business and use it to pay for it in the future. This exit strategy also gives you a tax advantage. If you structure the practice as an S or C corporation, you can maintain its brand identity to continue serving patients without any interruption.

With a practice pension plan, the buyer puts a percentage of your profit into a retirement plan. The new owner will get a tax deduction and you don’t have to pay taxes on the upfront sale.

Set Your Plan in Motion

After you have defined your exit strategy and identified the type of buyers, you can make strategic improvements to your practice to get it ready for sale.

Set the stage so the new owner can start serving patients as quickly as possible after the sale. Having the right workflows and technologies in place is key to a successful transition. Not to mention, the increase in efficiency and reduction in overhead expenses will help you attract more buyers.

Request a demo to see how tab32 can help you path the way to a successful exit.

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