Selling Your Dental Practice: A Start-to-Finish Guide

Selling Your Dental Practice: A Start-to-Finish Guide

With over 180,000 dental practices, the United States receives revenue of over $130 billion each year. In other words, an average but well-run dental practice can potentially make over $500,000 annually.

Lucrative right? However, people still feel the need to sell their practices. Others have not managed to reach such levels. Or, retirement is here, and you would love to sit and enjoy your sweat. Or, you want to switch careers. For others, it might be an opportunity for business growth.

Irrespective of the reasons, you have decided to sell your practice. Let’s look at some of the things you need to know before you sell your dental practice.

First Things First

For most dentists, the dental practice is their primary source of income. As you are planning to sell the practice, there are some critical questions that you need to ask yourself, and they are:

  • Is This the Right Time for You to Sell, Financially?

If your practice is your primary source of income, then selling will mean that your steady monthly income will be affected. Are you really prepared for this reality?

Even though you are going to pursue other income-generating projects, you should ensure that your pension fund is fully-funded. A healthy fund will cushion you even if the new venture goes under or an emergency arises.

  • Professionally, Is It the Right Time for You?

As a dentist, you spent at least eight years in school, and obviously, you have some years of experience. If you haven’t reached retirement age, has your passion run out? If you no longer find joy in dentistry, then selling your practice is a good idea.

But if it is burnout, then a sabbatical can solve the problem. You want to avoid a scenario where you have sold the practice, and your passion is still burning inside you.

  • What Is the Value of Your Practice?

Besides the above considerations, the value of your practice is at the heart of this transition. Regardless of your reasons for selling, there is an unchanging fact that you have to consider, business-wise: your selling price should always be higher than the purchase value.

If you also desire to get maximum profit, your best option is to sell it when it has the most value.

There are three different ways in which you can look at the actual value of your practice:

  • Market value. This is the price that an asset would be paid for at a given time. Typically, the market value of a dental practice will be between 60% and 80% of the collections.
  • Appraised value. This value is assigned by a certified professional who typically takes into account all the factors that contribute to the actual value of your dental practice, such as patient base, financial profitability, equipment, and much more.
  • Economic value. The economic value of your practice is the most important number to consider. This is because it is the cost to replace a given asset. Meaning whatever you are doing to replace it should give you the same profit margin or higher. This value has a huge impact on your future financial prosperity.

Steps to Follow When Selling Your Practice

In case you are wondering what steps to follow to sell your practice, keep the following points in mind:

  • Work out the timeline. When do you want to sell your practice? Will you still be working at the practice? When you know what you want to do, then work backward and plan appropriately.
  • Increase the profitability of your practice. This will ensure that you get the maximum value of your practice because your profit determines your valuation.
  • Get your finances in order. If you have poor business management, this is the time to improve. This gives you an exact picture of where the business is at. You will know what is working and what is not. Anyone serious enough to buy the practice will have to check to see if your finances are in order.
  • Build or seek a team that will help you increase the value of your practice. You will need the right advisors who know how to run, buy and sell dental practices. Excellent accountants, brokers, and lawyers will be your lifesavers.
  • Practice visits. No one knows your practice better than you. It is best when potential buyers come to visit the practice that you are the one who gives the tour.
  • Consider all options before settling on one. This will give you time to see which one suits your needs.
  • Agreement. Once you have agreed to an offer, then it’s put in writing, and you sign after receiving legal advice.
  • Exchange and banking the money. When everyone is happy, then the money is transferred, and the practice is officially sold.

Transitions can be difficult, and without the proper guidance, the whole process can be a nightmare. If you need dental financing or need to sell your practice call AFTCO Southwest today, we can get you what you need.