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Transition Paths to and From Practice Ownership

Dental practice for sale near me - dental office for sale near me - dental clinic near me - dental practice listings – National Dental Placements

Understanding your options is the first step

 

If you’re a recent graduate thinking about ownership or an established doctor looking toward your next career move, taking steps to understand your options in a dental practice transition needs to be the first thing you get arms around. Before you take steps to purchase or sell your practice, understanding your goals and knowing the options will help you determine which route is best for you.

“We often envision success without any insight as to why we want to achieve it,” Partner Christy Ratcliff said. “It’s important to remember your ‘why’ and take action because it’s what you want, not what others say you should want.”

No matter what your purpose behind your decision is—such as retiring early to travel the world or building on the next level of your dental empire—your goals will help guide your professional decisions along the way.

This also means your goals will help determine the right practice transition path for you. Every transition is unique, and fortunately, there are a variety of approaches to purchase or sell a practice. Here are a few common ways transitions can play out.

Walk-Away / Outright Sale

Simply put, the walk-away (or outright) sale is when a purchaser buys the practice, and the seller completely removes themselves, walking away from the business. There is a full switch in ownership.

From the buyer perspective, this is a great opportunity for individuals who are ready to be their own boss. These doctors could be first-time buyers who are a few years out of dental school or perhaps they have previous ownership experience.

Alongside other private practice acquisitions (as opposed to start-up practices), the walk-away sale yields the benefit of an established practice that already has cash flow and incoming patients. When acquiring the practice, the buyer must understand he or she is also acquiring the practice’s staff, patients and all the good and bad that may come along with it.

From the seller perspective, this situation is for the established doctor who is financially and emotionally ready to be done practicing dentistry and running the business. Typically, the walk-away sale has a short transition period, and the selling doctor may choose to work part-time to assist the new doctor, while ensuring the staff and patients are taken care of.

Partnership

Often referred to as a “work marriage,” partnerships are ideal for doctors who enjoy collaboration as they will make decisions together and share control. This is a good option for individuals who want to buy a portion of a practice rather than buying the entire practice. On the seller side, partnerships benefit owning doctors who have an influx of patients and would like to equally share the load with another doctor, or they might be looking to add more work/life balance to their schedule. It’s a common route for associate doctors in the practice to transition to a partnership with the owning doctor(s).

In a partnership, the doctors will spend a lot of time together, so it’s imperative they communicate well and personalities match or complement each other. Partnerships can especially thrive when a doctor brings a different skill set to the table, such as speaking a different language, that enhances the current practice.

Staggered Sale

The staggered sale is essentially a partnership, but with a shorter transition period.  It spreads out a 100% sale over the course of typically 2-5 years. This allows the seller to leave slowly over time, oftentimes making for a smooth transition period.

One situation where a staggered sale is beneficial is if the owning doctor isn’t quite ready to sell and retire. This doctor may be five years away from retiring, so they hire an associate with the intention of having the associate take over. Over the course of the years, the owning doctor and the associate slowly shift their number of workdays, so that the owner starts out working most of the days and slowly cuts back, while the associate begins to work more days.

This type of transition works well with a partnership mentality as the seller gradually lets go of ownership, and the associate is brought into the picture to eventually become the owner.

Merger

A merger is the act of combining two or more practices into one entity. In most cases, one practice moves into the other practice’s location, which may take a period of time to fully transfer the patients to the new location. However, the practices don’t have to move into one physical space to be considered a merger.

Most people don’t see mergers as a traditional transition plan, but they can be a way to add more patients, provide flexibility in the doctor’s schedule and bring in another doctor to share the load. Mergers can be especially successful when there are similarities in each practice’s profitability, size, payment methods, staff, equipment and real estate.

DSO or Private Equity

With the rise of dental service organizations (DSO) or private equity (PE) in recent years, the corporate sale is becoming a popular transition route. The DSO or PE path could be a good fit for individuals who don’t have many options for finding a buyer or simply want to focus on the dentistry but not the business side. This route often yields more money in the purchase price for the doctor, but further analysis is required to determine how this would impact long-term profitability.  

While corporate sales typically mean a big check, there are conditions that come with it. If a doctor sells to a DSO or PE, there’s usually a commitment of working back multiple years and for less money than what they were making as the owner. They give up control and become an employee.

As there are many differences between transitioning your practice to a DSO or private equity group versus an independent doctor, the corporate sale may be the right path for some but not all.

Remember Your “Why”

There are many possibilities to how a dental practice transition can play out. Whether you’re relieved you have options, or you’re a little overwhelmed by the choices, we always suggest bringing your thoughts back to your “why.” Remember why you’re pursuing ownership or why you want to sell, and this will help guide you to the transition path for you.

Our team is comprised of consultants who can help you assess your situation and steer you in the direction of your goals. Reach out to a member of our team to learn more about how we can guide you through the buying or selling process.

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