Interest rates are still high, creating uncertainty in doctors who are considering buying a dental practice. On the other end of the career spectrum, retiring owners feel they can’t stop working with the true impact of today’s economy still yet to materialize.

Unfortunately, what goes on in the economy isn’t something within a doctor’s control. And while it should not alter one’s career path (within reason), it is natural for questions to stir up in some buyers and sellers, causing them to wonder if they should wait or move now with their dental transition.

Brian Bortz, Cain Watters & Associates Partner, CPA and Investment Committee Chairman, shows what doctors can control.

“Given the uncertainty and volatility of today’s markets, trying to pinpoint perfect timing is a fallacy,” Brian said. “Instead of striving for that perfect scenario, ensure you’re entering a transition with the complete knowledge of both the situation and the process.”

Understanding what’s truly going on in the economy and how it may impact the dental industry can provide clarity.

Should Buyers Wait for Interest Rates to Drop Before Getting a Loan?

Buyers are constantly questioning if they should wait for interest rates to go down or move forward with the loan today.

While the federal funds rate is sitting at 5.33%, which is higher than it was during pre-pandemic days, it’s not as high as they’ve ever been. The average rate since 1954 is 4.6%, so really, it’s just slightly above historical long-term averages.

“Although it may feel really permanent to commit to an interest rate, I encourage my clients to look at the big picture,” Brian said. “This is not a depreciating asset. It’s a choice to own a very high, income-producing asset, and for many, it’s one of the wisest decisions you’ll ever make.”

Often, borrowers get so hung up in getting the lowest rate possible when the interest rate is only one of the loan terms. There are other factors to consider, such as the loan repayment period, monthly payment, balloon payments, prepayment penalties and other fees.

Looking at the holistic picture widens the view of the long-term ramifications. If the business is strong, has good cash flow and is not something the buyer is taking a huge risk on, the buyer will most likely have the ability to refinance it in the future.

How Can Owners on the Cusp of Retirement Stay Optimistic?

With general economic uncertainty, global conflicts and a U.S. election this year, it’s completely understandable for a practice owner to have some hesitation around making the decision to retire. This could even lead owners to want to add more to their retirement pile and ensure their plan stays in place so that they can live out the goal they’ve been working for.

Now while the investment market was down by more than 20% in 2022, it was up again by 24% in 2023. Also, the Gross Domestic Product (GDP) is currently growing at 5%, and historically over the last 80 years, the average is about 3.2% growth in GDP. The economy is actually growing at a higher pace than usual right now.

While the economy is a separate entity from the investment market, they do impact each other, and overall, these are great signs for the dental industry as well as owners on the cusp of retirement.

“Retirement is 90% psychological, 10% financial,” Brian said. “Fear is a real thing when you can’t go out there and print another paycheck. This is where an advisor can help.”

Financial advisors can assist owners in developing distribution, diversification and risk management strategies. These plans are constantly reviewed and looked at to help fit the owner’s financial goals and protect them in times of adversity.

“Mild recessions have historically happened every seven years, so the likelihood of you experiencing multiple recessions and market pullbacks when you retire is high,” Brian said. “Your pile will shrink during those years. It feels scary, but working with an advisor will help plan for these challenges. Over time, as the market and your portfolio recover, you end up in a much better place than you thought.”

Taking the Leap

Here’s the thing about waiting to buy or sell a dental practice: A truly great opportunity may arise at what may feel like an imperfect time.

When you face that opportunity, there is a trusted group of dental transition advisors, financial planners and other dental-specific professionals to help ensure you’re ready and to guide you through the process. Our team can connect you with the right resources. Contact us today.