What Are My Options for Selling My Dental Practice?

In the current seller’s market, our team is frequently approached by dentists contemplating a practice transition and asked, “What are my options for selling my dental practice?”

There are two options for selling your practice: sell to a private owner-user or sell to a corporate group. To help you evaluate your alternatives, we will outline some key information about each type of practice sale and how you can best be prepared.

Private Owner-User Sales

Private practice sales remain the most common type of transaction on the market today. Here are a few things you should know about these types of sales:

1. These transactions have minimal transition time. You will be able to work until the end of your career and retire shortly after you sell.
2. The current private buyer pool is very large, which provides you with options. You will be able to pick your ideal buyer who will carry on your legacy and continue providing quality care to your patients.
3. Valuations vary depending on the type and location of the practice. General practices typically sell to private buyers for 75 to 90 percent of collections.
4. Most private owner-user deals don’t require a seller carry-back, meaning the entirety of the purchase price is provided to you in cash at the time of closing.

Corporate Group Sales

Corporate groups, such as private equity firms, dental service organizations (DSOs) or dental partnership organizations (DPOs), are becoming increasingly popular. Here are a few things you should know about these types of sales:

1. Sellers typically work back three to five years when they sell to corporate groups. Very rarely do corporate groups allow the seller to walk away immediately after the sale.
2. Corporate models vary. Some offer partnerships while others do not. Some have better economic terms than others. Some groups provide lots of autonomy while others are lacking in this area.
3. Valuations for corporate groups sales are generally higher than private owner-user sales. DSOs may price your practice as high as 100 to 120 percent of revenue, sometimes up to 200 percent.
4. You will usually receive 60 to 70 percent of the sale price at the time of closing with the rest paid later.

Preparing for Private Owner-User Sales

To be prepared for a private sale, be sure to do the following:

1. Evaluate your current practice performance and find ways to steadily improve. An appraisal may help with this step.
2. Cultivate a great practice culture to better retain your employees and patients. Employee and patient retention will not only affect your bottom line now but will also be attractive to potential buyers in the future.
3. Modernize your practice, but don’t make any major costly purchases during the two to three years before you sell. Small upgrades like new flooring, lobby chairs or paint are cost-effective and can make a big difference in the eyes of a buyer.
4. Don’t coast to the finish line. Maintain your bottom line to receive an ideal practice valuation when it’s time to sell. If you’re slowing down now, the time to sell is probably sooner than you think.

Preparing for Corporate Sales

To be prepared for a corporate sale, here are a few tips:

1. Evaluate your current revenue. Most corporate groups are looking to purchase practices with revenue over $1 million, with exceptions.
2. Corporate offers are technical, so you should have a trusted advisor by your side to ensure you get the maximum value for your practice. Look for an advisor who has experience reviewing corporate offers and knows the right questions to ask.

Menlo Dental Transitions does not advocate for one type of sale over another. Most of our sales are private party sales, though we also have lots of experience in corporate sales. We recommend whichever option is the best for our clients and will help you evaluate your options to find the right fit.

Practices are currently selling at an all-time high, and with rising interest rates, that could change in the future. Whether you decide to sell now or far down the road, you can benefit from knowing your practice’s value. A practice appraisal is an affordable way to evaluate your current performance and better prepare for your future sale. Please contact us to request a practice valuation.