The past few years reminded us that life can be unpredictable and the world changes quickly. But dentistry has also proven resilient; owners have managed staffing issues, inflation, and new patient expectations to emerge more robust than ever.
Dentists who set themselves up for success take intentional steps to get where they want to go. You may have thought about the road ahead over the holidays, and may be wondering what to do now. Transitioning from one point in your career to the next is a process.
Consider working through these five steps to uncover possibilities for a planned exit. Don’t rush; analyze from every angle, and connect with the right resources to work through the details.
1. Thoroughly explore your vision, goals, and options for the next 3-5 years. Be realistic, objective, and forward-thinking.
Practice management and clinical care demand significant time and energy, and planning for a successful exit may take a backseat. But a defined future clarifies the strategy to get from A to B. Consider spending a few minutes regularly jotting down ideas for a bucket list or an agenda for your ideal week. You’ve probably done a template for your clinical schedule; what does your life look like when you’re financially free? What projects or hobbies would you like to pursue? Maybe you still want to practice dentistry but leave business management to someone else. Go ahead and dream.
But if your practice has plateaued and become a little “tired,” the potential buyer pool may be much smaller than you think. So, evaluate your operation and refine your practice vision, too. How can you create value and enhance market appeal? By the same token, a larger practice may hold more value than you ever imagined.
2. Discuss baseline practice valuation and exit plan ideas with a Practice Transition Specialist. Now, not later.
A well-run practice is significant and impacts your vision of life’s next phase. But dental practice valuations can range dramatically, and dentists don’t always know the value or the options available today. For example, is your practice worth 60% of collections or 200% of collections? We regularly see both ends of the spectrum, and some practices need time to capture the value they expect.
If we know what’s important to you and how you see the future, we can explore every possibility and estimate the probable value of your practice. This process is about running scenarios that consider everything from associate searches to partnerships to DSO sales; our expertise covers the spectrum.
3. Evaluate practice operations, branding, and financial metrics. Consider partnering with proven resources to strengthen each component. The more time, the better.
Many dentists we talk with are surprised to learn about exit plan ideas they’d never considered. But buyers have options and generally look for well-run, profitable businesses. If you understand your estimated practice value and ideal exit, you can take specific steps that may open more opportunities.
For example, fees set in the 80th percentile or above could add tens of thousands of dollars to your profits now. Or reducing overhead by $20,000 this year might add $100,000 to your future value. We enjoy helping our clients consider ways to capture the value they deserve.
4. Choose a comprehensive financial planner to formulate an efficient income, tax, and estate plan.
Business owners who’ve built successful businesses establish cash flow that’s dependable and steady over time. When you step away from your practice, your income structure changes, and there are many aspects to consider. And entrepreneurs tend to have more complicated finances that also involve practice sale revenues.
A comprehensive financial plan includes many elements that may work together differently than you expect. And minor adjustments could save thousands of dollars in taxes annually. So sit down with a fee-based planner that looks at the entire picture and knows your timeframe, projected practice value, and personal goals.
5. When ready, move forward with a clear plan, including formal valuation, listing, negotiation, etc. Choose regional specialists.
As you evaluate these steps, the timing of your exit starts to take shape. When you know the direction you want to go, you’ll move toward the transaction that formalizes your exit plan. At DDSmatch, we use a third-party valuation specialist to establish anaccurate value before listing, and this critical information is just one step in our Trusted Transition Process.
We understand the nuances of our region and the best techniques for attracting the right buyer to match your plan. If you’d like to bring in an associate for a couple of years before a buyout, we can help. If you’d like to attract a DSO or evaluate an unsolicited offer from one, we can provide due diligence for you.
What’s Your Next Move?
Dental practice transition planning may seem overwhelming, but you’re operating in one of the most exciting times in dentistry. Dental services expenditures are expected to grow to nearly$230 billion in the U.S. by 2030, and you may have opportunities you don’t even know about.
At DDSmatch, our mission is to help dentists create a personalized plan for the best solution. So whether you’re at step one or ready for step five, call us today, and let’s create your blueprint for the road ahead.
