How to Sell a Dental Practice: A Step-by-Step Guide
Are you looking to sell your dental practice, but don’t quite know how to go about it?
There are a million reasons why you might be selling. Maybe you’re retiring. Maybe you’re moving on to a different passion or an opportunity in a different market. Whatever your reason, one thing is sure: the process can be confusing.
A dental practice is a complex, multifaceted business, and successfully selling it requires a deep understanding of the legal, financial, and organizational implications of the sale. You are likely an expert in dentistry, patient care, and running your practice, but the sale of a practice is a whole different challenge. If you’re working nights and weekends just to keep your busy practice running, selling it might sound like an impossible task.
The experts at Triumphant Partners have decades of industry expertise in dental practice valuation, finance, and operations. To help you get started, they’ve assembled this step-by-step guide to selling your dental practice.
Step 1: Know Your Goals
You want to sell your dental practice, but the reason behind that goal is worth thinking through, because it shapes your whole approach. Do you want to sell as soon as possible and move on to a new opportunity? Are you nearing retirement and willing to spend some time transitioning? Are you ready to leave behind nights and weekends and reclaim your life while continuing to practice?
These are all valid goals, but the selling strategy is different for each. A dentist looking to leave quickly may be willing to accept a slightly smaller offer to close the deal fast and ensure a smooth transition. A dentist hoping to stay on and practice will want to carefully review the terms and operating models of the buyers they consider, since they will be working within that business for some time.
It also helps to know that one size does not fit all. Many dentists think of selling as a set-in-stone process. In our experience, the opposite is true. Your practice’s particulars, your post-sale exit strategy, your local market, and your personal goals all affect how the sale should be run.
And while many dentists sell when they are ready to retire, there are other good reasons too. Stress and burnout are real reasons to consider selling. Some dentists want a higher quality of life. Others sell to a DSO or DPO, a private equity firm, or a family office to unlock the equity in their practice or hand off administrative responsibilities and expenses.
Whatever lies ahead for you, take the time to think through exactly what you want from this sale. It is the cornerstone the rest of the process is built on.
Step 2: Find Your Value
Have you ever tried to sell something without knowing what it should cost? The process was likely frustrating and inefficient, and you were probably shortchanged.
The same applies to your dental practice. Most dentists are great at running and growing a practice, but running a successful practice is different from knowing what it is worth. Without a clear understanding of your practice’s value, you could leave tens of thousands of dollars on the table.
Many dentists start by asking whether they can find a buyer or what the legal fees will be. In our experience, the practice valuation needs to come first. It is impossible to field offers well or look for the right buyer without a baseline for what your practice is worth. If you don’t know your value, start here and the rest will follow.
Step 3: Prepare Your Practice and Your Financials
Once you know your value, the next step is preparing your practice and documenting your financials for buyers. This can feel daunting, since the information is technical and takes time to assemble, check, and collect. Generally, you should have the following ready:
- Collections documents
- Profit and loss statements
- Tax returns
- Pertinent licenses and certifications
- Expense reports, including staff salaries
Beyond the paperwork, a few steps go a long way:
- Review your practice’s financials and make sure they are accurate and up to date
- Identify and address any issues or liabilities that could affect the sale
- Develop a plan to present your practice to potential buyers
- Consider working with a professional dental practice broker to guide the process
A well-prepared practice not only sells for a higher price but also attracts more qualified and serious buyers.
Step 4: Find Potential Buyers
There are three common ways dentists find buyers, and each suits a different goal.
Use your connections. You likely know plenty of dentists from dental school, alumni associations, and conferences. This approach works best when selling to another dentist. Many recent graduates are eager to own their first practice, and dental schools and alumni networks can connect you with them.
Contact a DSO directly. Dental support organizations will field inquiries about buying a practice and may even reach out to you first. Keep in mind that DSOs are incentivized to make low offers, and they are counting on you not knowing your practice’s true value. Without a clear benchmark to compare against, you may receive a low offer. It is also easy to focus on the right price and forget to find the right DSO, one whose terms match what you want from the sale.
List the practice yourself or use a dental broker. Listing your practice yourself is one of the most direct ways to generate interest, but it often brings a flood of calls from DSOs and other dentists, many of which won’t match your needs. Listing yourself may work if you want to sell quickly and don’t need to maximize value. It is usually not the right choice if you want a highly qualified buyer. A knowledgeable dental broker manages the marketing and presents only qualified buyers, which helps ensure you receive a fair offer.
Step 5: Screen Your Buyers
Screening buyers is a critical step that you cannot afford to skip. Your practice is a valuable asset and will attract interest, but not all of it will fit your needs and goals.
Interest alone does not mean a buyer is viable. Many practices need to separate casual lookers from serious buyers. Some who seem qualified are only investigating and take up a lot of time without ever getting close to a deal. Others look perfect on paper, but as the deal moves forward, an issue such as the deal terms or their maximum offer disqualifies them.
It also helps to know what serious buyers look for in a dental practice:
- Financial performance: a strong track record of stable revenue and profitability
- Growth potential: a growing patient base or untapped opportunities
- Location: a desirable area with good demographics
- Office environment: a well-organized office with strong policies
- Staff and operations: a well-trained team and efficient operations
- Equipment and technology: modern, well-maintained equipment
The better you can vet or disqualify buyers, the sooner you can sell, and the less of your time is wasted.
Step 6: Avoid the Wrong Buyer
Selling to the wrong buyer can leave you in a partnership that doesn’t work for you. Here is what is at stake.
You might sell at the wrong terms. Many dentists want to keep practicing after selling to a DSO. If you sell to the wrong one, the terms of your time after the sale may not fit your goals. Pay close attention to who owns which decisions, profit sharing, your contracted time, and how and when you will be paid.
You might sell at the wrong value. Without a clear understanding of your practice’s fair market value, you may sell for less than it is worth. If you plan to retire, build generational wealth, or start a new venture with the proceeds, anything less than the best possible deal matters.
You might give up key responsibilities. The right DSO will tell you exactly what is and isn’t your responsibility after the transition. The wrong one might surprise you. Hiring, firing, marketing, and training may all follow the DSO’s set processes. If keeping control of critical decisions matters to you, the wrong DSO can undermine your satisfaction with the whole transition.
Step 7: Navigate Letters of Intent and Closing
The closing process can be daunting if you are new to it. Receiving a valid and fair Letter of Intent (LOI) is just the beginning. If the sale has been handled properly, you should be comparing multiple LOIs and using competition between buyers to reach maximum value. This stage often involves counteroffers and negotiation, and even a mutually satisfactory LOI is not the end. Closing can be the most difficult part of the process.
One often forgotten piece of the deal is equipping your attorneys with well-researched, compelling data. The better you understand your EBITDA and earnings details, the better your attorneys can advocate for you through the complex and often stressful closing process.
Step 8: Know Your Role After the Sale
This is an easily overlooked part of the process. Sellers are often expected to share some responsibilities for managing the practice after closing. If you don’t prepare, the details of your role may not be properly defined, and that can become a pain point later.
You do not have to stay on after the sale. Some dentists are happy to step away completely, and that is completely fine. Others want to stay involved in some way. There is no right or wrong answer. What matters is knowing what you want and making sure it is built into the deal.
Your Dental Practice Sale Partner
Does this all sound overwhelming? Valuing a practice, screening buyers, and packaging financial information are specialized skills that most dentists cannot execute effectively while running a practice and caring for patients.
That is where Triumphant Partners comes in. We bring decades of experience in complex practice sales and transitions, and we represent your interests only. When you successfully sell, we succeed with you. Our team supports you through:
- Initial discovery
- Healthcare-specific CPA underwriting
- A free practice valuation
- Marketing to our pre-screened and pre-qualified private buyer network
- Screening buyers and offers
- Negotiating deals and Letters of Intent
- Financial documents to support your attorneys through negotiation
- Handling the closing process
Are you preparing to sell your dental practice? Contact Triumphant Partners today for your free courtesy consultation.
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