Transitions
May 2022
Experience, Information, Consultants You Can Trust
Congratulations! Burbank General Dentistry Practice Terry A. Tedford, D.D.S. to Tony D. Hong, D.D.S., Highlands Ranch, CO Glenn DiBartolomeo, D.D.S. to Efraín Plaza, D.M.D., Altamonte Springs, FL Barry Rubenstein, D.D.S. to Timothy Adams, D.D.S., Clermont, FL Joseph Abiad, D.D.S. to Sharvil Shah, D.D.S., F.A.G.D., Southgate, MI Fountain Valley General Dentistry Practice Garden Grove General Dentistry Practice Charles C. Harrington, D.D.S. to Christine Chen, D.M.D., LLC, Gaithersburg, MD Peter J. Fauth, D.M.D. to Pamela Moses, D.M.D., Cazenovia, NY Doyle Sam Spence, D.D.S. to Jake Berry, MBA, Abilene, TX
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Are You Thinking About Selling Your Practice This Year? The rebound of dental practices from the pandemic has been extremely strong, with the most recent American Dental Association (ADA) data showing that patient volume is at 90% of pre-pandemic levels. For most practitioners, economic confidence is very high. Many practice owners who put thoughts of selling on hold during the COVID-19 pandemic are revisiting their plans.
“It’s a seller’s market, with many practice values rebounding from 2020 or exceeding their pre-pandemic levels,” says Dr. Thomas Snyder, Senior Director of Transition Services with Henry Schein Dental Practice Transitions. “Bank lending is also very strong, and interest rates have remained historically low.” Practice valuations vary based on dental location, earnings/cash flow, and other factors, but anecdotally, the majority of sales of practices around the country generally range between 60%-85% of their prior year’s gross revenues. Now continues to be an opportune time for young doctors to purchase a practice, as well as established practitioners to buy another practice. The Small Business Administration found that the failure rate of dental practices is less than 1.5%, which makes them an attractive type of business for banks to fund. Although some dentists have high student loans, recent statistics show that 20% of young dentists have no debt, according to the American Dental Education Association’s annual survey. “Even for doctors who owe $400,000 in student loans, based on their credit history and the business they’re interested in buying, you may be surprised that banks will fund them,” says Dr. Snyder. Securing a loan does take some time. A general rule of thumb is to allow from three to six months, or potentially nine months in outlying areas from start to finish, for the sale of a practice.
If you’re considering selling your practice, it’s wise to engage with a team experienced in dental practice transitions. This starts with a financial planner. They can provide strong, objective advice, based on the assets and liabilities you have, your lifestyle, and your financial targets after retirement. They will also want to know if selling the business is a financial necessity or simply a quality-of-life decision, as this can impact the timing and other factors of the sale. A transition specialist can then work with you to value your practice. This is based on a three to four-year look back, although valuation experts carefully review the performance of the practice in 2020, giving credit for mandated closure time where appropriate as a one-time event. Valuation experts, and lenders, will look more closely at the last, or trailing 12 months of financial performance. Many doctors choose to hire a transition specialist or broker because they have an inventory of qualified purchasers, but the transition specialist’s job shouldn’t end there. It’s best to work with a transition specialist or broker who will be fully engaged in the transaction and help you get the maximum value and to find a buyer you’ll be proud to take over your patients. Transition specialists or Brokers should have deep knowledge of the local market, and also have strong ties to lenders, attorneys, and CPAs who are well versed in dental transactions. Despite the pandemic, today’s economic conditions are fruitful for those looking to buy or sell a dental practice. If you’re considering selling, start early so you’re not rushed in finding a buyer. Whether buying or selling, the first step is to put an experienced team in place. They can help you navigate the complexities which will prove helpful for keeping your transaction moving forward and achieve your goals.