Building and preserving practice value is determined by annual collections. When a buyer sees continued growth, they not only see the value but are more likely to pay your listing price. When your desire to get to the office begins to erode your enthusiasm and you find yourself interested in taking days off for other things, you have reached a critical point. Prior to reaching this point, a plan of action for the transition sale should already be established. Your desire to take time off may stem from any of the following: reducing stress, more time with family, recreation, career change, health issues, or new challenges. If you have entertained thoughts about cutting back, you are no doubt ready to transition.

If you have memberships in local chambers of commerce or philanthropic clubs, you will know what is happening in the community. Your best indicators are: who is expanding their business within the community, who is moving out of the area, whether new housing developments are planned, and what sizable firms are establishing in the area. If you are in a community with continued beautification and maintenance programs, your practice will be looked upon more favorably by buyers.

There are a number of options in addition to selling your practice outright. First, if you like managing the practice, you can consider bringing in an associate — this gives you time away and continued revenue, with a built-in buyer possibility if negotiated properly in the employment contract. You can also carry back the loan paper, allowing the buyer to make monthly payments after a good down payment, maintaining your cash flow. Yet another option is to stay with the practice on a limited schedule as an associate, giving the buying dentist security that patients will remain after the sale. Note: within years of experience, about 50% of associate plans are disastrous due to poor structuring. All associate agreements should include an equity position with a consummation agreement of no more than six months.

See the answer to Question 3 above. Bringing on an associate can provide time away, continued revenue, and a built-in potential buyer — but only if the associate agreement is structured with a clear equity position and a consummation timeline of no more than six months. Do not start an associate relationship without a signed guiding document.

You, your financial counselor, and your CPA will be able to assist in deciding which option best fits your circumstances. If your practice has flourished and your financial situation is solid, you have many options. If practice growth did not go as planned, your options are more limited. A 100% sale and relinquishing all control is often the clearest path. Every transition has its challenges — there are no cookie-cutter solutions because you are dealing with both facts and emotions.

Buying and selling a practice was not part of the curriculum in dental school. Your knowledge about selling or transitioning is likely very limited. A practice broker will add value beyond your imagination. Would you go to a dentist for endodontic solutions if they had never completed a root canal? The same principle applies here.

Practice brokers use several valuation methods: Fair Market Value — the most widely recognized standard, based on a willing buyer and seller with reasonable knowledge of the relevant facts; Investment Value — value to a specific investor based on individual requirements (not typically used for professional practices); Going-Concern Value — assumes the practice is a viable operating entity with assets, workforce, and doors open for business; Degree of Marketability — how quickly and easily the practice can be liquidated; and Book Value — an accounting term (not a true valuation standard) representing net asset value after depreciation. Importantly, the real value ultimately exists in the mind of the buyer. Any valuation is only as good as the date it was prepared.

The single most difficult issue with any dental practice sale is finding the right buyer. Yes, there are buyers — but placing overly specific qualifications on personality, expertise, or style narrows the pool dramatically. Brokers do not introduce prospective buyers to sellers until binding contracts are signed, as a general rule, to protect both parties throughout the process.

There is no fixed answer. The price is whatever the seller and buyer both agree is fair, reached through offers and counter-offers until both agree. A useful exercise: ask yourself whether you would purchase the practice under the same terms and conditions being offered to the buyer.

After reviewing the practice profile — including an overview, data printouts, and three years of tax returns — a serious buyer will submit a written offer. They will consider: Is there sufficient cash flow to pay the bills, loan, and provide a sustainable income? A buyer will typically want to take home 25–30% of gross as personal income. Maximizing the proceeds while remaining fair to the buyer is an intricate process.

Buyers normally obtain an institutional loan. That institution will interview the buyer, obtain an application with the practice profile, and require three years of federal tax returns. Once processed through underwriters, the institution will provide a loan proposal or denial within a few days. The bank also conducts its own independent practice valuation.

Kunau & Cline prefer to work with smaller banks — the loan process is typically shorter and more flexible. All banks evaluate buyers individually; no two loan processes are identical. Banks prefer buyers who do not require a cosigner, and each application is weighed on its own merits.

If a buyer doesn’t qualify for the full purchase price, alternatives include: the seller carrying a portion of the loan short-term (giving the buyer time to build cash flow and refinance), or a creditworthy co-signer enabling the buyer to continue with the purchase. Be aware that as a seller-financer you would be in second-lien position behind the bank. Historical default rates on seller-financed deals are less than 1%, though the risk is still a real consideration.

No. After the sale is consummated and the practice experiences a drop in patient participation, it is the responsibility of the buyer to make up the shortfall. It is customary to project a 25–30% drop in patient participation when setting the price. The best way to keep patients from leaving is to strongly endorse the buyer — this is discussed further in the transition guide answer. A well-negotiated transition agreement should define exactly how much time you will spend in the practice post-close to support patient continuity.

Announcing the sale is a touch-and-go issue. It is always a good suggestion to initially let the staff know you are considering bringing someone else into the practice. When the time comes for a direct conversation, be honest and reinforce their continued employment. Hold a group meeting when a buyer is identified, and reassure staff that their 401k, vacation pay, and benefits will remain in place. Most buyers will not want to make operational changes until they are confident that patients are comfortable with the change.

CPA groups normally have good connections with investment firms offering special programs to invest sale proceeds and reduce tax liability. There is no one-size-fits-all tax mitigation program. Kunau & Cline has close relationships with boutique firms that often offer a better variety of programs. A good tax mitigation firm can save you hundreds if not thousands of dollars. Contact our office for a referral.

If you own the building that the practice occupies, it is a good idea to sell the practice with the building. Your opportunity to get your asking price is enhanced by including the building. Most buyers will want to purchase the building rather than paying a monthly rental fee. You can also provide the buyer with a right of first refusal to purchase the building at a later date.

It is a good business practice to involve your attorney and CPA in the decision process. They no doubt have experience in business transactions that provide insight on value, offers, and counter-offers. Your practice broker can also be a great resource in helping with valuation questions and can provide boilerplate counter-offer forms for your attorney to refine.

The Department of Real Estate has authorized brokers to charge a fee of 10% of the total practice sale, and 6% of the total sale of buildings. Your relationship with your practice broker can help determine those fees. A good broker’s commission is earned through appraisal expertise, deal structuring, and keeping transactions from falling apart — not just listing the practice.

The best way to prepare is to maintain or increase collections. A healthy practice will show consistency or increased growth. There is generally no need to renovate — a buyer will want their own coordinating paint colors, flooring, and fresh look. A practice showing a decrease in collections over the past three or more years is considered a declining practice, which attracts a different (and smaller) buyer pool.

Select based on the number of satisfied dentists who have transitioned with them — not office size or volume of sales. Comfort, trust, and years of hands-on experience matter most. Make sure you are given a written, detailed plan of action that the broker intends to implement. A skilled practice broker will supply it without being asked.

You will have greater success where you are a good listener. Building a trusting relationship quickly means the buyer will be more agreeable and more likely to negotiate in good faith. Becoming sensitive to each other’s needs and individual goals are key factors in developing the synergy that results in both parties agreeing on the final negotiated price.

Most definitely. The patients need to see that you are comfortable with the new dentist. Properly handled, patient retention should be 75–90% whether or not you remain on-site to introduce the new dentist. Your interaction with patients after the sale should be viewed as a helpful boost to the buyer, but not a prerequisite for the buyer’s success.

Yes. Realistically you sell one practice in a lifetime — the odds of mistakes are greater because the details of a sale are well-defined and one must be aware of potential pitfalls. Practice brokers use specific attorneys and escrow officers repeatedly, so the teams work well together. This reduces potential delays, mistakes, and paperwork problems. The ideal practice broker commands both sides while keeping individual wants from being disclosed to the other party. The use of a practice broker can save you thousands in legal and accounting fees and will ultimately secure a successful transaction.

There are critical issues your spouse needs to be aware of. First, time is of the essence — the more time that elapses between the owner’s death and the sale, the more practice value erodes. Second, the spouse will be inundated with well-meaning parties pressing to get involved — there are far too many details agreed upon at this point to make changes. Third, practice brokers are the only professionals who can successfully complete the escrow without creating major problems. Changing or halting the escrow can cause the buyer to rethink the agreed-upon price.

The length of time depends on the broker’s network, advertising reach, dental society involvement, and market supply and demand. Most practice brokers maintain an active website with a VIP awareness list that automatically notifies prospective buyers when a new matching listing comes up. Location is also a major factor — for larger cities it can take six to twelve months; rural or small-town practices may take longer.

The escrow company selection should be left to the practice broker — they have an established team they depend upon to make sure things go correctly. During escrow, creditors are notified and given 30 days to respond with open invoices; EDD will review your file; and final financial distributions will be prepared for your review and signature. Sign all documents promptly via DocuSign. Once escrow closes, your only obligations are what you have agreed to in writing with the buyer in terms of after-sale commitments. Without a written agreement, you are officially out of business at close.