Dentists often view the sale of their practice as the final step before retirement, but waiting until they are fully ready to exit can be a mistake. Selling a dental practice 5-10 years before retirement offers significant advantages, both financial and personal. Here are key reasons why dentists should consider transitioning earlier than expected.

1. Maximizing Practice Value

The value of a dental practice is closely tied to its financial health, patient base, and operational efficiency. Selling at peak performance—before declining production or patient attrition begins—ensures that dentists get the highest possible valuation (American Dental Association, 2023). Buyers look for profitable, well-managed practices with a stable and growing patient base, making it crucial to sell while the business is thriving.

2. Avoiding Burnout and Declining Performance

After decades of running a practice, many dentists experience burnout, which can negatively impact patient care and business performance. A decline in energy, motivation, or willingness to adopt new technologies can cause revenue to drop, making the practice less attractive to buyers (Dental Economics, 2022). Selling earlier allows dentists to transition out of ownership before exhaustion affects practice value.

3. Taking Advantage of Favorable Market Conditions

The dental industry is evolving, with private equity firms, dental service organizations (DSOs), and individual buyers seeking strong acquisitions. Market conditions fluctuate, and waiting too long may mean missing out on favorable valuations. Studies show that DSOs have been acquiring practices at record levels, making early sales financially advantageous (Becker’s Dental Review, 2023).

4. Ensuring a Smooth Transition for Patients and Staff

Patients and staff are more likely to accept a new owner if the transition is gradual. Selling 5-10 years before retirement allows dentists to stay on in an associate or advisory role, ensuring a smoother transition (Harvard Business Review, 2023). This continuity builds trust with patients, retains key staff, and helps maintain the practice’s reputation and success.

5. Reducing Financial Risk and Securing Retirement Income

Dentists often have significant portions of their net worth tied up in their practice. Selling earlier allows them to diversify their assets and invest in other areas, such as stocks, real estate, or retirement accounts (Forbes, 2022). This reduces financial risk and provides a more stable and predictable income stream for retirement.

6. Leveraging Earn-Out or Partnership Opportunities

Selling in advance provides opportunities to negotiate earn-out agreements or phased buyouts, where the dentist remains involved in the practice for a set period. This allows for a gradual transition, continued income, and mentorship for the new owner, making the process financially and professionally beneficial (Harvard Business Review, 2023).

7. Avoiding Health-Related Emergencies

Unexpected health issues can force dentists into an unplanned and often disadvantageous sale. Selling proactively ensures they are in control of the timeline, valuation, and transition process, rather than being forced to sell under stress or duress (American Dental Association, 2023).

8. Capitalizing on Technological and Regulatory Changes

The dental industry is undergoing rapid changes in technology, insurance, and compliance regulations. Dentists nearing retirement may not want to invest in expensive new equipment or navigate complex policy shifts. Selling before these changes become burdensome allows them to exit on their terms while leaving modernization to the new owner (Dental Economics, 2022).

9. Enhancing Work-Life Balance Before Retirement

Selling early doesn’t mean stopping work altogether. Many dentists choose to work part-time as associates or consultants, maintaining patient relationships while reducing administrative and managerial burdens. This phased approach allows them to ease into retirement while still earning an income and enjoying their profession (Forbes, 2022).

10. Allowing for Strategic Tax and Estate Planning

Selling a dental practice early provides time to plan for taxes and estate management efficiently. Dentists can work with financial advisors to minimize capital gains taxes, maximize retirement account contributions, and ensure their estate plan aligns with their long-term goals (American Association of Dental Consultants, 2023).

Conclusion

While it may seem counterintuitive to sell a thriving practice before retirement, doing so offers financial security, reduced stress, and a smoother transition for patients and staff. By strategically planning a sale 5-10 years in advance, dentists can maximize their practice’s value, secure their financial future, and enjoy a more flexible and rewarding transition into retirement.

If you are wanting to make that transition and would like to learn more about how a DSO can ease your transition, contact us today for a free practice evaluation. 

References

• American Dental Association. (2023). “Guide to Dental Practice Sales.” Retrieved from www.ada.org

• Becker’s Dental Review. (2023). “Trends in DSO Acquisitions and Market Conditions.” Retrieved from www.beckersdental.com

• Dental Economics. (2022). “The Financial Implications of Selling a Dental Practice.” Retrieved from www.dentaleconomics.com

• Forbes. (2022). “Investment Strategies for Retiring Dentists.” Retrieved from www.forbes.com

• Harvard Business Review. (2023). “Business Transition Strategies for Healthcare Professionals.” Retrieved from www.hbr.org

• American Association of Dental Consultants. (2023). “Tax and Estate Planning for Dental Professionals.” Retrieved from www.aadc.org