Dental practice transitions are complex processes that involve the transfer of ownership or management of a dental practice from one dentist to another. Whether it’s a sale, partnership, or retirement, navigating these transitions requires planning, communication, and attention to legal and financial details. Here’s what you should know when considering a transition.
Types Of Dental Practice Transitions
Dental practice transitions come in various forms. From outright sales to partnership agreements, associate buy-ins, and retirements, each path has its unique challenges and benefits.
Types of dental practice transitions include:
- Buy-in
- Associate buy-in: A practice associate buys a portion of the practice, sometimes multiple portions over time, which can eventually result in the transfer of ownership.
- Non-associate buy-in: An outside dentist purchases a portion of an existing practice. The buy-in contract could include a clause to allow the dentist to purchase the rest of the practice once the initial owner retires.
- Buy-out: A practice has two (or more) owners. One of the owners buys out the other.
- Full purchase: A dentist purchases the entire practice.
- Merger: Two or more dental practices become one. Ownership is shared by various partners.
- Affiliate transition: A dental practice slowly transitions to become part of a dental practice group.
- Roll-up transition: Multiple dental practices are acquired and combined over time. Typically, this transition type is used by private equity groups.
Dental Practice Transition Considerations
Though each type is unique, here are some of the basics of any transition.
Legal Framework
From drafting comprehensive contracts to handling licenses, permits, and non-compete agreements, legal considerations play a pivotal role in safeguarding the interests of both the seller and the buyer. Two of the most common contracts reviewed in every transaction are the purchase agreement and the lease or commercial real estate purchase agreement.
Dental practice deals are unique, so working with a legal professional who has experience with them can be beneficial. Use our Build Your Team program to get connected to an industry-specific expert for free.
Patient & Staff Transition
Effective communication is key during a dental practice transition. Dentists should communicate transparently with their patients to ensure a seamless transfer of care. Equally important is keeping the dental team informed and addressing any concerns or uncertainties that may arise during the transition period.
Transitioning patients and staff smoothly requires careful planning. Ensuring the secure transfer of patient records and the adaptation of employee contracts can help maintain continuity and stability during the transition. Work with the buyer/seller to achieve this.
Due Diligence
Both buyers and sellers should conduct due diligence to protect their interests. Sellers should be prepared to interview and perform due diligence on potential buyers, ensuring that the buyer will be a good fit for their patients and staff. Additionally, sellers should provide comprehensive documentation to facilitate a transparent transition.
Buyers must thoroughly investigate the financial health, legal standing, and operational efficiency of the practice. This due diligence should include reviewing procedure mix, inspecting the facility and equipment, looking into the practice’s goodwill, reviewing contracts, considering local and current patient base demographics and payor mix, and understanding current cash flow and profitability.
Professional Guidance
Seeking assistance from professionals specializing in dental practice transitions is advisable. Engaging legal and financial advisors, as well as utilizing the services of practice brokers, can provide invaluable support in navigating the complexities of the transition process.
If you need help finding the right experts to guide your transition, we can help! The Build Your Team program can connect you with industry-specific experts who can help you achieve your goals. Get connected to CPAs, attorneys, practice transition experts, and more for free on our Build Your Team page.
Financing The Transition
The financial aspect of a dental practice transition is multifaceted. Dentists should delve into the valuation of the practice being sold, acquired or bought into, considering patient demographics, revenue, age and type of equipment, and goodwill. Exploring financing options, tax implications, and negotiating a fair deal are important elements of the process.
When buying or buying into a dental practice, practice loans are one of the most common ways to finance your purchase. When choosing the right lender for your needs, consider the relationship you are creating with your financial institution, the support and services they provide, and how their structure allows you to focus on what you do best — patient care — rather than worrying about business operations before making your final decision.
Finding a specialty lender who works specifically with dentists can make a big difference in your lending experience. Not all banks or financial institutions have specialty groups that understand your needs, but it’s important to work with one that does. Read more about finding the right lender.
Panacea Financial’s practice loans are built for any type of dental practice transition, whether acquisition, startup, expansion, buy-in or other. With a streamlined digital application, fast credit decisions and competitive pricing, Panacea’s loans are built for you to succeed as you move into the next phase of your career.
Ready to transition into practice ownership or partnership? Get connected to a dental practice finance specialist today.
