Selling Your Dental Practice to a Corporate Entity? The Top Five Questions to Ask
What dentists need to know about selling their practice to a dental corporation
"Having your cake and eating it is a very appealing concept," explains Mike Carroll, owner of dental practice transitions firm Carroll and Company. "By selling to a group and working back, owner-doctors acquire a capital sum, leave management headaches behind them, work fewer hours per week, and are able to concentrate simply on their core skill of dentistry. It doesn't hurt that corporate entities will pay very competitive prices to acquire the right practices – up to 100% of the gross revenues in some instances."
Dental practices are among the most consistently high-yield businesses in the country. This has led to large corporate dental groups or smaller, dentist-led networks becoming a far larger presence in the profession today. In the vast majority of cases, the owner-doctor will continue to work in the practice for an agreed period after the sale.
This model does not apply across the board, however. To secure a return on their investment, corporations are looking for profitable, well-maintained practices with five or more operatories grossing upwards of $750,000 a year. Practices with four or fewer operatories, with lower gross revenues or above-average overhead, will tend to sell to an individual buyer. (Even here, though, a merger may be the way forward: there's a growing trend for dentists to acquire two or more practices.)
Our clients come to us with many questions and concerns about how to navigate the complexities of sale to a corporate entity.
In our experience, the following five questions will start the conversation along the right lines and lead to a successful result.
- For how long will I be contracted to work back? If I leave before the contracted period will there be a penalty?
- How will my compensation be structured –a percentage of production/collections, profit share, or a combination?
- Will any of the purchase price be held back to comply with post-sale employment requirements?
- Am I willing to work as an employee? Can I step away from the mindset of an owner?
- What is the philosophy of treatment of the corporate entity?
For more information about this or other issues concerning transitioning your dental practice, or for a free copy of our magazine, please contact Carroll and Company at 650-362-7004, extension 101 or 102, or email us at email@example.com.