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The Monetary Advantages & Disadvantages of Selling Your Dental Practice

May 22, 2022

Filed under: Uncategorized — nextlevel @ 9:04 pm

A handshake signifying the sale of a dental practice. If you’re tempted to sell your practice and retire, you aren’t alone—this is something that most dentists consider at a certain point in their careers, and it’s natural to be a little unsure how to go about it. That said, there are certain financial advantages and disadvantages to selling your practice that you should be aware of before making the move. Keep reading to learn more about a few of them.

Consider the Value of Your Dental Practice

There are three different ways to look at the actual value of your practice:

  • Appraised value – This is the value assigned by a professional who is certified to take into account all the factors that contribute to the value of your practice (equipment, financial profitability, patient base, etc.).
  • Market value – This is the price that’s most commonly paid for an asset at a given time; for a dental practice, market value usually ends up being between 60% and 85% of collections.
  • Economic value – This is the most important number to consider as it is the cost to replace a given asset. It has a dramatic impact on your ability to retire and your future financial stability.

Before selling your dental practice, it’s important to calculate its economic value; knowing these numbers will give you the power to make informed and practical decisions about your practice regarding its sale.

Consider Your Future Income

After calculating your practice’s value, you can determine what selling it would do to your income. It’s very important to take this into consideration, as after taxes, debt, and other things are paid off, your income might drastically change once your practice has been sold! In some situations, a poor or rash decision to sell can lead to a dentist’s annual income being severely reduced. When this happens, some dentists live off part of the principal every year and hope that it does not run out before death—this is called a “death spiral” in the investment world as the assets are continually reduced each year.

Consider a Better Option

The numbers often speak for themselves; economically speaking, keeping your dental practice long-term will yield the greatest wealth and set you up for a better future. However, it then becomes a question of managing the dental practice—whether you have a stock portfolio, real estate, or a dental practice, someone has to be in charge, whether it’s you or somebody that you hire! And by having someone who’s growth-oriented in charge, you can still maintain a phenomenal quality of life while maintaining your asset!

It’s also important to note that there are many forces at work who want you to sell, as it’ll benefit them economically. Your lender, financial advisor, and the transaction company all stand to gain from your practice’s sale—but you must, too! It’s always best to focus largely on making the best economic decision for you, your family, your team, your patients, and your legacy. That said, take your time to truly learn and understand the value of your practice before deciding on how to proceed with its sale.

About Next Level Consultants

The team at Next Level Consultants is thrilled to provide dentists with the skills, tools, and knowledge to successfully start and run their own practice. Under the leadership of Michael Dinsio and Paula Quinn, Next Level Consultants has helped countless dentists achieve their financial goals and is looking forward to assisting you next. If you have any questions about selling your dental practice, don’t hesitate to contact Next Level Consultants today.