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As a dental entrepreneur, I know firsthand the years of dedication, long hours, and relentless passion that go into building a successful dental practice. But here’s the thing: while running the day-to-day operations is important, what’s equally crucial is planning for the day you’ll eventually step away from the business. You may not be thinking about retirement just yet, but having an exit strategy in place is key to preserving the legacy you’ve built, maximizing the value of your dental practice, and ensuring your financial future is secure.
By 2012, I had built my organization from 1 to 8 practices across 2 states. I was traveling between dental practices, overseeing a complex and wide-ranging organization and leadership team and quite frankly, I was burnt out, stressed out and looking for a way out. That is not the place of strength to be negotiating or navigating an exit from at all.
I needed to take a step back, listen to myself and reassess my roles and my life. So, I did just that. I began to think seriously about exiting my organization, as hard as that was for me to imagine at the time. I regrouped, and after several months of consideration and feedback from others, I made the decision to exit.
But that was only the beginning of another process, exiting. Exiting is a process and like most everything else I did as a dental entrepreneur, I learned how to do the process correctly through trial and error and going through my own journey with it. Let’s look at the steps you need to take for a healthy, successful and profitable exit from your dental practice.
An exit strategy isn’t just about the moment you sell your practice. It’s about crafting a roadmap that ensures a smooth transition—one that protects everything you’ve worked so hard for. And the extraction process that I’ve written in regard to scaling applies to selling and exiting as well. First, let’s look at why you need to plan well in advance for your exit.
The Advantages of a Solid Exit Strategy
- Maximizing Your Dental Practice’s Value
If you’re going to sell your practice, you want to get the best possible value, right? A well-thought-out exit strategy allows you to identify areas where your dental practice can improve—whether it’s streamlining operations, boosting patient satisfaction, or enhancing your marketing efforts. These are all factors that can significantly increase the attractiveness of your practice to potential buyers. I have an interesting story about my marketing program at my exit. In the last two years, I did not have a marketing program. I had shut down all marketing because we had too many patients. My teams could not handle the patient retention we were seeing so I stopped spending money on marketing completely.
Before that, I was spending about $100,000 a month to get us where we were. And as PE and other entities came in to review our financials they got spooked because we didn’t have any marketing. I said to them, look at our patient retention, look at our daily schedules and then tell me where we’re going to put the patients that come in from implementing a new marketing program. They didn’t have an answer for me. Our financials were strong and solid. Extracting my marketing program increased our valuation. And these outside entities started to realize and understand the value I had created with these decisions.
- Financial Security for Life After Dentistry
Selling your dental practice is a major financial event. It’s not just about getting a lump sum; it’s about ensuring that the sale aligns with your retirement plans or other financial goals. A strategic exit plan helps you map out how the proceeds from the sale will fit into your overall financial future, giving you peace of mind as you look forward to the next chapter of your life. This applies to not just selling your practice outright, but also to joining a DPO or DSO.
- A Seamless Transition
Dentistry is all about relationships—those bonds you’ve formed with patients over years of care and trust. A well-constructed exit strategy ensures that these relationships, along with the reputation you’ve built, are preserved. It helps facilitate a smooth handover to the new owner, ensuring continuity in patient care and trust. You want to ensure that the hands you turn your patients over to are hands you trust too.
- Preserving Your Legacy and Brand
Your practice isn’t just a business; it’s a reflection of your personal brand, values, and hard work. Having a thoughtful exit plan can make sure that the standards and reputation you’ve built continue to thrive long after you step away.
The Necessities of an Exit Strategy – Your Foundation
Now, let’s look at the foundational aspects of a strong exit strategy. These are areas you will need to spend time on, but I also recommend hiring professionals to execute these aspects of the business successfully.
- Understanding Your Dental Practice’s True Value
First things first: you need to know what your dental practice is worth. This involves a thorough assessment, including your financial records, patient base, market reputation, and even intangible assets like goodwill. Understanding the true value of your practice will give you a strong starting point when negotiating a sale. One of the ways you can get started is by understanding and determining your organization’s EBITDA. My partner and the CEO of Optimize, Josh Gwinn, has written a great post on understanding this metric and how to get there.
- Legal and Financial Preparedness
Ensuring your legal and financial documents are in order is critical. This means up-to-date financial statements, clear legal agreements, and full compliance with any industry regulations. It’s not the most exciting part of the process, but it’s essential to avoid any surprises down the road.
- Succession Planning
Whether you’re passing the dental practice to a family member, selling to a partner, or bringing in a completely new owner, you need a succession plan. Identifying and preparing a suitable successor ensures that the practice continues to run smoothly once you’re no longer in charge. And ideally, this starts at least a couple years before your actual exit to prepare everyone involved in the process and set your expectations for your legacy.
- Understanding Tax Implications
Taxes are unavoidable, and selling a practice comes with its own set of tax challenges. Consulting with a financial advisor or accountant early on can help you understand the tax implications of the sale and minimize your liabilities.
Strategies for Effective Exit Planning
I took 2 years to prepare my organization for my exit. And my organization looked vastly different after those two years than it did when I started. For one, I sold 3 of my practices and scaled down from 8 to 5. I needed to make that change for my sanity, but I also did it because it made the process of consolidation easier, and more attractive to buyers. I was able to increase my valuation by taking the steps to scale down and consolidate.
The other thing I did was, I made my leadership team fully autonomous. They knew exactly what to do and how to do it, without me. I made myself essentially obsolete, another attractive feature to buyers and a much-needed mental relief for me. But those two actions took time, strategy and fore thought to execute. Nothing was left to chance in my preparation for what was to come next. So, here are some strategies for effective planning.
- Start Early
If you take nothing else away from this post, remember this: start planning early. Ideally, you should begin exit planning years before you intend to step away. This gives you time to implement the necessary changes to enhance your dental practice’s value and ensures a smoother transition when the time comes.
- Build a Strong Management Team
A reliable, competent management team adds enormous value to your practice. It not only reassures potential buyers but also makes the transition process easier when you do step back. Empowering your team to handle the day-to-day independently is a huge plus.
- Enhance Your Marketability
Take the time to invest in modern equipment, upgrade your office environment, and embrace technology. Having a strong digital presence, solid reviews, and an updated office can make your practice far more appealing to prospective buyers.
- Explore Different Exit Options
You’ve got options when it comes to how you exit. You could sell to a partner, merge with another practice, or bring in a new owner entirely. You may also opt to sell to a PE, join a DSO or a DPO. Each option has its pros and cons, so it’s important to weigh them based on your personal and financial goals.
- Engage Professional Advisors
Don’t go through this process alone. Surround yourself with a team of experts—financial planners, accountants, lawyers, and brokers. They can guide you through the legal, financial, and market complexities that come with selling a dental practice, ensuring you get the best outcome.
Build an Environment of Negotiating Strength
Exit planning isn’t something you leave until the last minute. It requires foresight, strategic thinking, and a commitment to preserving the legacy you’ve worked so hard to build. The earlier you start, the better prepared you’ll be to maximize your practice’s value, ensure a smooth transition, and achieve your financial goals. Whether you’re aiming to retire, reduce your role, or pursue new ventures, a solid exit strategy is your foundation for future success.
When I exited my own practice for an 8-figure valuation, it was the result of careful planning and knowing my numbers inside and out. One of the most effective ways to strengthen your negotiating position is to track and understand your key performance indicators (KPIs). When you have a clear grasp of your financials and operational metrics, you can demonstrate the true value of your practice to any potential buyer.
That’s why we created the OPA KPI Tracker—a free, easy-to-use tool designed specifically for dental entrepreneurs. With the KPI Tracker, you’ll monitor the metrics that matter most for scaling, growing, and ultimately exiting your practice on your own terms.
Ready to lay the groundwork for a successful exit?
Download our free OPA KPI Tracker now and start building a practice—and a future—that’s ready for any opportunity.