Selling your Dental Office to a Corporate Buyer - Business Brokers | 1-800-Biz-Broker

If you are considering to sell your dental practice, don’t limit your potential buyer list to other solo dentists. Selling to corporate buyers such as dental management organizations or DMOs, and small group networks (SGNs) can offer you many benefits. Here is an overview of both organizations and the pros and cons of selling to each one.

Dental Management Organizations

Dental management organizations have been around since the 1990s. DMOs own a few dozen to a few hundred practices and manage them under one corporate umbrella. The practices share the same name (Western Dental, for example,). A DMO develops and acquires new practices, usually across a particular regional market. They have vast financial resources from private equity funds. The investors and dentists who own DMOs know that dental practices yield more profits that many other health-care options.

Practices belonging to a DMO receive operational and management support. They also provide continuing education regarding new dental procedures to dentists and their staff. A DMO lets dentists serve patients without worrying about day-to-day management of the operation. New dentists choose DMOs over other types of practices more often in today’s market. Some dental management organizations allow dentists to “co-own” one or more of the practices and share in the profits.

Small Group Networks

Small Group Networks consist of three to 20 dental practices managed by one owner. SGNs are typically owned by a dentist with experience in running successful, high-profit practices. They don’t have the same financial resources as DMOs, so they don’t have the same training and growth opportunities.

Determine Your Goals before Choosing a Buyer

Most dentists sell their practices to another solo dentist to make their patients will receive excellent, personalized treatment. Planning an exit strategy and desired outcome before the sale can help you to achieve your financial and personal objectives for selling the practice.

An exit strategy gives you the best financial return possible for all your hard work, it will preserve your equity. You’ll also need an emergency exit strategy to provide for your family in case of illness or death. The emergency strategy will ensure that your practice sells for the maximum amount should something catastrophic occur to you or a family member

Be honest about why you want to sell your practice. Are there medical or financial issues, or do you want to retire or take an extended break? Do you want to sell because you think you can get a good price given market conditions?

Post-Sale Employment is a Possibility

Corporate buyers can offer maximum prices for dental practices in large markets. In some instances, you may not receive all of the agreed-upon price. A deferred payment using a promissory note may be part of the sale price. When you complete your minimum employment after the sale, the buyer pays off the note. If you want all the money in cash upfront, this method will not work for you.

Be aware of your accounts receivables during sale negotiations with a DMO or other corporate group. Accounts receivables aren’t part of a traditional dental practice sale, but they may be included in a sale to a corporate group. Always ask about AR inclusion at the beginning of the sale process.

If a DMO or SGN purchases your practice, they may require that you work with them as a dentist for two years post-sale. The pay rate is usually 25% to 35% of your after-sale net earning. Some corporate purchasers will give you a percentage of profit according to a preset formula. If you want to leave your practice right after the sale, you’ll need to find another buyer.

Sole Proprietors Vs. DMOs

Any dentist who is happiest as a sole proprietor will have difficulty working as an employee in a strictly-regimented DMO or SGN. A healthy payment agreement may ease the pain of a corporate environment for some dentists, but for others even the money won’t make up for this management shift.

If you want to phase out of your dental practice as a post-sale employee, a corporate buyer may be right for you. Dentists with a high-grossing practice may find most of their potential buyers are DMOs or SGNs. Many solo dentists, especially ones right out of dental school, may not have the resources or management skills to buy a high-profit dental practice.

There are pros and cons to selling your practice to a corporate buyer, and only you can decide if the advantages outweigh the disadvantages in your particular situation. However, it is imperative that you hire a business broker with experience in how to sell dental practices to help you get the best deal possible. Contact the experts at 1-800-BIZ-BROKER to learn more, or visit www.1800bizbroker.com.

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