Strategies for Seamless Dental Owner Recruitment and Retirement

Whether you plan to retire or leave your dental practice soon or not for several years, it's important to plan ahead and think about how to transition your practice to new ownership and attract potential new owners.

Single-Ower or Group Practice?

The strategy to follow will depend on if you’re transitioning a single owner practice or are part of a group practice.

Single Owner: Single owner practices will either transition to a new owner or train an associate to take over as owner when the time comes.

Group Practice: In group practices, associates typically become owners as owners retire.

Transition Type Matters

The transition details of single owner and group owner practices will differ significantly.

Single Owner: For single owner practices, ownership transitions can be a large, impactful event that happens over time.

Group Practice: In a group practice, the goal is to make the transition a normal part of operations so there's very little business disruption.

While the strategies may differ, the overall goals are the same for both transition types:

• Maintain patient base
• Maintain quality of care for patients
• Stability for staff
• Exchange of value for ownership

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How to Identify and Attract Potential Owners

Various strategies can be used to seek and engage potential successors. Utilizing your professional network is a fruitful approach, encompassing colleagues, dental school alumni, vendors, and industry associations like the WDA/ADA.

A professional recruiter can also be a great resource for finding and vetting candidates. Recruiters are especially useful if you don’t have the time or the inclination to sift through candidates. Keep in mind that there will be costs associated with this option.

Group practices might have a dedicated Human Resources employee or team that recruits new talent as part of their HR duties. In these cases, there is likely already a defined process in place for hiring.

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Keys to Identify and Attract Talent

Transparent Discussions – Candidness from both buyers and sellers about their expectations is crucial to avoid future complications.

Career Goals – When does the buyer want to transition into the role, and how long do they plan to stay? Are they willing to work as an associate first? The seller needs to decide if they want to stay with the practice in some capacity after the sale.

Time Frames – A clear timeline of the transition helps keep both sides on track.

Expectations – Both sides need to be on the same page about how much of the current patient base is being transitioned to the new owner, and well as how to handle new patients during the transition.

General Structure – Preliminary discussions about the sale's structure, including financing details and whether it involves an asset or stock sale, are important.

Potential Price – Discussing valuation methods and possibly involving a third-party evaluator can help set a fair price.

Add New Owners Seamlessly

Adding a new owner is a big change for any practice, and following these tips will help facilitate a smooth transition:

• Be ready to share information: Start gathering any relevant details as soon as possible.
• Plan introductions: Smooth introductions to staff, patients, and professional contacts are key to maintaining continuity.
• Engage trusted advisors: Attorneys, CPAs, and bankers need to be kept in the loop throughout the process.
• Get associates involved in management decisions/activities: This empowers associates with business management insight.
• Develop a timeline: Discuss and determine a realistic timeline for the sale and transition. This can be over the course of multiple years.
• Determine associate expectations: Clearly communicate to associates their roles and responsibilities during the transition and beyond.
• Multiple owners: Develop a fair compensation formula to distribute profits appropriately.

Payment Terms

There are several ways to structure payment terms.

Cash at closing: A bank loan for the buyer typically results in a lump sum payment to the seller but may increase the total cost for the buyer.

Seller financing: In this case, the buyers pays off the loan over time, typically with an interest rate component that stays with the seller.

Practice financing: Here, the practice itself buys back the seller’s interest, and then sells it to the buyer.

Profit redistribution: A pre-tax arrangement that is generally cost-effective for the buyer but may be complex in multi-owner scenarios.

A Smooth Transition into Retirement

Make sure you’re ready for retirement: Many times, financially ready is the focus for retirement. You need to be mentally ready as well. Retirement is a mindset shift.

Stick to the established timeline: Dragging out the agreed-upon timeline will only serve to frustrate the new owner and others associated with the transition. Make sure to meet all deadlines.

Complete expected activities: Ensure all transition-related activities, such as patient notifications and legal formalities, are accomplished.

Post-retirement involvement: Define what your relationship with the practice and new owner will be once the transition is complete. Do you still want to be involved in the practice, and how much? Is a clean break preferred?

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Finding a new owner for your dental practice is just the tip of the iceberg. Whether moving on to new ventures or retiring, collaborating closely with the new owner will help ensure a smooth transition.