4 Tips For Dentists Selling a Dental Practice Before Retirement

One of the best things about owning your own dental practice in San Antonio is knowing you have the power to choose how your career progresses. You decide when the time is right to plan a future transition, take on an associate, selling a dental practice, and retiring. Knowing this, you may assume that many dentists choose to retire earlier than individuals in other professions, reaping the benefits of a lucrative career. However, according to the American Dental Association, the average age of retirement for dentists was 69 in 2017. Not only is this more than the U.S. average retirement age of 63, it is an increase from 2001 data which found the average dentist retiring at the age of 65

There may be several reasons for this, one being that dentists love the work they do and choose to practice longer. According to U.S. News & World Report dentistry is in the top 10 best jobs in part because of the high salary, low stress, and great work-life balance. Another reason dentists might retire later may be that they aren’t financially ready to retire and maintain the lifestyle they have become accustomed to. Many dentists are not aware that in order to retire they will need to save a significant amount of money in addition to the money they will get from selling their practice. 

How do you ensure you land in the camp of dentists who can retire when they want? Between your current investments and selling a dental practice in San Antonio you should have enough money to carry you through your final years living the lifestyle you want. Retirement success isn’t something you stumble into, it is something you plan carefully for. Read our tips below to learn how you can start preparing today to retire on your terms.

Tip #1: Look at Your Lifestyle

The ADA reports, “The average net income for dentists in private practice in 2019 was $204,710 for general dentists and $343,410 for specialists.” This income is far above the U.S. average net income of just over $51,000 in 2019. These numbers likely come as no surprise to most dental professionals, but it is important to point out that a larger average income likely means higher average expenses. 

There is nothing wrong with having higher expenses, in fact you should be able to enjoy life both before and after retirement. However, make sure you account for all your expenses when planning for retirement. Think about both the lifestyle you currently lead and your retirement goals. Will your current investments and the profits from selling a dental practice allow you to do things like travel, eat out, and live comfortably during retirement? Or will you need to scale back your expenses in order to make your money last? It is important to note that retirement could last 25 years or more. If you do not have enough money set aside to maintain your current lifestyle and retire in the next few years you need to determine what your priorities are. Do you want to cut back your expenses so you can retire sooner, or work longer than you planned in order to put aside more for retirement?

These are obviously very personal and individualized decisions and should be made with the help of an experienced financial planner. At DDSmatch Southwest we encourage our clients to review their investments regularly, especially as they move closer to retirement. As part of our Practice Optimizer Experience we partner with HK Financial Services to perform a Retirement Check-Up. The experts at HK Financial Services will review your investments and projected future income in order to help you plan and time your retirement, including when selling a dental practice makes the most sense. This Ideal Retirement Calculation can be done in tandem with your current financial advisor, or simply as a supplement. Either way, it is important to get a full picture of your financial situation well before retirement so you can retire on your own terms.

Tip #2: Know How Much Your Dental Practice is Worth

You probably know how much money you have in your checking and savings accounts, what your investments are worth, and how much your home is appraised for. But do you know how much your dental practice is worth? Your dental practice may represent a large portion of your net worth, and will impact how much money you have to live off of during retirement. For that reason, it is almost impossible to make a retirement plan without an accurate estimate of your dental practice’s value. Unfortunately, many dentists nearing retirement rely too heavily on their practice’s perceived value without actually knowing what that value is. When it comes time to sell they are left with a smaller nest egg than they thought.

How do you get an accurate picture of your practice’s worth? Selling a dental practice in San Antonio involves more than just calculating the average of the practice’s collections in the past few years or finding the value of the equipment included. Our business valuation partners at Blue & Co. provide clients with a 70 page report detailing every financial aspect of the practice. They review specifics and ask questions such as, why did your marketing expenses increase by 10% in one year? Did that 10% increase result in an increase in revenue? In a post-COVID market it is especially important to parse out these financial details. Sterilization costs likely went up in 2020, while patient loads were down. However, as the industry recovers, your costs should follow a predictable curve. An expert valuation will account for situations like this. For more information on how practices are valued post-COVID visit our dental transitions blog. 

Our Practice Optimizer Experience recommends dentists who are planning to retire in the next five to seven years have two valuations performed. The first valuation at the beginning of your journey will show you what your practice is worth right now. Getting a clear picture of your practice’s worth well in advance of selling a dental practice in San Antonio is helpful for several reasons. 

  • You and your financial advisors can use the information to more closely estimate your net worth, and determine whether or not you are on track to retire on your timeline. 
  • If your practice is not valued as highly as you would like you can use the valuation to set growth goals. The transition experts at DDSmatch Southwest use Dr. Charles Blair’s “Practice Booster Clinical Treatment Analyzer” to uncover your practice’s unused potential and maximize growth.
  • You can use your valuation to plan out how much you need to work before retirement. Taking steps such as reducing your hours or adding an associate will affect your practice’s value, and you need to make sure your practice is prepared for the changes.

Then, when you feel you are ready to list your San Antonio practice, it is time for the second valuation. This valuation is what will be presented to your buyer. The valuations performed by our partners at Blue & Co. are accurate, fair, and trusted by banking institutions. For more information about what goes into your valuation contact our team of transition specialists.

Tip #3: Your Roadmap to Selling a Dental Practice

Once you know how much money you need in order to retire on your terms, and what your practice and investments are worth, it is time to make a roadmap. First, if you do not already have a team of dental transition experts in place it is time to gather them. Your team should include a dental CPA, dental attorney, and practice transition specialist. These experts will guide you during the final years of your career, helping you make decisions that will benefit you in retirement. For example, your team may help you determine whether buying new equipment for your office will result in a return on investment or just wasted money. 

When you have a team of trusted advisors in place you need to answer some important questions about how your final years will play out. A few things you need to review are:

  • If you do not have enough money to retire when you want, how can you add more to your nest egg?
  • Are you looking for a buyer who will pay top dollar or are you more concerned with maintaining the legacy you have built after selling a dental practice?
  • Do you want to take on an associate to cover some of your patient load while you make a gradual exit? Your advisors will help you determine whether your practice is financially able to carry another dentist and how that will affect your current lifestyle.
  • Is there a date you must sell by? How flexible are you with your timeline?
  • If you need to increase your practice’s value before you sell what are the best ways to do so, and when will you need to start these processes in order to get the best return?

As we mentioned above, DDSmatch Southwest partners with HK Financial to help our clients plan out their financial future. The experts you work with will help you map out your ideal retirement, giving you steps to make that dream a reality. Do you want to travel more after you retire? Buy a vacation home? Help your grandchild pay for dental school? If you do not have a big enough nest egg to support your ideal lifestyle your financial advisor should help you determine how much you need to put away in order to meet your goals, in addition to your current investments and the proceeds from selling a dental practice in San Antonio. 

A dental CPA is also invaluable in this process, as they will give you information on the tax benefits of certain retirement accounts, investments, and more. During the process of selling your practice your dental CPA will advise you on asset allocation, which determines how much of the money from the sale you actually keep. If you do not already have a CPA who works specifically within the dental industry talk to one of our transition experts for a referral.

Planning at least five to seven years ahead of your intended retirement date will give you more control over your career, allow you to finish well, and leave the legacy you intend. With the right team in place you can be sure your interests are being promoted at every turn. A detailed, yet flexible retirement roadmap will allow you to move confidently toward retirement knowing no details are overlooked. 

Tip #4: Contact Dental Transition Experts Before Selling A Dental Practice In San Antonio

How far away is retirement for you? The earlier you start planning for retirement the easier it will be to transition on your own terms. Even if you are just starting your career in dentistry you should be thinking about the future and putting money away for retirement. If you aren’t sure where to start, or if now is the right time, contact the DDSmatch Southwest transition experts. Our team works with dentists at every stage, but we offer a special experience to those transitioning into retirement. Our Practice Optimizer Experience was developed for dentists who are within 3-7 years of retirement. Your transition experts will walk you through these steps, ensuring no detail is overlooked.

  • Conceptual Transition Experience
  • Trusted Valuation Analysis
  • Ideal Retirement Calculation
  • Estate Preparedness Gameplan
  • Dental Insurance Navigator
  • Clinical Opportunity Blueprint
  • Critical Metrics Analysis
  • The Trusted Transition Process

Our job at DDSmatch Southwest is to ensure a smooth transition for everyone involved. We know that for dentists moving into retirement there is a lot of stress involved with selling a dental practice. We are here to take some of that stress away through planning, preparing, and prioritizing for your future.

Whether you are ready to list your San Antonio practice today, or the process is still years away, we are here for you. Request a consultation with our dental transition specialists by visiting our contact page or calling 855-546-0044.