Specialty Dental Practice Transitions | Practice Transitions | PMA

Do you own a specialty dental practice? Whether you are an orthodontist, an endodontist or a periodontist, when it comes to getting ready to retire and sell your practice the time to plan is now. Why is that? Let our dental transition experts Matt and Joe share why.

Matt Scherer:

Hello and welcome, my name is Matt Scherer. I’m with PMA Practice Transitions and I help dental professionals buy and sell their practice in Ohio and Western PA and my colleague is.

Joe Gordon:

I’m Joe Gordon. I do the same that Matt does, but I operate in Indiana and Northern Kentucky.

Matt Scherer:

And our subject for today is transitioning a specialty practice.

Joe Gordon:

It is an interesting subject.

Matt Scherer:

It is.

Joe Gordon:

Let’s put it this way, Matt, if I’m a general dentist and I gross $1 million a year, where I’m a specialty practice that grosses $1 million a year, who’s going to get paid more for that practice when they transition it?

Matt Scherer:

The general dentist.

Joe Gordon:

The general dentist.

Matt Scherer:

Right. Yeah, I think when we talk about specialty practices, obviously you have a perio, endo, which is endodontics, oral surgery, pedos, which is pedodontist and orthodontists and periodontist as I stated, which is perio, but I think if you’re a periodontist an endodontist or an oral surgery and you’re thinking about transitioning your practice sometime in the future, you probably need to start a lot sooner-

Joe Gordon:

Than the general.

Matt Scherer:

Than a general dentist or even an orthodontist or a pedodontist as well. Why is that?

Joe Gordon:

Well, one, you have a much smaller population of potential buyers out there. You almost, and I’ve seen some of the most successful ones, is groom a potential buyer while they’re still in their specialty residency.

Matt Scherer:

Yeah, that’s a great one.

Joe Gordon:

That is a great time to get in there, your participation maybe in that residency program can help you get a lead on somebody that can do that. You don’t have in a lot of these areas, the consistent patient flow, you don’t have recurring work, it’s not an annuity. In a general practice, patients are somewhat of an annuity. You’re going to see them twice a year just like clockwork. You’re an oral surgeon or an endodontist, nobody drives by and says, “Hey, I think I’m going to have a root canal today.” or “I think I’m going to finally get that last wisdom tooth pulled out.” or whatever. That’s not how we operate, we all know that, so it makes it much more difficult to sell these practices. The multiple of gross revenue is not as high as since they’re referral based.

Matt Scherer:

Correct.

Joe Gordon:

And we have the smaller population of potential buyers.

Matt Scherer:

Right.

Joe Gordon:

So, we have to think much farther ahead, probably almost, let’s say double the amount of time that you would think about selling a general practice.

Matt Scherer:

And I think if you’re a general practice and you specialize in an area that could almost be treated like a specialty practice as well, so if you’re a high end cosmetic dentist, you shrink your buyer pool down considerably because you’ve got to find a buyer who can do that type of dentistry, so again, you’re almost like a specialist so you need to start thinking much further down the road than just the general dentist.

Joe Gordon:

And then on the buyer side too, what you want to look at when buying one of these referral-based specialties, where are the referrals coming from?

Matt Scherer:

Yes.

Joe Gordon:

How old are the referrers? Generally we tend to gravitate to people our own age, we’ve kind of grown up with, do we have the same thing going on here? Even if the referrals are of age, are there younger dentists around that maybe you can tap into.

Matt Scherer:

Right, I was going to say, because that could be a good thing and a bad thing for the buying dentist. It could be a good thing in that, Hey I can go out and see people my age and get referrals from them and maybe even keep some of the…

Joe Gordon:

Keep some of the older ones.

Matt Scherer:

The older ones.

Joe Gordon:

Absolutely, so you’ve got to look at both of those. If you just have a whole aging population around you, it’s going to be a little more difficult, but if you have that mix of young and old, then it could definitely be the right situation. We generally see these where people come in and associate for a while. Pretty typical.

Matt Scherer:

If you can find an associate.

Joe Gordon:

If you can find the associate to do that, but will go ahead and come up with an agreement on the sale of the practice up front before we go down that road, that’ll be… would be part of the initial employment-

Matt Scherer:

Yes.

Joe Gordon:

… agreement with an associate, so a number of things you can do with these practices. Again, just make your timetable much farther out than you would with a general practice.

Matt Scherer:

Can’t agree with you more, so that wraps up this segment. We appreciate your time, and if you like us, please give us the thumbs up and also please refer us to your friends and colleagues.


Matt Scherer | PMA Team Member Published by Matt Scherer
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