Exit strategies for dental practice owners

Introduction

Exiting your dental practice is one of the most important decisions you’ll make in your career – yet one that’s often overlooked or delayed.

Whether you’re planning to retire, pursue a new venture or simply step away from ownership, having a well-thought-out exit strategy is crucial.

This guide is designed to help you navigate each stage of the process, from initial planning to some common mistakes to avoid. With the right strategy in place, your exit can be as rewarding as the years you’ve spent building your practice.

Defining your goals

Before you begin planning your exit, it’s a good idea to spend some time thinking about your personal and professional goals. Answering these questions early on can help provide clarity and make sure your exit plan is aligned to your vision for the future:

• When do I want to leave the practice?

Deciding when you want to exit will inform your entire strategy, so it’s important to establish this early on. Will it be when you reach a certain age? Or perhaps you have a set date in mind?

• What sort of income will I need post-exit?

Once you’ve decided when you want to leave, you’ll have to work out what your financial needs will be post-exit. This will help you create a plan that accounts for where your money will come from after you sell your business – whether it’s from the sale itself, your pension or other assets you own.

• Do I want to stay involved in the practice?

If stepping away entirely feels too daunting, you may be able to stay connected to the practice through part-time work, mentorship or advisory roles. 

Some dentists also choose to sell the goodwill of their practice while maintaining ownership of the building. This option allows you to stay involved in the practice while benefitting from an additional source of ongoing income.

• Do I want to pass the practice onto family?

Consider whether succession within your family is an option, or if selling to an outside buyer makes more sense for your goals.

The sale process

One of the most important parts of planning your exit is deciding how you’re going to pass on your practice. There are several sale options to consider and the one you choose will depend on your individual circumstances.

• Selling to another dentist – A private sale can help you avoid broker fees and give you more control over discussions and negotiations. However, you’ll need to identify a suitable buyer yourself, which can take time.
• Associate-to-owner transition – Selling your business to an associate already working in the practice can offer a lot of benefits. You already know their clinical style and there will be minimal disruption for your patients. Remember to set out your exit terms well in advance though, so both parties are clear on when full ownership transfers.
• Using a broker – A good broker will have access to approved lists of dental professionals that may be interested in buying your practice. If you choose this method, make sure you find a specialist with experience of the dental practice market.
• Merging with another practice – Merging with a nearby dental practice can help leverage resources and increase the overall valuation of your business. However, each practice will have its own culture and brand that will need to be carefully managed.
• Family succession – Passing on your practice to a family member is a great way to keep your legacy alive and ensure things continue running smoothly. It can present emotional challenges though, so it’s important to make sure personal relationships don’t complicate business decisions and financial arrangements.

Once you’ve decided which option is best for you, there are some things you can do to ensure the sale of your business is completed as smoothly as possible. You can read more on this in our guide to selling a dental practice.

Transition planning

Stepping away from your practice can mark the beginning of an exciting next chapter, but it does require careful planning. A successful transition starts well in advance and a clear timeline can help make the process feel more manageable.

• 10 years before

Planning your exit this far in advance may seem excessive, but there are some things you can do to lay the groundwork for a smooth and profitable transition. This stage is all about defining your long-term goals, getting your financial house in order and starting to prepare your practice for sale.

At this point, it may be worth speaking to a Specialist Financial Adviser who can help ensure your exit strategy aligns to your vision for the future. This might include working out how much you need from the sale of your practice or starting to use your limited company to make pension contributions.

You may also want to consider professionalising your practice in advance of selling – whether that’s taking the time to clean up your business finances or updating your technology to remain competitive.

• 5 years before

At this stage, you should be starting to think more seriously about making your practice as attractive and saleable as possible.

If you plan to sell to a third party (rather than transition ownership to an associate), there are some things you can do to prepare yourself for the sale process. This includes carrying out a valuation of the practice and outlining key details a future seller is likely to be interested in, such as patient base, EBITDA and employee data.

Regardless of how you choose to sell or pass on your practice, reducing owner dependence is crucial. This might involve delegating clinical responsibilities to associates or implementing systems that allow the business to run smoothly without you.

You should also establish a plan for transferring ownership. This will vary depending on who you’re passing the business onto. For example, if you’re handing over to an associate, the transition is more likely to happen gradually over time, allowing you to prepare them to take over.

• 2-3 years before

When you reach this stage of your exit, your planning starts to become reality. This means you should be actively taking steps that directly affect the outcome of your exit, such as preparing financial statements, finalising agreements and preparing for life after dentistry.

Perhaps one of the most important parts of this process is building your transition team. This is likely to include an accountant, solicitor and financial planner to ensure you’re getting the best legal and financial outcomes – from securing the right deal to navigating potential tax implications.

Once you’ve identified an appropriate buyer for your practice and successfully signed over your business, you can start looking forward to embracing your next chapter.

Common mistakes to avoid

Planning your exit strategy can be complex, so it’s a good idea to familiarise yourself with some common pitfalls you may experience along the way. This can help you avoid unnecessary stress and disruption during the transition.

• Waiting too long to plan – A rushed exit could lead to reduced practice value, limited buyer interest and poor financial outcomes.
• Overestimating the value of your practice – Relying on industry rule of thumb can create unrealistic expectations, which is why it’s essential to arrange a formal valuation carried out by a professional.
• Poor communication – Leaving your practice is a big change for you personally, but it can affect other people involved in the process too. Failing to communicate properly with your patients and staff can damage morale, retention and goodwill.
• Ignoring tax implications – Without proper planning, you may be hit with unexpected tax bills – for example, Capital Gains Tax (CGT) when you come to sell. Be sure to seek advice to ensure you’re managing the process tax-efficiently.

Tax treatment depends upon your individual circumstances and may be subject to change in the future.

Preparing for life after dentistry

For many, dentistry is more than just a job. It can also be part of your identity and a source of personal fulfilment. It’s common to feel a void after exiting and you may need to spend some time rediscovering your purpose.

Are there any interests or hobbies you’ve previously put on hold? Or perhaps you want to find ways to continue making an impact? If this is the case, there are some ways you can remain professionally engaged – whether it’s mentoring younger dentists, part-time teaching or writing on dental topics that interest you.

Remember, stepping away isn’t just about what you’re leaving behind – it’s also about what you’re gaining. You’ll have the time to prioritise your health and wellbeing, spend more time with your loved ones and work on projects you might have previously postponed.

Whatever your next chapter looks like, financial freedom is key to making it a reality. This is where early planning becomes crucial. Speaking to a Specialist Financial Adviser who understands the nuances of the dental profession can help you make informed decisions and build flexibility into your exit strategy.

With the right support in place, you can create a plan that leads you smoothly into the lifestyle you’ve worked so hard to earn.