How dental practice sales changed in 2020 — and what it means for you in 2021

smile dentist team arms crossed in dental clinic, asian doctor

The practice sales market isn’t static. Here’s what you need to know – and who you need to know – to buy or sell in 2021.

2020 was a wild and unforgettable year for the dental industry. I hope we never have to live through anything like that again. It was hard enough navigating that time as a dentist, but what about the folks who were also thinking of selling their practice before the pandemic? What happens now? Here’s how dental practice sales changed after the pandemic and what that means for selling your practice in 2021. 

Your practice value may have changed in 2020. But how’s the recovery?

With practice closures, increased infection control protocols, health concerns, and general anxiety about public spaces, it makes sense that your numbers dropped in 2020. 

So how do we factor 2020 numbers into a valuation? And – more importantly – how are today’s buyers (and the banks lending them money to purchase a practice) thinking about 2020 numbers? While we’d traditionally love to see modest growth, in 2021 it’s more about showing a strong recovery for your business. 

So what are we looking for when we say a strong recovery? A strong returning patient base, hygiene days equal to what they were in 2019, and solid numbers that match your 2019 revenue. According to the most recent ADA economic impact survey data (June 14, 2021), 53.1% of California practices are open and experiencing business as usual. Does this sound like your practice? Nice! We’ll explain what to do next.

On the other hand, if you’re one of the 46.3% of dentists describing lower patient volume than usual, don’t lose hope! We’ve got good news for you, too. It’ll just take some work. Skip down a paragraph and see what you can do to make sure you get the best dental practice sales price in 2021. 

If your practice recovery is good… If your numbers in 2019 and 2021 look similar, then we can safely use 2019 figures to drive a strong valuation. Feel confident in the process and continue on as planned with your sale! A great recovery is a super encouraging sign to any potential buyers in 2021. Your practice is healthy, your patients are coming back, and it’s business as usual. 

If your practice hasn’t yet recovered fully… don’t worry. There are tons of reasons why your practice numbers may still be down. Many doctors used COVID as an opportunity to cut back on their practice and slow down and never really revamped as the economy reopened. 

That’s ok, but it can hurt the value of your practice. Any potential buyer will see that and think “if the doctor that’s been working in this practice for years couldn’t rebound, how would I be able to after the sale?” It’s a question that can scare folks off and make your practice look less desirable. 

So where do we go from here? If you are just ready to sell now no matter what, we have buyers looking for all types of practices. First, you want someone who will give you an honest opinion of value, which typically will come from your broker. 

If you’re willing to put in a little more time to get the maximum value for your practice, you may want to put in some work to make sure that you’re able to get your revenue and client base back to pre-pandemic numbers. Consider working with a practice management consultant. They can help you fix problem areas and get your practice primed for a comeback. Curious as to how that process works? We’d be happy to put you in touch with someone. 

A broker who understands your timetable is more important than ever. 

No one likes a pushy real estate agent, especially when the market is in a unique (and potentially volatile) place. It’s the same for dental practices, so you need to make sure that you and your broker are on the same page. That means finding someone who is communicative, open, and ready to strategize — instead of taking a one-size-fits-all approach

As brokers, we’re obviously incentivized to get the highest value for your practice sale. When you meet with us, our strategy sessions will always include what’s best for you and your practice. We are here to help you sell at a price that makes you happy. 

We also make it clear that our sellers are free to reject any offer. They’re not locked in when they work with us. So what are they getting? A realistic valuation, access to a large pool of potential buyers, our deep well of expertise, and an entire team that has done this before. Most doctors will only do this once or twice in their life – we do it day in, day out.

Speaking of timetables, there are many factors right now that make it a good time to sell, including: 

  • more sellers potentially entering the market, 
  • interest rate increases on the horizon (giving buyers less purchasing power)
  • a likely increase in the capital gains tax rates

You need an experienced broker team who will give you the best chance at selling your practice successfully and on your preferred timeline.

You only need one buyer for your practice. Find the perfect fit. That’s where it starts, but it’s not where it ends. 

Talk about the dental practice sales market is just that — talk. At the end of the day, there’s ONE buyer (or one group) who will purchase your practice. That makes it less like selling widgets and more like matchmaking. Luckily, the internet has given us more options than ever before. That said, here’s what we mean when we say “a good match.”

  1. Could the buyer imagine practicing in this area? (Location is huge for most buyers.)
  2. Will the cash flow support their lives and student loan debt? 
  3. Does the buyer fit with the clinical philosophy and the business culture of the practice?

Ensuring that you match these three big ideas is the only way to find a buyer who will actually act on buying the practice. Remember, it’s a huge step for them too! 

If you have a buyer in 2021, congrats! You’re halfway there. 

Most folks think that their relationship with a dental practice sales broker ends after they find you a buyer. This couldn’t be further from the truth! While that is a huge step (congrats!), you still need someone who can push this deal through and make sure that it happens on your timetable. Too often we hear stories about folks who tried to sell their practice to a colleague, only to have it drawn out over years and years – if it ever gets completed at all. No one wants that headache.

A practice sale has a hundred moving parts. Attorneys, landlords, consultants, CPAs, getting lending for the buyer, advocating for the seller, etc. Sound overwhelming? It can be! Don’t let that stop you from living your dream! Find a dental practice sales broker that knows how to navigate these sales — even if you already have a buyer. At IPS, we even offer a half-commission model if you already have a buyer in mind. 

Curious to learn more? We’d love to talk to you today! 

Talk to an agent

 

Trevor Kimball, PhD