We are constantly asked the question: "Should I sell my practice when its value is at its peak, even though I`m not ready to retire?" The question we ask back is: "Are you prepared to work as an associate or employee after selling your practice?" We need to challenge the premise that the only way the dentist can retire is to sell early and then work for another 10 or more years as the second in command. We have seen this scenario fail more often than it succeeds. The reason is that the senior doctor, who has built the practice and made all the decisions, usually does not take well to a loss of autonomy.
The young doctor buys the practice and begins to make changes. The senior doctor may not like these changes. Staff members frequently disapproves, as well. They complain to the older doctor about the changes. The senior doctor does not know how to handle this situation, but tends to support the staff. Therefore, communication does not occur along proper channels. Thus, the young owner begins to resent the former owner for not relinquishing control of the practice and for meddling in the new order. This can lead to an unhappy termination of the purchase contract or of the senior dentist and the staff.
These problems have occurred even between family members in the same practice. When you have been at the helm for a long time, it is difficult to give up the wheel. Having an unhappy relationship with your successor is no way to end a career. If selling your practice early and working as an associate is no walk in the park, then when is the best time to sell a dental practice? We can provide a few guidelines.
First: The right time to sell the practice is when your pension is fully funded. When you sell your practice and terminate your professional income, your pension needs to pay for your lifestyle. It also needs to continue growing to support your financial needs until at least age 90. If your pension is not properly funded - no matter how much you can get for the sale of your practice - it is not the right time to sell. This is because proceeds from the sale of the practice will likely fall short of the lump sum of $1.5 million or more needed to retire.
Second: The right time to sell is when you are tired of practicing dentistry. Of course, this is precisely the time many dentists want to sell. However, if you are tired of practicing dentistry and your pension is not fully funded, it is not the time to attempt to sell the practice. Interestingly, many dentists discover that, once they get the business end of dentistry in order and have funded their pension, they love practicing again and have no intention of selling for many years.