Dental Practice Buying Options

In the Walkaway, the seller is looking to sell today, and leave the practice tomorrow. This normally means the seller is retiring or relocating. When a seller waits until retirement to sell, the practice production has usually slowed down, which tends to drop the market value of the practice. For this reason, the Walkaway can be a good value for a new buyer who is willing to put in the work necessary to ramp up production back to full capacity.

Think of the Presale as a pre-retirement transition for the seller. In the Presale, a practice is sold today, but the seller remains on staff as the purchaser’s associate for a pre-determined period of time. This provides young dentists an invaluable opportunity to work alongside a built-in mentor. Although some sellers opt to Presale as much as 15 years before they retire, most retire within 5 years or less.

Dentists who already own a practice may consider a Practice Merger for their next growth move. A Practice Merger occurs when an existing practice owner acquires the seller’s practice and merges the two practices together into one location. Merger buyers are established, experienced and often have an easier time finding financing than first-time buyers. Practice Mergers can be structured as a Walkaway or a Presale.

Practice Consolidation is when two or more practice owners combine their practices in a single, multi-owner group practice. Unlike in a merger, the practice owners become equal co-owners in the larger practice. They typically see an increase in income due to overhead savings. Additionally, internal growth is possible if one doctor provides services that the other doctor has been referring out of the practice.

The Co-ownership Program, or COAP, is when a doctor sells an equal ownership interest in the practice. The sale is immediate and the owner doctors continue to grow the practice together. Owner income is a combination of provider income based on individual production of the doctors, and profit distributions based on equal ownership. Co-owned practices must be structured as a corporation or an LLC for owner liability reasons and for long-term capital gain advantages for the seller.

A Progressive Ownership Program, or a POP, is a combination of the associate/co-ownership plan. The new co-owner comes into the practice as an associate with a formal contract that leads to equal practice ownership. The buy-ins occur in stages based on the production level of the associate versus the production level of the practice owner. The POP is similar to the COAP program, but structured for a slower pace.

Ownership Redemption is when one owner of a multi-owner practice desires to sell his or her ownership interest. This transaction can either be structured as a sale to the other owners of the practice or to a new owner.

When carefully structured, an associateship can be a low-risk stepping-stone to the next phase of your career. However, most associateships are not well planned, and history has shown that 90% of associateships fail. If you are interested in accepting an associate position, PARAGON can help you identify the right opportunity and structure your associateship in a way that eliminates ambiguity and sets both parties up for success.

Any of the above transitions can be structured with contractual delays. Ask your PARAGON consultant for details.