Are You Planning for Retirement?
As a dentist, planning for retirement means more than just putting aside income for your future. Many dentists haven’t considered what will happen to their most valuable retirement asset — their dental practice.
There is a saying used in investing: “Buy low, sell high.” The same principle can be applied to the life cycle of a dental practice. While the time periods may vary somewhat from doctor to doctor, the events that take place during the course of a dentist’s career are always the same.
The Dental Career Life Cycle
The GROWTH phase: After graduation from dental school, new dentists establish themselves and build their client base. This phase typically lasts 10–12 years.
The MATURITY phase: Peak production takes place between the ages of 38–58. This phase lasts about 20–25 years. A dental practice reaches its peak value during this phase.
The DECLINE phase: As dentists near retirement, freedom and a better quality of life often become more important than money. They stop taking new patients and cut back their hours. The income produced by the practice begins to decline.
Obviously, the ideal time to sell a practice is toward the end of the maturity phase. However, many dentists aren’t ready to retire at this point. Therefore, most dental practices sell in the decline phase.
Once a practice reaches its peak value, it makes no financial sense not to sell. Eventually, every dentist will hit the point where they cannot physically or emotionally produce any more revenue with their own two hands — their “solo economic threshold,” if you will. They crave relief from the constant work, yet feel the financial pressure to constantly bring in more revenue. When this happens, the time is right to consider selling your practice.
Many practitioners don’t realize they don’t have to own a practice to continue dentistry. But with the right arrangement, you can sell your practice at peak value, convert the equity into usable cash and continue to practice as an associate for the purchaser for as long as you wish. You maintain your current level of income performing only the procedures you enjoy, choosing your patient load and accumulating significantly greater sums of money by retirement age.
Selling at peak value is the best route to retirement and makes the last 10 to 20 years of a dental career much more enjoyable, much more rewarding and far less stressful.
