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The field of practice transitions in dentistry has undergone significant evolution, mirroring the advancements in clinical technology. From the simplistic buy-and-sell model of the 1950s to the emergence of innovative transition strategies today, the dental business cycle is adapting to meet the changing needs of both buyers and sellers.
Historical Perspective
In the mid-20th century, practice transitions were limited to basic buyouts, often resulting in dentists closing their doors without compensation. The shift from this approach began in the late 1960s and 1970s, driven by factors like dental insurance and changing socioeconomic patterns. Compensation for the business value of a practice became recognized, leading to the birth of the practice transition market.
Evolution of Practice Transitions
The 1970s and 1980s witnessed a surge in practice transitions, with dentists realizing the transferable business value of their practices. Practice brokers emerged, evolving from dental supply personnel to professionals with backgrounds in dentistry, law, accounting, or business. The focus shifted to meeting the financial and emotional needs of both buyers and sellers.
Recent Developments
In the last 12-15 years, practice transitions have become more nuanced, considering the specific needs of dentists. Programs were introduced to allow sellers to extract 100% equity while staying on as clinicians for up to 10 additional years. The market saw variations in sale prices, timeframes, and models based on practice location and specialization.
Challenges and Changes in 2018 and Beyond
As of 2018, the dental industry faces a “New Normal,” marked by conditions like the economic downturn from the recent recession and changing demographics. Practice transitions are expected to become more complex, creative, and crucial for dentists’ emotional and financial well-being.
Trends Affecting Practice Transitions
Dental Service Organizations (DSOs)
- Increasing competition from DSOs, providing alternative career paths for young dentists.
- DSOs offer sellers various compensation options, including cash, equity, or a combination.
Creative Practice Transitions
- Transition strategies such as Pre-Sale, Deferred Pre-Sale, Incremental Practice Sale, and Practice Mergers.
- These creative approaches cater to the needs of both buyers and sellers, offering flexibility and increased value.
Miscellaneous Strategies
- Incubator Programs, Two-Stage Closings, Present Value/Future Value Transitions, and other innovative models.
- These strategies cater to specific situations, providing opportunities for unique and mutually beneficial transitions.
Conclusion
While traditional practice transitions will remain available, the future demands increased creativity, extensive planning, and extended time frames. Dentists must adapt to the changing landscape, incorporating innovative strategies to ensure fair compensation for their efforts in building successful dental practices. The bright future of the dental business, particularly in practice transitions, hinges on dentists’ ability to embrace evolving paradigms and plan effectively.
