Timing the Market
Why 2017 Might Be THE Year to Consider Selling Your Practice
As practice transition specialists, we are often asked “Is now a good time to sell my dental practice?” While there are many factors involved in making the decision to transition your practice, the short answer is “Yes”. The current practice transition environment features several attributes that are helping to enhance practice value and make it an ideal time to consider a practice sale:
- Seller’s Market – The substantial increase in the profitability of dental practices and the poor economic outlook in medicine have caused a significant increase in dental school applicants over the past 10 years. As a result, the pool of potential buyers has increased dramatically over the past few years and this trend is expected to continue in the near future. Increase in the demand for quality practice acquisition opportunities is inevitable.
- Limited Supply of Acquisition Opportunities – Many doctors who are well within retirement age have delayed the sale of their practices due to the recession. The increase in demand coupled with a limited supply of quality opportunities has resulted in an increase in the value and marketability…now is the time.
- Low Interest Rates. The low cost of capital and many lenders offering 100% financing is allowing buyers to comfortably afford to purchase practices and fueling the increased demand for quality practice purchase opportunities.
- Costly Start-Ups – Dental equipment, technology, and leasehold improvements, extraordinary student loan debt, and the time and cost required to start a practice and generate a profit…all reasons why doctors are purchasing an established practice rather than pursuing a start-up.
- Increasing Burden of Management. There are currently transition options available to doctors who desire to lighten their management burden, cash out the value of their offices at the peak of the market, and continue working at their office until retirement.
- The Market will change While market conditions are currently very favorable for sellers, we are expecting several changes to occur over the next few years that will likely put downward pressure on practice values, including:
- Increasing Number of Acquisition Opportunities – As the economy and stock market continue to recover, more and more sellers will enter the marketplace. The “Sellers’ Market” will diminish.
- Increasing Interest Rates – Interest rates for dental loans are expected to increase by .5 – 1% in 2017. Significant increase in interest rates will harm the buyer’s cash flow and could adversely impact practice values.
- Other Factors – Downward Pressure on Pricing (from PPO plans), Upward Pressure on Overhead (technology, marketing, etc.), Increasing Competition (growth of corporate dentistry), Increasing Management Burden (discussed above), and Rising Student Loan Debt
If you’re contemplating a transition of your practice or a satellite office…if you’re thinking of expansion by acquisition…the facts are suggesting now is the time. Contact HHA to discuss your options…