04/02/2026
What Dentists Need to Know About Transitions, Insights from Keith Nicholson in Dental Economics
https://lnkd.in/epZi3rTP
Key Takeaways:
For many dentists, buying or selling a practice is the most meaningful business transaction of our professional lives. As a dental professional, I’ve purchased a practice, acquired another location during ownership, and sold my business. With each iteration, I learned actionable insights that I apply to support peers embarking on practice transitions.
Practice value is the gestalt of profitability, brand, culture, geographic location, trajectory, and more. As consultants, we work cohesively with clients to highlight the salient features relevant to value.
Adjusted (normalized) operating cash flow is a critical data point for computing value as it underpins the buyer’s access to a practice loan and capacity to make loan payments. However, numerous factors impact value, including the payer mix, hygiene production, equipment condition, local demographics and economics, and more.
The type of sale and the tax allocation of assets influence the final sales price because these features have significant implications for liability and after-tax proceeds. Dental transactions are typically classified as an asset sale, ascribing 70-90% of value to intangible assets.
DSO transactions are ostensibly more complex because the seller’s proceeds are enveloped in much more than the sales price. We use financial modeling to forecast the expected financial implications of keeping your practice vs. selling to a DSO.
In private equity, value creation can be achieved through EBITDA growth, EBITDA multiple expansion, and debt paydown. These channels have important implications for equity stock performance.
As advisers, we lead negotiations, taking a holistic approach and focusing on integrative issues to expand the pie for mutual gain.
Planning and preparation is an important stage during which we provide strategies to boost the future sales price and adhere to the desired exit timetable. The first step is often a Quality of Earnings (QoE) process to examine the level and sustainability of cash flows.
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