You have worked diligently for decades to help improve the smiles of countless patients, perhaps treating two, three or more generations of the same family. You helped them achieve and maintain good oral health and subsequently good overall health – your job is nearly done and retirement is looming.
Now, though, you start to wonder – is your financial future in good health too? Did you start saving soon enough and have you thought far enough ahead about selling your practice to ensure a good profit?
A September 2016 study of dentists, physicians and other healthcare professionals by TD Bank indicated that while 56 percent of those surveyed expect that their partners would take over the practice when they retire, less than half – 48 percent – were confident that the sale of the practice, along with existing savings and investments, would bring enough financial security to last throughout retirement.
Dentists generally are not able to start saving for retirement as early as other professionals for many reasons. In addition to undergrad studies, they have an additional four years of dental school. Tack on a dental residency which can be another two or three years, that new dentist is nearing 30 and is just now ready to start earning. In addition, dentists have one of the highest average student loan debts after dental school – over $261,000, according to the American Student Dental Association’s 2016 numbers. Add starting a private practice to the equation – and the resulting business expenses – along with starting a family, it is easy to see the challenges for dentists in trying to save for the future.
Fast forward 30-40 years and now the dentist is looking ahead to life as a retiree. Student debt is long gone, the kids are grown and on their own, there’s been some savings, and the practice is doing well. Should be simple to sell, right? If you had a partner or two and did your homework ahead of time, as did Dr. David Rummel of Columbus, Ohio, you may have done it right.
Rummel, who practiced for 37 years, was in partnership with the same dentist for 30 years – and when he knew retirement was sooner than later, began to think about how to find the right dentist who not only would fit in well with patients and staff, but would be in a position to buy Rummel’s share of the business. “I was very concerned about the quality of the person who would take on my position – and I think that’s a concern for a lot of dentists,” he said. “We probably had four or five dentists come into the practice before finding the one we would offer the opportunity to buy me out.”
The economy is a major factor in when dentists decide to retire, stated Dr. Henry Fields, Professor and Endowed Division Chair of the Orthodontics Department at The Ohio State University College of Dentistry – and a bad or recovering economy means a later retirement for most. Fields, who is also former dean of the OSU College of Dentistry, explained that dentists today tend to wait later to retire. “There are some that have been hanging on for a while recently because of the downturn in the economy and generally speaking, the departure date has been later.” Fields said as dentists choose to delay their retirement for financial reasons, there are also those new dentists finishing dental school – and that means more dentists in practice.
There are other issues dentists face when preparing for retirement:
- Selling a dental practice is not the same as selling a home. If the dentist waits too long to build value in the business, it can be hard to sell. Emmett Apolinario, CEPA, CVB said it takes years to build a practice value that results in a realistic, yet profitable sale. “Dentists may not have planned for their exit and are then pressured to demand more than the business is worth when they go to sell it – and what they get is not enough to retire on,” he said.
Attorney Susan Rector, partner with Schottenstein, Zox & Dunn, agreed, stating that the time to think about selling is long before retiring and added that as important is knowing how much money is needed to support retirement. “What am I going to sell and at what price – and what is my role going to be after I sell?”
- Emotions come into play. Mark Koogler, attorney and partner with Porter, Wright, Morris & Arthur LLP said the process isn’t as easy on the mind as one would think. “They never had to think about this before and are not prepared for the process that needs to happen. A lot of emotions and pressing issues are placed on the dentist. They also need to be talking well in advance about structuring the sale to minimize taxes, the risk of not closing the transaction and knowing how much they need to get out of the deal.”
- Boyd Karren, Director of Marketing with Dental CMO in Utah, said dentists may feel additional pressure thinking about revenue and corporate dentistry – and the possibility of a national dental chain waiting to buy the practice but the dentist not wanting his or her life’s work to fall in the hands of a big healthcare chain.
- Do you cut back on time spent in the office as you get closer to retirement – or do you keep working? An April 2015 article in ADA News, the twice monthly news publication of the American Dental Association, offers some insight into this from Wells Fargo Practice Finance: “By following these important guidelines — maintaining production levels through the sale of your practice, staying technologically current, leaving future work for your buyer and keeping your financial books in order — ADA members are more likely to increase their chances of gaining the highest dollar for their career-long investments and attracting the perfect new owner for their practices and patients.”
While these are just some of the considerations dentists should address head-on, there seems to be one constant: it’s never too early to start planning for retirement, especially if it involves the sale of a dental practice. “There needs to be planning with your business broker, CPAs and wealth manager,” Rector advises.
Molly Mae Grubb is the founder of Grubb Wealth Management, a Registered Investment Advisory firm. She provides a full-service personal and business wealth management firm in Columbus, Ohio, and has been in the industry for over 12 years. Molly acts as a personal CFO to provide them with freedom and security so they can truly achieve all that is important to them. Previously, Molly led business services and investment teams at National City and Key Bank. She is a wealth management professional, and earned her B.S. degree in Actuarial Science at The Ohio State University.