Dental Practice Succession Planning: Preparing for the Future

Most dental practice owners will need a succession plan within the next decade, and few have started one. Today, 25.3% of dentists in the U.S. are 60 or older.

You have spent decades building your practice, and your exit plan deserves the same care. If you own a dental practice, succession planning should be near the top of your priority list. This guide walks you through the essential steps, whether you are approaching retirement or exploring practice ownership.

Understanding Your Practice’s True Value

Three Methods Every Owner Should Know

Practice valuations rely on three distinct methods, each capturing a different dimension of your practice’s worth. Professional evaluators typically use multiple methods weighted for the specific practice rather than a single formula.

Understanding all three keeps you from leaving money on the table:

• Asset-based valuation looks at what you actually own, from equipment to patient goodwill.
• Income-based valuation focuses on cash flow and earnings potential and often carries more weight for profitable, growing practices.
• Market-based valuation compares your practice against recent local sales, giving you a reality check on price.

A practice valuation should also be updated regularly. Even if you are not planning to sell soon, annual valuations let you track trends and catch surprises early.

Why EBITDA Has Replaced Collections

Buyers now start with EBITDA multiples rather than a percentage of collections, and that single shift has changed how practices are priced. EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It reflects your practice’s core operating profit, and buyers commonly anchor to a multiple of EBITDA when evaluating a deal.

That shift changes how two seemingly similar practices can be valued very differently.

• Two practices can collect the same revenue and still earn very different profits.
• A healthy solo practice may still be discussed in terms of collections as a percentage, but buyers increasingly focus on EBITDA first.
• Higher profit margins can support a stronger valuation, even when top-line revenue looks similar.

Consider a practice with $1.8 million in revenue and lean overhead. It may command more interest than a practice with identical revenue but weaker margins, because buyers look past collections alone.

An EBITDA target of 20% to 25% of revenue can improve buyer appeal. Every unnecessary overhead dollar you remove before a sale raises your exit value.

Building Your Succession Timeline

Give yourself at least 18 to 24 months to prepare. A clear timeline, broken into phases, keeps the process on track.

Phase 1. Set Goals and Assemble Your Team, 1 to 5 Years Out

Start by defining your retirement timeline and financial goals. Gather five years of production, collections, and tax records, then build an advisory team that includes a dental CPA, attorney, valuator, and wealth advisor.

Identify your ideal exit date and work backward from there. Early conversations with staff also matter. A clear, honest message reduces uncertainty and keeps your team steady.

Phase 2. Find Your Match and Negotiate

Keep an open mind about buyer type. Cultural fit, clinical philosophy, and staff rapport matter alongside price. Involving key staff in interviews shows you how the buyer connects with your team.

Start with a letter of intent that outlines the basic terms, then move into formal appraisal and due diligence. The final asset purchase agreement is the binding contract, and your attorney review should cover accuracy and state law compliance.

Phase 3. Execute the Integration

Put a structured onboarding plan in place. Introduce the new owner to patients, staff, and referring specialists in a coordinated way. Many outright sales include 30 to 90 days of overlap, while gradual transitions may run longer.

A smooth handoff often depends less on paperwork and more on how consistently patients and employees hear the same message.

Choosing Your Transition Model

Four primary models cover most dental practice transitions, each balancing speed, control, and continuity differently.

• Outright sale offers a clean break. This works well for a fast exit, but patients have little time to adjust.
• Gradual buy-in lets an associate purchase ownership over time. This can ease the transition for patients and staff.
• Extended associate period keeps the seller on under new ownership for months or years. That can support retention, but only if authority and communication are clear.
• DSO affiliation shifts administrative and operational management to a dental support organization. These deals often include earnouts and usually reduce practice autonomy.

The right model depends on your goals, your buyer pool, and how much involvement you want after closing.

The DSO Question: Weighing Your Options

DSOs now play a major role in dental practice succession, offering faster exits while shifting the balance of clinical autonomy and practice culture. Understanding what a DSO deal involves matters before you choose a transition path.

Why DSOs Are Gaining Ground

DSO affiliation reached 16.1% of dentists in 2024. Fewer individual buyers are stepping in at the same time. Among 2025 graduating seniors planning to enter private practice immediately, 32% intended to join a DSO, up from 28% in 2021. Fewer new graduates are looking for immediate solo ownership.

What a DSO Sale Means for You

A DSO sale can offer a faster, more structured exit and quicker access to liquidity. It can also bring reduced clinical autonomy, future performance earnouts and changes in staff culture. In 2025 alone, at least seven states — including California, Indiana, Massachusetts, Maine, New Mexico, Oregon, and Washington — enacted new laws increasing oversight of private equity acquisitions in healthcare.

If you are weighing a DSO offer, take time to understand both the tradeoffs and the benefits before signing.

Legal and Tax Essentials You Cannot Overlook

Legal and tax details directly affect your timeline, your risk exposure, and what you keep from the sale. Many sellers underestimate their impact.

Legal Compliance

Selling a dental practice involves more than a standard business closing. Before diligence starts, make sure you and your attorney review the items below and map out any state-specific requirements.

• Under HIPAA, the buyer may need a business associate agreement before accessing patient records.
• State law may require written patient authorization before chart review, which can be stricter than HIPAA.
• Many states still require practices to be dentist owned.
• DEA registrations for controlled substances do not transfer automatically and may require separate steps.
• The Corporate Transparency Act remains federal law, but a March 2025 FinCEN interim final rule removed BOI reporting requirements for U.S.-formed entities. Because the regulatory landscape continues to shift, consult your attorney to confirm whether any filing obligations apply at the time of your transaction.
• Noncompete agreements are now largely covered by state rules, and the rules vary widely.

Patient chart access during due diligence illustrates the risk well. Handling that step incorrectly can slow a transaction or create avoidable compliance exposure. A quick legal review early in the process prevents that.

Tax Strategy

Tax planning can change your net outcome more than many sellers expect. How you allocate the purchase price across equipment, patient records, and goodwill can shift your effective tax bill significantly.

Several tax details tend to shape the final outcome, and overlooking them can cost you.

• Both sides must file IRS Form 8594 using the same allocation.
• Goodwill often receives capital gains treatment.
• Fully depreciated equipment may be taxed at ordinary income rates.
• Depreciation recapture can still apply, even before all installment payments are received.

Two offers with the same headline price can produce very different after-tax results depending on how value is allocated between equipment and goodwill. Early planning with a dental CPA gives you more control over what you actually keep.

How Patient Retention Protects Practice Value

Patient retention is both a risk and a value driver during a transition. Buyers want proof that revenue will stay steady after the handoff, and historical production numbers alone do not provide that proof.

Buyers gauge that stability through several indicators:

• case acceptance
• new patient flow
• recare consistency
• collection ratios
• systems that do not depend entirely on the owner

In real practice terms, think about a hygiene recall program that still fills the schedule after the selling doctor cuts back. Documented workflows, trained team members, and steady follow-up make that kind of continuity easier to prove. Buyers in 2026 are more selective and reward predictable systems.

Taking the Next Step With Confidence

The owners who plan early usually keep more options open. They also give themselves more time to improve profitability, prepare staff, and protect patient relationships before a sale is on the table.

Start with the basics this quarter. Confirm your EBITDA, organize your records, and work with advisors to shape the right transition model. If you are also thinking about how patient communication fits into long-term practice value, book a quick demo to see how clear financing conversations can support your patient care goals and become a Sunbit partner today.