One of the most uncomfortable times to think about selling a dental practice is when the numbers aren’t quite as strong as they used to be.
Maybe collections were down last year. Perhaps you’re working fewer hours, lost a hygienist, or had an associate leave. Or maybe you’ve simply reached the point in your career where you don’t have the same desire to maintain the pace you did five or ten years ago.
That often leads sellers to ask:
“Should I wait until my collections recover before I sell?”
Sometimes the answer is yes.
But not always.
The more important question is:
Why are collections down?
Understanding the reason behind the decline—and whether it’s temporary, correctable or likely to continue—is far more important than looking at the percentage decline by itself.
Not Every Revenue Decline Tells the Same Story
Imagine two practices that both experienced a 10% decline in collections last year.
On paper, they may look similar.
But suppose the first dentist reduced the practice from five clinical days per week to four as retirement approached.
The second continued working the same schedule but experienced declining new-patient numbers, fewer active patients and falling production.
Those are two very different practices.
The numbers tell us what happened.
The circumstances surrounding those numbers help explain why it happened.
And buyers will want to understand both.
An Intentional Slowdown Before Retirement
One of the more common situations we encounter is a dentist gradually reducing his or her workload before selling.
The owner may:
- Eliminate a clinical day
- Take more vacation
- Stop accepting new patients
- Refer more procedures
- Reduce the number of larger cases being scheduled
- Simply choose to work at a more comfortable pace
Naturally, production and collections may decline.
That doesn’t mean the underlying practice suddenly became unhealthy.
A buyer may see an established patient base, available capacity and an opportunity to restore some of the production the seller intentionally gave up.
The decline still needs to be considered in the financial analysis, but the explanation matters.
Staffing Problems Can Distort the Numbers
Another common reason for declining collections is staffing.
Consider a practice that historically operated with two hygienists but spent much of the past year with only one.
The practice may have:
- Fewer available hygiene appointments
- Longer recall intervals
- Reduced doctor exams
- Fewer treatment opportunities flowing from hygiene
Collections can decline even though patient demand remains relatively strong.
Again, a buyer shouldn’t simply ignore the decline. Hiring another hygienist may not be easy or immediate.
But a staffing-related decline tells a very different story from a practice that is simply losing patients.
Associate Changes Can Have a Major Impact
Multi-doctor practices require another level of analysis.
If an associate who historically produced $250,000 leaves the practice, total collections could decline substantially even if the owner’s production remains stable.
That raises important questions:
- Has the associate been replaced?
- Could the buyer absorb some of that production?
- Is there enough patient demand to support another doctor?
- Did the patients remain with the practice?
Looking only at total collections can obscure what’s actually happening.
Temporary Events Matter, Too
Occasionally, a practice has an unusual year because of circumstances that aren’t representative of its normal operation.
Examples could include:
- An extended illness or leave
- Office construction or relocation
- Equipment problems that interrupted operations
- Temporary staffing shortages
- Other unusual disruptions
In these situations, reviewing several years of financial and production history becomes especially important.
A single year shouldn’t necessarily define the entire practice.
But the seller should be prepared to clearly document and explain what happened.
When a Decline Is More Concerning
Not every decline has an easy explanation.
Buyers will understandably be more cautious when the practice shows continuing deterioration in areas such as:
- Active patient count
- New-patient flow
- Hygiene activity
- Doctor production
- Collection percentage
A practice that has declined consistently for several years without an identifiable cause may be fundamentally different from one that experienced a temporary disruption.
In that situation, waiting may give the seller an opportunity to stabilize the practice.
But there’s an important catch.
Waiting only helps if something is going to change.
Simply waiting another year while the same decline continues can make the eventual sale more difficult.
Should You Try to Rebuild Before Selling?
This depends on both the practice and the seller.
If you’re still several years from retirement and have the energy to rebuild, it may make sense to:
- Restore clinical hours
- Address staffing gaps
- Reestablish the hygiene schedule
- Improve new-patient flow
- Replace a departed associate
A stronger operating history can make the practice easier to market and potentially more valuable.
But rebuilding takes time and effort.
If you’re ready to retire now, spending another two years aggressively growing the practice simply to sell it may not fit your personal goals.
That’s why the decision can’t be based solely on maximizing the sale price.
Don’t Make Major Changes Just to Impress a Buyer
Sellers sometimes feel pressure to “fix” everything immediately before going to market.
That can lead to questionable decisions.
For example, this may not be the time to:
- Make unnecessary equipment purchases
- Add staff the practice can’t support
- Dramatically increase marketing expenses
- Change the practice model simply to increase short-term revenue
A buyer generally wants to understand the practice as it actually operates.
A clear explanation of a weakness is often more useful than a rushed attempt to disguise it.
How the Practice’s Story Should Be Presented
When collections are declining, transparency is critical.
A prospective buyer should be able to see:
- What changed
- When it changed
- Why it changed
- Whether the underlying issue still exists
- What opportunity, if any, exists to restore production
That may require looking beyond tax returns and profit-and-loss statements.
Production by provider, procedure reports, patient statistics, hygiene production and other practice-management reports can help explain what’s really occurring inside the practice.
The Bottom Line
Declining collections don’t automatically mean you should postpone selling your dental practice.
And they don’t automatically mean you should sell immediately.
The answer depends on why the practice declined and what is likely to happen next.
A temporary staffing issue, reduced seller schedule or associate departure tells a very different story from a sustained loss of patients and production.
Before deciding to wait, ask yourself:
If I keep the practice for another year, what am I realistically going to do differently?
If there’s a clear plan to restore performance, waiting may make sense.
If you’re ready to transition and the underlying practice remains sound, waiting solely because the most recent year’s collections aren’t your highest ever may not be necessary.
The important thing is to understand the numbers, explain the circumstances honestly and make the decision that fits both the practice and your personal transition goals.
Thinking About Selling but Concerned About Recent Performance?
You don’t need to wait until your practice looks perfect before having a conversation about a potential transition.
American Practice Consultants can review your practice’s financial and operational history, help determine how a prospective buyer is likely to view recent changes, and discuss whether selling now or allowing additional time to stabilize the practice makes the most sense.
Contact us for a confidential conversation about your dental practice and your transition goals.