Guide to Selling a Dental Practice in Tennessee

Selling your dental practice in Tennessee is one of the most significant financial decisions you will ever make. It’s the culmination of your life’s work. The market here is strong, but successfully navigating a sale involves more than just finding a buyer. It requires strategic preparation, a deep understanding of your practice’s true value, and a clear-eyed view of the process from start to finish. This guide is designed to give you, the practice owner, a clear picture of the landscape.

We find many owners believe that you only start planning for a sale when you are ready to hang up your scrubs for good. The reality is that the most successful transitions, and the highest valuations, are achieved when planning begins 2 to 3 years before your target exit date. This timeframe allows you to optimize your operations, clean up your financials, and position your practice to attract the best possible buyer, whether it’s an associate, a private practitioner, or a larger group.

Market Overview: The Tennessee Dental Landscape

The market for dental practices in Tennessee is robust. Your practice is likely in high demand due to favorable demographics and ongoing population growth across the state. In fact, Tennessee has more residents per dental practice (about 4,500) than the national average. This points to a healthy, and in some areas underserved, patient population.

Geographic Hotspots

Unsurprisingly, location plays a major role. We see practices in and around major growth hubs like Nashville, Chattanooga, Knoxville, and Memphis fetching premium valuations. These areas attract buyers who are looking for established patient bases and strong community ties.

The Rise of Group Buyers

A key feature of the current market is the significant presence of Dental Service Organizations (DSOs). These corporate groups are actively acquiring practices across Tennessee and often have the capital to make competitive, all-cash offers. This has changed the landscape, providing owners with more options than the traditional associate-to-owner path.

Key Considerations for Tennessee Practice Owners

Beyond market dynamics, a successful sale depends on careful preparation. It’s about getting your house in order long before you put it on the market. Thinking through a few key areas can dramatically improve your final outcome, both in terms of sale price and peace of mind. For Tennessee owners, we recommend focusing on three specific areas.

Here are a few things to get you started:

1. Your Profitability Story. Buyers are not just buying your revenue. They are buying your cash flow. A practice with clean financial records and an overhead below 65% is far more attractive. We help owners “normalize” their financials by identifying and adjusting for personal expenses run through the business, creating a clear picture of the practice’s true profitability.
2. Tennessee-Specific Rules. The state has specific regulations, including the “corporate practice of dentistry” doctrine, that can affect how a sale to a DSO is structured. Understanding these rules upfront prevents legal headaches and delays during the closing process.
3. The Tax Consequences. How your sale is structured has massive tax implications. Allocating the purchase price between goodwill, equipment, and a non-compete agreement determines how much goes to you versus the IRS. Goodwill is typically taxed at a lower capital gains rate. Getting this wrong can cost you hundreds of thousands of dollars.

Market Activity and Buyer Types

The current market is not just strong. It is also diverse. The “right” buyer for your practice depends entirely on your personal and financial goals. For years, the only real option was to sell to an associate or another local dentist. Today, you have more choices, each with its own set of advantages and considerations. Running a confidential, structured process ensures you can compare these different options and create competitive tension to drive up value.

Here is a brief look at the common buyer profiles in Tennessee:

The Dental Practice Sale Process

From the day you decide to sell to the day the funds are in your account, the process typically takes between 6 and 12 months. It is not a single transaction but a series of carefully managed stages. The journey begins with a comprehensive valuation to set a realistic and defensible asking price. From there, we move into a confidential marketing phase, where we discreetly approach a curated list of vetted potential buyers.

Maintaining confidentiality is one of the most important parts of the process. You do not want staff or patients to worry unnecessarily. This is managed through strict non-disclosure agreements and a controlled flow of information. Once offers are received, negotiation begins. After an offer is accepted, the most intensive phase starts: due diligence. This is where the buyer and their lenders scrutinize your financial records, operational procedures, and legal documents. Being prepared for due diligence is what separates a smooth closing from a deal that falls apart at the last minute.

What is Your Tennessee Dental Practice Worth?

Many owners have heard that a dental practice sells for a “percentage of revenue,” typically 60% to 80% in today’s market. While that is a common benchmark, it is an incomplete picture. Sophisticated buyers, especially DSOs, do not value practices this way. They use a more precise method that provides a much clearer view of your practice’s earning power. A professional valuation is the foundation of a successful sale.

Here is how we determine what a buyer is truly willing to pay:

1. We establish your real cash flow. We start with your net income and add back interest, taxes, depreciation, and amortization (EBITDA). Then, the important part: we “adjust” that number by adding back personal or one-time expenses (like a car lease or a new cone beam you just bought) to find your Adjusted EBITDA. This number reflects the true profit available to a new owner.
2. We apply the right multiple. Based on your practice’s size, location, staff stability, and growth potential, we apply a valuation multiple to your Adjusted EBITDA. A solo practice might get a 4x multiple, while a multi-provider practice in Nashville with strong growth could command a 7x multiple or higher.
3. We tell your story. Numbers alone are not enough. We frame the narrative around your practice
   9s unique strengths. This could be your high patient retention, potential for adding new specialty services, or dominant position in your local community. This story is what justifies a premium valuation.

Planning for Life After the Sale

Closing the deal is a major milestone, but it is not the end of the road. A successful transition plan is what protects your legacy and ensures the continued success of the practice you built. This involves thoughtfully considering your role after the sale and managing the communication with your team and patients.

For many owners, especially those selling to a larger group, the sale includes an employment or transition agreement. This can range from a few months of part-time work to help with the handover to a multi-year arrangement where you continue practicing with a reduced management burden. Defining these terms clearly during negotiations is critical to ensuring your post-sale life aligns with your personal goals. Protecting your staff and ensuring continuity of care for your patients is equally important. A well-crafted communication plan, and sometimes retention bonuses for key staff, can ensure a smooth and positive transition for everyone involved.