The market for dental practices in Denver is entering a period of significant change. A generational shift means more practices will become available as owners look toward retirement. This presents both a major opportunity and new challenges. For owners, understanding this evolving landscape is the first step toward a successful sale. Proper preparation and strategic timing are critical to maximizing your practice’s value and securing your legacy.
Market Overview
Denvers dental market is dynamic and ripe with opportunity. Historically, few dental practices were on the market at any given time, but that is changing. A wave of baby boomer dentists is now approaching retirement, which will increase the supply of practices for sale. At the same time, Colorado has a lower resident-to-practice ratio than the national average. This means buyers have more options, making it a competitive environment for sellers who want to attract premium offers.
A key trend shaping the market is the growth of Dental Service Organizations (DSOs). Already, 21% of Colorado dentists are affiliated with a DSO, a number that is rising as more graduates from schools like the University of Colorado prefer group practice settings. This shift from solo practitioners to larger, well-funded buyers changes the entire sales process.
Key Considerations for Denver Sellers
Beyond market trends, a successful sale requires careful thought about your specific goals and how your practice fits into the current landscape. Here are a few key areas to consider.
The New Generation of Buyers
The dentists looking to acquire practices today are different. Many younger dentists, including recent graduates, are more comfortable with group practice structures and DSO affiliation. This means they value different things than a traditional solo buyer might. They often look for modern systems, efficient operations, and a clear growth path. Showcasing this potential is now a key part of the sale.
Solo Buyer vs. Strategic Group
Are you looking to sell to another dentist who will carry on your legacy in a similar fashion, or to a larger group or private equity-backed DSO? Each path has different implications for valuation, your post-sale role, and your staff’s future. Understanding the motivations of each buyer type is critical to positioning your practice effectively.
Protecting Your Legacy and Staff
Your practice is more than a set of financial statements. It represents years of work and relationships with patients and staff. A well-structured sale ensures your team is treated fairly and your legacy in the community is protected. This is often a key negotiation point that requires careful planning.
Market Activity and Timing
For years, the Denver dental market had a limited inventory of practices for sale. That is changing quickly. With a large number of dentists nearing retirement, the market is on the cusp of a major transition. We expect to see a significant increase in the number of high-quality practices becoming available over the next few years.
This creates a unique window of opportunity. Right now, buyer demand from DSOs and private equity groups is strong. For practice owners who are prepared, this is an ideal time to explore a sale before the market becomes crowded with other sellers. Timing your entry correctly can have a substantial impact on your final valuation and the terms of the deal. The key is to start preparing now so you can act when the conditions are most favorable for you.
The Path to a Successful Sale
Selling your practice is a multi-stage journey that requires careful management to protect confidentiality and maximize value. A reactive approach, like only responding to unsolicited offers, rarely yields the best result. A professional process puts you in control. Here are the typical stages:
- Preparation and Valuation. We work with you to analyze your financials, normalize expenses, and develop a clear picture of your practice’s true earning power. This forms the foundation for your valuation.
- Confidential Marketing. Your practice is presented to a curated list of qualified buyers without revealing its identity. We create a compelling narrative that highlights your practice9s unique strengths and growth opportunities.
- Negotiation and Offer Management. We generate competitive tension among multiple buyers to drive up the price and improve terms, culminating in a formal Letter of Intent (LOI).
- Due Diligence. This is the buyer’s detailed review of your clinical, financial, and operational records. Proper preparation here is critical, as this is where many deals encounter unexpected problems.
- Closing and Transition. We work with legal counsel to finalize the purchase agreement and ensure a smooth transition for you, your staff, and your patients.
Understanding Your Practice’s Value
Many owners believe their practice9s value is a simple percentage of revenue. In today’s market, sophisticated buyers like DSOs look deeper. The value of your practice is primarily determined by a formula: Adjusted EBITDA x a Valuation Multiple.
Adjusted EBITDA is a measure of your practice’s true cash flow. It starts with your net income and adds back interest, taxes, depreciation, and amortization. We then “adjust” it by adding back one-time costs and personal owner expenses (like a vehicle lease or excess salary) to show the full earning potential available to a new owner.
The multiple is what a buyer is willing to pay for each dollar of that cash flow. This isn’t a fixed number. It can be higher for practices with multiple providers, strong growth, modern facilities, or a favorable payer mix. The only way to know your true value is to undergo a comprehensive valuation that reflects today’s market conditions and buyer appetites.
Planning for Life After the Sale
The day you sign the closing documents is just the beginning of a new chapter. A successful transaction plan accounts for what happens after the sale is complete. The structure of your deal has major implications for your finances, your career, and your team. Thinking through these elements beforehand ensures your long-term goals are met.
Key post-sale factors are often negotiated as part of the deal itself.
| Consideration | What It Means for You |
|---|---|
| Your Future Role | Will you continue working for 1-3 years, or is this a clean break? Your compensation and responsibilities need to be clearly defined. |
| Tax Planning | How the deal is structured as an asset or stock sale can dramatically impact your net, after-tax proceeds. This requires planning. |
| Rollover Equity | You may roll a portion of your proceeds into equity in the new, larger company. This provides a chance for a “second bite of the apple” when that company sells. |
| Earnouts | A part of the sale price may be tied to the practice hitting certain performance targets post-sale. The terms of this are critical. |
Navigating these choices is key to a successful transition. Your personal and financial objectives should drive every aspect of the deal structure, from the initial offer to the final agreement.
Frequently Asked Questions
What are the current market trends for selling a dental practice in Denver?
The Denver dental market is experiencing a significant generational shift with many baby boomer dentists approaching retirement. This will increase the supply of practices for sale. Additionally, there is a growing influence of Dental Service Organizations (DSOs) in Colorado, with 21% of dentists already affiliated with DSOs, changing the sales landscape towards larger group buyers.
How is the rise of Dental Service Organizations (DSOs) impacting the sale of dental practices in Denver?
The rise of DSOs means buyers are increasingly well-funded groups rather than solo practitioners. Younger dentists prefer group practice settings and value modern systems and efficient operations. Sellers need to showcase their practice’s potential for growth and efficiency to attract these strategic buyers and achieve a higher valuation.
What factors determine the valuation of a dental practice in Denver?
Valuation is primarily based on Adjusted EBITDA multiplied by a valuation multiple. Adjusted EBITDA accounts for the practice’s true cash flow by adjusting net income for expenses like interest, taxes, and one-time costs. The valuation multiple varies based on factors such as multiple providers, strong growth, modern facilities, and favorable payer mix, reflecting today‚Äôs market conditions.
What should dental practice owners in Denver consider when choosing between selling to a solo buyer versus a strategic group or DSO?
Owners should consider how they want their legacy to continue, the impact on their staff, and the implications for valuation and their post-sale role. Solo buyers may be more likely to uphold the traditional practice style, while DSOs might offer higher valuations but involve changes in operations and potential equity rollovers or earnouts.
What post-sale planning should sellers of Denver dental practices keep in mind?
After the sale, important considerations include your future role in the practice, tax planning related to the deal structure (asset vs. stock sale), opportunities for rollover equity, and earnouts tied to the practice’s post-sale performance. Solid planning ensures your financial and personal goals are met during the transition period.