Guide to Selling a Dental Practice in Cincinnati, OH

Selling your dental practice in Cincinnati is a major decision. It is the result of years of hard work, patient relationships, and personal investment. Whether you are planning for retirement, seeking a strategic partner for growth, or simply ready for a new chapter, navigating your exit requires careful preparation. This guide provides a clear overview of the Cincinnati market, the key factors that drive practice value, and the steps involved in a successful transition. Proper planning is the key to maximizing your financial outcome and protecting your legacy.

A Look at the Cincinnati Dental Market

The dental practice landscape in Cincinnati presents a unique set of opportunities and challenges. Understanding these market dynamics is the first step toward positioning your practice for a successful sale. The environment is active, with both individual dentists and larger groups looking for acquisition opportunities.

A Tale of Two Buyers

The type of buyer interested in your practice often depends on its size. Individual dentists typically look for well-run practices with stable cash flow, often those producing over $500,000 in annual revenue. In contrast, Dental Service Organizations (DSOs) and group practices are usually hunting for larger operations, frequently those with collections exceeding $1 million. DSOs may also prefer that you, the selling dentist, remain involved for one to three years post-sale to ensure a smooth transition.

Economic Crosscurrents

Current economic conditions, like higher interest rates, can affect a buyer’s ability to secure financing. This means that buyers are looking closely at a practice’s financial health, particularly its profitability and efficiency. As a seller, demonstrating consistent performance and having clean financial records is more important than ever. Being open to flexible deal structures, like an earn-out or some seller financing, can also make your practice more attractive in this climate.

4 Key Considerations Before You Sell

To attract the best buyers and command a premium price, you need to look at your practice through their eyes. The preparation you do in the years leading up to a sale has a direct impact on the final offer. Here are four areas that buyers scrutinize most.

1. Your Financial Story. Buyers will want to see three to five years of financial history. They are not just looking at revenue. They are digging into your overhead costs, collection rates, and profitability. Practices with an overhead below 65% are particularly attractive. Getting your financial house in order is not a last-minute task.

2. The State of Your Technology. Modernization matters. A practice with outdated equipment and technology will see less interest and lower offers. Buyers are looking for digital X-rays, modern computers, and efficient, cloud-based practice management software. Even simple cosmetic updates like new paint and carpets can signal a well-maintained operation.

3. Your Team’s Stability. A stable, experienced staff is a huge asset. High employee turnover can be a red flag for potential buyers, as it might suggest underlying issues. A tenured team that supports the transition adds significant value and provides continuity for patients.

4. The Real Estate Question. If you own your practice’s building, you have a major decision to make. Do you sell the real estate with the practice or become a landlord? Many DSO buyers prefer to purchase the property along with the practice. This question has significant financial and logistical implications that require careful thought.

Understanding Current Market Activity

Recent transactions in the Cincinnati area show that buyers are becoming more sophisticated. They are placing less value on abstract “goodwill” and more on proven financial performance and clear potential for future profit. This shift influences how deals are being structured today.

To see how this plays out, consider the different priorities of buyers.

This table shows that an offer is more than just a price. It is a package of terms that must align with your personal and financial goals.

The Four Phases of the Sale Process

Selling a practice is not an event. It is a process that unfolds over several distinct phases. Many owners are surprised to learn that the ideal preparation timeline begins years before the “For Sale” sign ever goes up.

1. The Preparation Phase (1-3 Years Pre-Sale). This is where you optimize your practice. You will work on maximizing collections, controlling overhead, updating technology, and ensuring your financial records are clean. This is the period where you build the value that buyers will pay for later.

2. The Marketing Phase (Confidential Outreach). Your practice is not listed on a public marketplace. A proper sale process involves creating a confidential summary of your practice and sharing it with a curated list of qualified, vetted buyers. Protecting confidentiality is critical to prevent disruption to your staff and patients.

3. The Negotiation Phase (Structuring the Deal). You will likely receive offers with different terms, prices, and structures. This is where you negotiate not just the final number, but also critical elements like the transition plan and non-compete clauses. Understanding the tax implications of an asset sale versus an entity sale is also a key part of this phase.

4. The Due Diligence & Closing Phase. Once an offer is accepted, the buyer will conduct a thorough review of your practice’s financials, legal documents, and operations. A well-prepared practice makes this stage go smoothly. After diligence, the final legal documents are drafted and signed at closing.

How Your Practice is Valued

Many dentists believe their practice is worth a simple multiple of its annual revenue, like 0.75x collections. While that is a common rule of thumb, sophisticated buyers and DSOs do not use it. They use a more detailed method that gives a truer picture of your practice’s earning power.

Beyond the Revenue Multiple

Today’s buyers value practices based on a metric called Adjusted EBITDA. This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a practice’s cash flow and profitability.

Focusing on Adjusted EBITDA

To calculate Adjusted EBITDA, we start with your net income and add back certain expenses that would not carry over to a new owner. These “add-backs” can include your personal salary if it is above market rate, personal car leases, or other one-time expenses. For example, a practice with $500,000 in net income might have an Adjusted EBITDA of $700,000 after these normalizations. This higher number is what the valuation multiple is applied to, resulting in a significantly higher sale price.

The Story Behind the Numbers

Finally, buyers do not just buy numbers; they buy a story. The valuation is also influenced by your growth potential, the stability of your team, and your position in the Cincinnati market. Presenting this story effectively is a key part of achieving a premium valuation.

Life After the Sale: Planning Your Transition

The work is not over once the purchase agreement is signed. A successful sale includes a well-planned transition that protects your relationships with your staff, patients, and professional network. This ensures the continued success of the practice and preserves the legacy you built.

Here are four final considerations to plan for.

1. Ensuring a Smooth Handover. Your role in the first few months after the sale is critical. Buyers want you to help transfer patient relationships and goodwill. This often means staying on for an agreed-upon period to introduce the new owner and ensure continuity of care.

2. Communicating with Your Team. Your staff is one of your practice’s most valuable assets. Informing them about the sale in a timely and sensitive manner is important for their morale and retention. The new owner will want to keep the team in place, and your support is key to making that happen.

3. Informing Patients and Referrers. A coordinated communication plan is needed to inform your patients and referral sources about the change in ownership. A personal letter or email endorsing the new dentist goes a long way toward preventing patient attrition.

4. Understanding Your Non-Compete. Nearly every sale includes a non-compete agreement that restricts you from practicing within a certain geographical area for a specific period. It is important to fully understand and negotiate these terms as part of the overall deal.