Guide to Selling a Dental Practice in Detroit, MI

Selling your dental practice is one of the most significant financial and professional decisions you will ever make. For practice owners in Detroit, the current market presents unique opportunities and specific challenges. This guide provides key insights into the local market, valuation methods, and the steps involved in a successful transition, helping you navigate the path toward your next chapter with confidence.

Detroit’s Dental Market: What Owners Should Know

The market for dental practices in the Detroit metropolitan area is active and healthy. Even with shifts in the broader economy, demand from both individual dentists and larger dental groups remains strong, creating a favorable environment for sellers.

The Current Climate

Right now, the region is largely considered a sellers market, particularly for well-run practices in desirable suburban and urban locations. While every practice owner is mindful of rising operating costs, the underlying value of established dental practices has proven resilient. Buyers are actively seeking acquisition opportunities, but they are also more sophisticated than ever. They look for practices with a history of steady performance and clear growth potential.

The Detroit Advantage

Your location in the Detroit metro area is a significant asset. Buyers are attracted to the region’s diverse and growing communities, affordability, and economic revitalization. A practice with a visible location and a strong local reputation holds considerable appeal. Properly highlighting these community-based strengths can meaningfully impact buyer interest and your final valuation.

Key Considerations Before You Sell

A strong market is a great starting point, but a successful sale depends on careful preparation. How you position your practice is critical. Most owners find that planning should begin long before they want to exit. Here are three areas to focus on now.

1. Your Timeline. The ideal time to start preparing for a sale is two to three years before your target date. Buyers and lenders base their valuations on several years of financial performance, not just the most recent one. Starting early gives you time to optimize operations and present the strongest possible case.
2. Your Ideal Buyer. Who you sell to matters. An individual dentist will look for a well-managed practice with under 65% overhead and annual collections over $500,000. A Dental Service Organization (DSO) typically targets larger practices collecting over $1 million and will likely require you to stay on and work for one to three years post-sale. Your personal goals will determine which path is right for you.
3. Your Practice’s Condition. A fresh coat of paint and some modern touches can improve curb appeal. However, avoid major capital investments right before a sale, as you may not see a return. The most important updates are often technological. If you don’t have digital X-rays and modern practice management software, now is the time to invest.

A Look at Recent Market Activity in Detroit

The theoretical value of a practice becomes much clearer when you see what is happening on the ground. The Detroit market shows consistent activity across a wide spectrum of practice types and sizes. While every transaction is confidential, publicly available information on listings and sales provides a strong indicator of market health.

Here are a few recent examples from the Detroit metro area, which showcase the range of opportunities available.

This activity demonstrates a healthy demand for practices of all sizes, from smaller, well-established clinics to large, multi-operatory facilities.

Understanding the Sale Process

Selling your practice is a structured process with several distinct phases. Understanding these steps can help you prepare for what lies ahead and avoid common pitfalls. While it may seem straightforward, each stage requires careful management to protect your interests.

1. Preparation and Valuation. This is the foundational stage. We work with owners to gather and organize financial records, normalize expenses, and establish a credible and defensible valuation. This sets the stage for everything that follows.
2. Confidential Marketing. Your practice is taken to the market without revealing its identity. We use our network to connect with a pool of qualified, vetted buyers both individuals and groups who are actively looking for a practice like yours.
3. Negotiation and Due Diligence. This is where most of the heavy lifting occurs. After signing a Letter of Intent (LOI), the buyer will conduct a deep dive into your financials, operations, and records. This phase demands rigorous organization and expert negotiation to keep the deal on track and ensure the terms are in your favor. Many deals fail at this stage without proper guidance.
4. Closing and Transition. The final phase involves working with attorneys to finalize legal agreements. After the closing, a well-defined transition plan is executed to ensure a smooth handover for your staff, your patients, and the new owner.

How Your Dental Practice is Valued

Determining the true market value of your practice is more of an art than a science. While simple formulas exist, sophisticated buyers look much deeper. A professional valuation is the foundation of a successful exit strategy.

Beyond the Rule of Thumb

You have likely heard of practices selling for a percentage of their annual collections, often in the 65% to 85% range. While this can provide a quick estimate, it is not how serious buyers, especially DSOs and private equity groups, value a business. This method fails to account for profitability, growth potential, provider reliance, and other key risk factors that drive true value.

The Buyer’s Perspective: Adjusted EBITDA

Today’s buyers make decisions based on Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This metric represents the true cash flow and profitability of your practice. To calculate it, we start with your net income and add back certain expenses like your salary (if above market rate), personal expenses run through the business, depreciation, and interest. A higher Adjusted EBITDA leads to a higher valuation multiple. A practice with a strong growth story and efficient operations will command a premium multiple from the market.

Planning for Life After the Sale

The day you sign the closing papers is not the end of the journey. A successful transaction includes a well-designed plan for what comes next, both for you and for the practice you built. Thinking through these elements during the negotiation process is critical.

1. Your Future Role. If selling to a group or DSO, you will likely be asked to continue working for a transition period, often one to three years. The terms of this employment agreement, including your compensation, schedule, and responsibilities, are a key part of the negotiation.
2. Your Team’s Transition. For many owners, ensuring their staff and patients are well cared for is a top priority. A well-managed transition plan, including clear communication and introductions to the new owner, is vital for retention and continuity of care. The right buyer will share these priorities.
3. Your Real Estate Strategy. If you own the building that houses your practice, you have a major decision to make. You can sell the property with the practice or become a landlord by leasing it to the new owner. Each path has significant financial and tax implications that must be carefully considered, especially since a corporate buyer may choose to relocate the practice down the line.