Selling your dental practice in Illinois is one of the most significant financial decisions of your career. The current market presents unique opportunities, but navigating the process requires a clear understanding of valuation, timing, and local regulations. This guide provides a straightforward overview to help you move from uncertainty to a clear strategy, ensuring you are prepared to secure the best possible outcome for your legacy and your future.
A Strong Market for Illinois Dentists
If you are considering a sale, the timing is favorable. The market for dental practices in Illinois is robust, supported by several key trends that create significant opportunity for prepared owners.
High Buyer Demand
We see strong and consistent demand from a diverse range of buyers. This includes private dentists looking to expand, associate dentists seeking their first practice, and larger Dental Service Organizations (DSOs) actively acquiring in the Midwest. This high demand is a primary driver of the positive market conditions you see today.
Healthy Industry Growth
The dental industry in Illinois is not just stable; it’s growing. Projections show an expected annualized revenue growth of 3.8%, which is slightly ahead of the national average. Buyers are attracted to markets with clear growth potential, and Illinois checks that box. This positive outlook gives buyers confidence and can contribute to more favorable sale terms for you.
3 Things to Address Before Selling in Illinois
A strong market is a great start, but a successful sale depends on managing the details. For dental practice owners in Illinois, three areas require special attention.
1. The Illinois Dental Practice Act
You must navigate state-specific rules. The Illinois Dental Practice Act has particular requirements, especially regarding patient data and business structures. For example, a new law effective January 1, 2025, sharply restricts how dental offices can assist patients with third-party financing applications. Non-compliance can lead to fines and complications during a sale.
2. Your Tax Structure
How you structure the sale will directly impact your take-home proceeds. Most practice sales are asset sales. In these, goodwill is typically taxed at the lower capital gains rate, while tangible assets may be taxed as ordinary income. A poorly structured deal can cost you tens or even hundreds of thousands of dollars.
3. Your Advisory Team
A sale is not a solo project. Trying to manage it alone alongside running your practice is a recipe for burnout and a lower sale price. A successful transition requires a coordinated team: an M&A advisor to run the process, an experienced attorney to handle contracts, and a CPA to manage tax strategy.
Understanding Current Valuations and Deal Flow
General market strength is one thing. What practices are actually selling for is another. In Illinois, we are seeing a clear split in the market that rewards well-positioned practices.
What Drives Value?
While you may hear rules of thumb like “60% to 80% of annual revenue,” the reality is more nuanced. The final price depends on profitability, not just collections. Other key factors include your location, the strength of your hygiene program, your patient base, and whether the practice can run without you. Practices that score high in these areas are in a different category.
The Role of Competitive Tension
Top-performing practices often achieve valuations between 80% and 150% of collections. This happens when a practice is properly prepared and presented to a wide range of qualified buyers at the same time. This creates competitive tension, or a “bidding war,” which is the single most effective way to maximize your sale price. Simply taking the first offer that comes along almost guarantees you will leave money on the table.
The Four Stages of a Practice Sale
Selling your practice is not a single event. It is a process with four distinct stages. Understanding this roadmap helps demystify the journey and allows you to prepare for what lies ahead. At SovDoc, we manage every step to protect your interests and maximize your outcome.
| Stage | What Happens | The Goal |
|---|---|---|
| 1. Preparation | We analyze your financials, operations, and growth story to determine a defensible valuation. | To build a compelling case that justifies a premium price before going to market. |
| 2. Marketing | We confidentially present the opportunity to our network of vetted buyers. | To create a competitive environment with multiple interested parties, not just one. |
| 3. Negotiation | We manage offers, help you select the best partner, and finalize a Letter of Intent (LOI). | To secure the best possible terms on price, structure, and your post-sale role. |
| 4. Due Diligence | The selected buyer verifies all financial, legal, and operational information about your practice. | To facilitate a smooth, transparent review that prevents last-minute surprises or renegotiations. |
The due diligence stage is often where deals can stall or fall apart if the initial preparation was not thorough.
How Buyers Actually Value Your Practice
Perhaps the biggest misconception about practice sales is how value is determined. Sophisticated buyers don’t just look at your gross collections. They buy your practice based on its profitability, which we measure using a metric called Adjusted EBITDA.
It9;s About Profit, Not Just Revenue
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Think of it as the core cash flow of your business. We then “adjust” it by adding back personal expenses run through the practice or normalizing your salary to a fair market rate. For example, if you pay yourself $300,000 but a replacement dentist would cost $150,000, we add that $150,000 difference back to your profit. This process reveals the true earning power a new owner can expect.
Finding Your Multiple
That Adjusted EBITDA figure is then multiplied by a number (the “multiple”) to determine your practice’s enterprise value. This multiple is influenced by risk and growth potential. A multi-provider practice with a strong hygiene department and modern facility will command a much higher multiple than a solo practice with outdated equipment.
A proper valuation is the cornerstone of any successful exit strategy.
Planning for Life After the Sale
The day you sign the closing documents is a milestone, but it9s not the finish line. Planning for the post-sale period is critical for ensuring a successful transition for everyone involved and for protecting your financial outcome.
1. The Transition Plan
A smooth handover is vital. It protects patient and staff retention, which is often tied to the final payments you receive (the “earnout”). A clear communication plan and a structured introduction of the new owner protects the goodwill you spent a lifetime building.
2. Your Non-Compete Agreement
Nearly every sale includes a non-compete clause that restricts your ability to practice dentistry within a certain geographic area for a period of time. The terms of this agreement are highly negotiable and should be carefully structured to align with your future career and life plans.
3. Your Financial Future
The proceeds from your sale will likely be a mix of cash at close, potential earnout payments, and sometimes, rolled equity in the new, larger company. How these are structured has massive tax implications and affects your long-term wealth. Planning this from the very beginning is key.
Frequently Asked Questions
What is the current market outlook for selling a dental practice in Illinois?
The market for dental practices in Illinois is strong with high buyer demand from private dentists, associates, and DSOs. The industry is growing with an expected annualized revenue growth of 3.8%, which is slightly ahead of the national average, creating favorable conditions for sellers.
What are the key legal considerations when selling a dental practice in Illinois?
Sellers must comply with the Illinois Dental Practice Act, which includes specific rules on patient data and business structures. A new law effective January 1, 2025, restricts how dental offices can assist patients with third-party financing applications. Non-compliance can result in fines and complications.
How does the tax structure impact the sale of a dental practice in Illinois?
The sale is typically structured as an asset sale where goodwill is taxed at the lower capital gains rate and tangible assets are taxed as ordinary income. A poorly structured sale can result in significant tax costs, so consulting a CPA to optimize tax strategy is essential.
What factors influence the valuation of a dental practice in Illinois?
Valuation depends on profitability (adjusted EBITDA) rather than just revenue. Other factors include location, hygiene program strength, patient base, and ability to operate without the owner. Top practices can achieve valuations between 80% and 150% of collections through competitive buyer interest.
What are the stages of selling a dental practice in Illinois?
The sale process includes four stages: 1) Preparation—building a compelling case for valuation, 2) Marketing—to create buyer competition, 3) Negotiation—finalizing terms and selecting the best buyer, and 4) Due Diligence—verification by the buyer to ensure smooth closing. Thorough preparation is critical to avoid deal collapse during due diligence.