Trends in Transitions: Retiring Baby Boomers
There are approximately 150,000 dentists in the United States. Over half of these are classified as baby boomers. In the next 20 years, it is estimated that one-half, or 75,000, of the currently practicing dentists, will retire. The current number of graduates coming out of dental school is on a decline. According to the Journal of American Dental Association, there will be 500 fewer dentists coming out of school than retiring over the next 20 years.
What this means to the baby-boomer dentists will be reflected in practice values. Currently, if you live in a desirable area, Seattle, or Portland, for example, you can sell your practice for an average of 75% of the last 12 months of production. (Disclaimer: This is a rule of thumb; an actual valuation should be done to determine your practice’s value). I have even seen practices selling for as high as 100% of production in certain cases. This classifies the current market for practices as a seller’s market. The high percentage is primarily due to the shortage of practices for sale in certain states and prime locations.
Thanks to the current poor economy, there are many baby boomer dentists who were going to retire but have decided to work a little longer while they recover their paper losses in their retirement portfolio. Most dentists assume the sale of their practice will make up 20% of their retirement account. While the baby-boomer dentists hold on to the practice, it is creating an adverse effect on future practice values. Dentists who cannot find an existing practice to purchase are opening their own start-up practices. Also, when the economy does pick up again, there will be a log-jam effect of dentists retiring. This will drive practice values down to at least the national average of 65% of production.
So, if you are holding off on selling your practice to recoup some of your lost retirement portfolio, you may want to do some math to determine if holding on to your practice is the right thing to do. It may be better to sell your practice and harvest the equity while the values and practice are at their peak. You can then work as an associate to continue building your dream retirement, or better yet, retire to your dream retirement spot and live your retirement dream.
What this means to the baby-boomer dentists will be reflected in practice values. Currently, if you live in a desirable area, Seattle, or Portland, for example, you can sell your practice for an average of 75% of the last 12 months of production. (Disclaimer: This is a rule of thumb; an actual valuation should be done to determine your practice’s value). I have even seen practices selling for as high as 100% of production in certain cases. This classifies the current market for practices as a seller’s market. The high percentage is primarily due to the shortage of practices for sale in certain states and prime locations.
Thanks to the current poor economy, there are many baby boomer dentists who were going to retire but have decided to work a little longer while they recover their paper losses in their retirement portfolio. Most dentists assume the sale of their practice will make up 20% of their retirement account. While the baby-boomer dentists hold on to the practice, it is creating an adverse effect on future practice values. Dentists who cannot find an existing practice to purchase are opening their own start-up practices. Also, when the economy does pick up again, there will be a log-jam effect of dentists retiring. This will drive practice values down to at least the national average of 65% of production.
So, if you are holding off on selling your practice to recoup some of your lost retirement portfolio, you may want to do some math to determine if holding on to your practice is the right thing to do. It may be better to sell your practice and harvest the equity while the values and practice are at their peak. You can then work as an associate to continue building your dream retirement, or better yet, retire to your dream retirement spot and live your retirement dream.