Thinking About Selling? Your Exit Plan Is Likely Wrong.

The same practice, collecting $1.4 million a year, can be worth $1,064,000 to a buyer or $784,000 to the same buyer, and the entire difference is ten points of overhead you decided not to fix four years ago. Nobody is going to pay you for the two extra years you grind out at the end; they are going to pay you for the profit line on a tax return you have already filed.

Here is our thesis, and informed owners will argue with it: the date you retire is nearly irrelevant to what you get paid, and the only exit plan worth having is a margin plan you start running 36 months before you call a broker. Working two more years at the same overhead is usually the worst available option, because it costs you two years and buys you nothing at the table. Dental practices sell for roughly 2x one year's profit, and the average practice sells for just below 75% of collections, according to the Academy of General Dentistry. Read those two averages together and the whole exit conversation changes.

Why 75% of Collections Is an Outcome, Not a Rule

Most owners hear "75% of collections" and treat it as a price tag: $1.4 million in collections, so about a million dollars, give or take the lease. That is backwards. The 75% is what falls out the other end when a practice with ordinary profitability gets priced on profit.

Do the arithmetic on the AGD's own two averages. If a sale clears at about 2x one year's profit and lands just under 75% of collections, then the implied profit being capitalized sits around 37.5% of collections. No practice runs a 37.5% net margin after paying the owner a market wage for the dentistry. The number only reconciles if "profit" means earnings before the owner's own compensation, which is exactly how a buyer looks at it: they want to know what the business produces before it decides how to pay the person in the back.

That single reframe kills the most expensive assumption in dentistry. Your collections are not your value. Your collections are the raw material; your overhead decides how much of it survives the trip to the purchase agreement. Two owners with identical schedules, identical hygiene, identical zip codes and a $280,000 difference in sale proceeds is not a hypothetical, and it is not luck.

$1.4 Million, Two Owners, $280,000 Apart

Take two six-operatory general practices, each collecting $1.4 million. Both owners are 62. Both plan to sell "in a few years."

Owner A runs all-in overhead of 62% before their own pay, so earnings before owner compensation come to $532,000. At the AGD's 2x average, that practice prices around $1,064,000.

Owner B runs 72%, which is not an outlier in a practice carrying a second associate day that does not pay for itself, a 19% write-off load on two bottom PPO tiers, and supplies at 7.5%. Earnings before owner comp: $392,000. Priced on the same logic, call it $784,000.

Same top line. A $280,000 spread at closing. And the sale price is the smaller half of the story: those ten points of overhead were also costing Owner B $140,000 a year in personal income the whole time. Fix it three years before listing and the total swing is roughly $700,000. Fix it ninety days before the broker tour and you get nothing, because buyers and their lenders underwrite trailing performance, not your explanation of it.

That is the whole argument. You cannot fix five years of 70% overhead in the quarter before a practice goes on the shelf.

The Mistake: Owners Plan the Date and Ignore the Margin

The specific error, and it is most common among solo owners between 58 and 66 with strong collections and tired margins, is building the exit around a calendar event. They pick a year. They tell the team "probably 2029." They ask a broker what practices are going for. Then they spend the intervening years doing exactly what they have always done, because production feels like progress and production is the one thing a buyer will not pay a premium for.

The tell is almost always capacity. In the Practice Market Index, our own dataset built from broker listings, the median practice listed for sale has 5 operatories (n=857) and runs median collections per operatory of $200,000 (n=732). Owners who built out to seven or eight rooms expecting to grow into them, and then never did, are asking a buyer to pay for empty real estate and the rent attached to it. An 8-op practice collecting $1.1 million is not a bigger practice than a 5-op doing the same number. It is the same practice with three rooms of cost strapped to it, and the margin shows it.

Our view: the second most expensive mistake is the associate hired as a succession plan without the economics of a succession plan. An associate at 32% of adjusted production who covers their own overhead and buys you Fridays off is a good hire. An associate who drops your margin four points so you can "transition patients" is a $112,000 reduction in sale value, before you have even found out whether they want to own anything.

The Buyer You're Picturing Is Getting Rarer

The classic exit assumes a 34-year-old associate with a bank letter who wants your practice, your staff and your Tuesday schedule. That buyer is thinner on the ground than it used to be. As of 2023, 73% of U.S. dentists are practice owners, down from 85% in 2005, per the ADA Health Policy Institute. A 12-point drop in ownership rate over two decades is a structural change in who is shopping, not a soft patch.

Meanwhile the asking side is crowded. The Practice Market Index currently tracks 1,045 practices listed for sale, with median collections of $990,500 (middle half $659,630 to $1,500,000, n=856). You will not be the only $1 million general practice in front of a buyer this year. When supply is deep and the independent buyer pool is shrinking, the practices that clear are the ones whose numbers survive diligence without a story attached.

That also means you should expect a group buyer, and group buyers are relentless on exactly the line we have been talking about. They will rebuild your P&L at market-rate doctor compensation, strip out the car, the trips and your spouse's payroll, and price what is left. Every point of real overhead costs you twice: once in the multiple and once in the earnings it applies to.

If You're Going to Drop a Plan, Do It in Year Minus Three

The fastest legitimate margin move in most practices is the PPO book, and the worst time to make it is twelve months before listing. Collections dip first and recover second. A buyer looking at a trailing twelve months that fell 9% does not see a strategy. They see risk, and they price risk.

Run the Break-Even Retention Test before you touch anything. Take net collections per visit under the plan, divide by net collections per visit out of network, and that is the share of those patients you have to keep for collections to stay flat. If the plan nets $142 a visit and your out-of-network equivalent nets $205, your break-even retention is 69%. Keep more than 69% of that cohort and leaving wins on the top line and wins harder on the bottom. Keep less and you have cut production to buy a worse practice.

Now add the exit math. On a $1.4 million practice where that plan represents $310,000 in collections and a 24-point write-off, going out of network at 75% retention holds collections roughly flat while recovering real dollars of write-off, which is margin that compounds straight into the multiple. Done 36 months out, the buyer sees three clean years and a practice with a 66% overhead. Done 10 months out, they see a practice in the middle of an experiment, and they bid accordingly. Same decision, two completely different prices, separated only by when you pulled the trigger.

Retiring at 68.7 Is a Statistic, Not a Strategy

Dentists are not leaving early. In 2024, dentists retired at an average age of 68.7, up from 64.7 in 2001, with average career span stretching to 41.3 years, per ADA HPI. Only 21% retire before 65, 20% are 75 or older when they retire, and 86% of those who retired in 2023 had careers of at least 35 years, per ADA News.

Staying longer is a legitimate choice. The problem is that length and preparation keep getting confused. 35% of dentists plan to retire within five years, yet few report a formal transition or mentorship plan, according to DentalPost. That gap is where scramble-mode exits come from: a health event, a lease renewal, a spouse's decision, and suddenly the practice goes to market on whatever last year's numbers happened to be.

We wouldn't take that deal, and we wouldn't let a calendar make it for us. If you are 63 and running 70% overhead, the honest options are to spend 36 months at 64% and sell into a decent number, or to accept now that you are selling a job rather than a business and price your expectations accordingly. Both are defensible. Drifting is not.

Start the 36-Month Clock This Week

Pull your last full year and rebuild it the way a buyer will: back out your compensation, your vehicle, your CE travel and any family payroll, then divide what remains by collections. That percentage, not your collections, is your practice's value in one number. Then list every line above 2% of collections and name the three you can move in the next 24 months, with the PPO book tested first. Put a date on each one and tell your accountant what you are doing, because the proof has to show up on a filed return, not in a conversation.

If you want to see what that rebuilt margin does to your practice's value before you commit three years to it, our valuation and overhead tools will let you run your own numbers on earnings before owner compensation and the range it supports. We are watching two things heading into 2026: whether collections per operatory on the listing side holds near $200,000 or slides as oversized practices come to market, and whether group buyers keep competing for sub-$1 million general practices. If independent buyer financing loosens and we start seeing ordinary-margin practices clear at strong prices anyway, we will say so and change the call. Until then, assume the only thing you control is the profit line, and that it takes three years to move.