Both new and retiring dentists can do better than a
lump-sum sale to stay true to the path toward career
success. An agreement structured around the retirement
income method can be a win-win arrangement for both
Te agreement can be customized between both
dentists, but the basic shape is the same: Te established
dentist exchanges ownership in his or her practice for
an annual retirement income. Te ownership shares
are held in escrow until the new dentist has fulflled the
obligations of the contract.
Under this setup, the established dentist can retire or
continue to see a smaller set of patients to supplement
the retirement payment. As long as the retirement
income payment from the practice exceeds the annual
withdrawal amount received from the lump-sum sale
proceeds, it’s a better deal for the established dentist.
Here’s an example of how the retirement income
method can work between an established dentist and
one fresh out of dental school.
Dr. Michael Jones has practiced for more than 20 years
and wants to transition his client base to another capable
dentist, someone he can trust to carry on the business
he built and provide high-quality service to his patients.
Dr. Jane Smith just graduated from dental school and is
carrying a signifcant debt burden from student loans.
But she brings the right mix of energy and determination
needed to keep a practice going.
Te two dentists forge an agreement using the
retirement income method, in which Dr. Jones hands
over to the younger Dr. Smith full ownership of his
established practice—building, equipment, client list,
everything. No money is exchanged up front. All of the
fxed overhead costs of running practice—ofce space,
utilities, accounting fees, insurance premiums, and
more—are covered by Dr. Smith as the new owner.
As a young practitioner, she can look to Dr. Jones as
a mentor for guidance on running the practice. And Dr.
Jones can pass along what he’s learned about building
and managing a dental practice while stepping out of the
day-to-day operations of the business. By mentoring his
young apprentice, he can ensure the practice he built is
passed to the next generation in capable hands.
Te agreement could be structured so that his
ownership stake is paid using the installment sales
method. Using the $21,480 annual income calculation
from the lump-sum payout from above as our hurdle
rate, any payment above $1,790 per month would be a
better deal for Dr. Jones.
Te average dental salary on Glassdoor at one of the
corporate dental practices is $144,711 per year.
4 In all
likelihood, Dr. Smith could aford to pay as much as
$4,000–$5,000 per month to Dr. Jones for the opportunity
to own her own practice when you compare what she
would make in corporate dentistry (not to mention the
quality-of-life issues for her, as well). It could be a win-
win for both parties.
Te biggest beneft of using a retirement income
method is the freedom it ofers to both new and
established dentists. Te fnancial worries about the
payment, ownership, and practice development are
eased by mentorship, trust, and mutual incentives. Both
practitioners can focus on doing the work they love and
following a career path that leads to long-term success
and fnancial rewards for both parties involved.
Rusty Holcombe, CFP, is president of the Atlanta-based
investment firm Holcombe Financial. He is the author of the
book You Should Only Have to Get Rich Once. Holcombe Financial delivers a creative financial-planning process to clients
ready to think differently about their wealth and develops tailor-made solutions to help maintain clients’ independence forever.
For more information, visit holcombefinancial.com.
1. How does your dental practice compare? Cain Watters and
Associates website. http://www.cainwatters.com/PDF/
HowDoes YourDentalPracticeCompare.pdf. Published 2013.
Accessed January 4, 2016.
2. Giroux T. Purchasing a practice. Dental Economics website.
issue-2/features/ purchasing-a-practice.html. Published February 2001. Accessed January 4, 2016.
3. ADEA survey of dental school seniors, 2013 graduating class:
Tables report. American Dental Education Association website. http://www.adea.org/surveys-and-reports/dental-school-
seniors-2013-tables.aspx. Accessed January 4, 2016.
4. Salary: Dentists. Glassdoor website. https://www.glassdoor.
com/Salaries/dentists-salary-SRCH_KO0, 8.htm. Updated
November 25, 2015. Accessed January 4, 2016.