The art of the retirement exit strategy

Nicholas Etheridge, dental Specialist Financial Adviser at Wesleyan Financial Services, provides a practice owner’s guide to planning a smooth transition into retirement…

Selling a dental practice is more than just a financial transaction—it’s a significant life event that requires careful preparation. Many practice owners can focus either too much on the sale itself or too much on what comes next, without considering the picture as a whole. A successful exit strategy balances both the commercial and personal aspects of transitioning from practice ownership to the next chapter of life.

Balancing the business and the personal

The commercial side of an exit strategy involves ensuring that all legal and financial agreements are structured correctly. A well-prepared business is far more attractive to potential buyers, whether you plan to sell to an associate, a business partner, or a corporate entity.

From a personal perspective, retirement isn’t just about financial security—it’s also about finding purpose beyond dentistry. Without a plan for both elements, a smooth transition becomes much harder to achieve.

For many, the sale of a practice represents a large portion of their retirement fund. However, relying solely on the proceeds from the sale can be risky. A strong financial plan can benefit from incorporating a mix of personal savings, NHS or private pensions, ISAs, and other investments to help ensure financial stability throughout retirement.

Timing also plays a crucial role; understanding when to access different sources of capital in a tax-efficient way can make a substantial difference in long-term financial health.

Please note: The value of investments can go down as well as up and you may get back less than you invest.

Strong agreements, smooth exits

Business agreements are the backbone of a well-structured exit plan. Partnerships, for example, should have a partnership agreement throughout the whole lifespan of the partnership and certainly long before a sale is even considered. This agreement protects not only the business but also the owners and their families by outlining what happens in the event of illness, death, or an unexpected departure.

One key point to build into your partnership agreement is how ownership and financial responsibilities are managed. If a partner were to pass away unexpectedly, does the agreement account for how their share of the practice will be valued and paid to their family? Insurance policies are commonly used to ensure that funds are available to compensate a deceased partner’s estate while allowing the practice to continue operating smoothly.

A comprehensive agreement should also address potential partnership breakdowns and retirement timelines. Without clear terms in place, the value of a practice could suffer, and the selling process could become more complex than necessary. Having these agreements reviewed by legal and financial experts well in advance of selling can prevent unforeseen complications down the road that may delay your plans.

The financial formula for a lucrative sale

Dental practices are typically valued based on a financial metric known as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation). The higher the EBITDA, the more attractive the practice is to buyers. This means that streamlining operations, reducing unnecessary expenses, and increasing revenue in the years leading up to a sale can significantly impact the final sale price.

An accountant can help identify areas for financial optimisation, while a financial adviser ensures that post-sale income aligns with long-term goals. Similar to selling your home, market factors also impact the sale of a practice.

The early bird gets the best outcome

Some dentists begin planning their exit strategy up to 20 years in advance, and while that may seem early, it provides ample time to prepare both financially and operationally. A solid roadmap includes three key timeframes:

• 10 years out – Start defining what retirement will look like and how it will be funded. Consider whether an associate or partner might take over or if the practice will be sold externally. Review and refine partnership agreements. Begin making improvements to boost the practice’s value. Start to identify any potential shortfalls in projected retirement income whilst there is still time to rectify them.
• 5 years out – Fine-tune financial planning, including cash flow modelling with the help of a financial adviser to help clarify income and expenditure post-sale.
• Final years before sale – Ensure all financials are in top shape, review legal agreements, and assess market conditions to determine the best time to sell. Practices with strong profitability are more attractive to buyers, so increasing income and managing expenses wisely can significantly enhance value.

Market trends also play a role in deciding when to sell. For example, the goodwill value of dental practices fluctuates based on demand. Keeping an eye on industry reports and seeking professional advice can help determine whether to accelerate or delay the sale for a more favourable deal.

Speak to a specialist

If you would like support with developing or refining your exit strategy, you can speak to a dental Specialist Financial Adviser at Wesleyan Financial Services. Visit wesleyan.co.uk/dental or call 0808 149 9416.

Charges may apply. You will not be charged until you have agreed the services you require and the associated costs. Learn more at www.wesleyan.co.uk/charges.

About Nicholas

Nicholas Etheridge is a dental Specialist Financial Adviser at Wesleyan Financial Services, supporting dentists, their families and their practices with financial planning to secure their financial future.

Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority. Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Calls may be recorded to help us provide, monitor and improve our services to you.