For a Happy Retirement, Resist These 6 Temptations

For a dentist—especially one who owns his or her practice—planning to retire is a very emotional thing. But if you trust gut instincts, there’s a risk you’ll make a decision you regret. Often, you must go against the grain of your inclinations for the big decisions involved in selling a practice and retiring, says Novi, Michigan-based transition specialist Patrick W. Houlihan, DDS.

Dr. Houlihan has been advising dentists on practice transitions for 20 years, and two years ago he sold his own Plymouth, Michigan, dental practice and made such consulting a full-time focus. The biggest potential threat to your happy retirement, he insists, isn’t financial. It’s emotional. It’s YOU.

It’s only human to feel these six temptations. Your job is to resist them.

1. The temptation to wait. Start planning retirement five years ahead of your target date. “Your staff and family probably know when you’re ready to retire long before you do—or before you admit it to yourself,” says Dr. Houlihan. “If you adopt the philosophy of looking at it five years out, the process will start percolating in your mind so you can retire at the top of your game.”

2. The temptation to go it alone. Typically, your retirement planning will include the sale of your practice and a deal by which, for a time, you work for the new owners to ease the transition for patients and staff. Attorneys and accountants must handle official duties only they can perform; beyond that, many business-savvy dentists believe that with their smarts they can make the big decisions unaided. Put that thought in the waste receptacle—you’ll need help.

“As dentists, we think we’re pretty smart people who can figure anything out,” Dr. Houlihan says. “But our information is limited to our experience. We don’t often see what’s happening in the dental marketplace in general.”

You’ll need someone to “quarterback” the deal, giving you the best information so that you can make the right decisions—and that quarterback can’t be you. It can be a consultant like Dr. Houlihan, or a lawyer or an accountant, as long as it’s someone with lots of experience in dental transitions—plus the objectivity you lack.

Now 63, Dr. Houlihan walked the walk when he sold his own practice. “I’ve quarterbacked over a hundred of these deals, and still I didn’t trust myself to handle my own,” he says. “It’s too hard. It’s too personal.”

3. The temptation to hire your buddy. This isn’t the time to give that promising but inexperienced nephew or brother-in-law a break. “You don’t want to pay them to learn how things work,” says Dr. Houlihan, “and many times they can gum up the deal.” One seller, he says, retained an old high school pal as a lawyer—a lawyer who didn’t send regular bills. (“I told him, ‘You’d better get a bill!’”) After 14 months (the typical practice sale takes three months), the invoice finally arrived: While a reasonable legal bill for a practice sale might be $5,000, this one was $128,000—though the practice sold for only $410,000!

4. The temptation to take transactions personally. The biggest mistake retiring dentists make, says Dr. Houlihan, is viewing their practice sale price as a measure of their professional worth. “They believe they need a certain figure—or a certain scenario—to validate their practice career,” he says. “They’ll say, ‘You mean I worked for 35 years taking care of these people, coming in on Saturdays for emergencies, and this is all it amounts to?’”

Dr. Houlihan cites one dentist who was already perhaps two or three years past ideal retirement age, and in a rural area where buyers were scarce. He fixated on $600,000 as an ironclad minimum he’d accept—or no deal. So he turned down a $595,000 offer—and headed into years of practice decline and growing regret.

“When it ends, it’s business,” says Dr. Houlihan. “It’s not a personal thing. Obviously, you want to make sure your patients are well taken care of. But you can’t let the business side determine how you view your professional life.”

5. The temptation to kid yourself about corporate buyers. It’s a tough world out there, and a changing one. Largely because of Michigan’s traditional union strength as a manufacturing state, Dr. Houlihan explains, dental insurance is bigger here than in other states, so procedure-based price competition has been slower to develop. He estimates that 70 to 75 percent of dental practices in the state are still individually owned. But that percentage is lower elsewhere, and it’s declining here. When a practice he’s put on the market draws 10 calls of interest today, he says, just three are likely to be from young individual dentists looking for a practice home. Three more are apt to be from dentists based elsewhere hoping to add a practice and benefit from economies of scale, and four from corporately owned dental providers.

There’s nothing inherently wrong with selling to a corporate entity, Dr. Houlihan says. Often, it’s the most lucrative option. But don’t sell your private practice to a chain and expect its culture not to change. “These companies buy a practice to grow it for their investors,” he says. “They don’t want it to stay the same. To grow a practice, you have to do things differently.”

What you don’t want is to recall your practice sale with regret. Dr. Houlihan says he’s spoken with perhaps 100 dentists who’ve sold their practices to corporate entities, and “significantly less than 10” have been happy with the transaction, looking back 30 to 60 days later.

At a minimum, Dr. Houlihan recommends, “make absolutely sure you speak with five or six dentists who have sold to that corporation, hopefully more than two months ago. And seek out names the company didn’t give you to call.”

6. The temptation to see retirement as all-or-nothing. Here’s the good news. That picture we have in our minds, in which marathon office hours are suddenly replaced by watching afternoon TV and occasionally mowing the lawn, is way out of date.

“Retirement should be going to something, not just leaving something,” advises Dr. Houlihan. Today, locum tenens work (on a schedule you craft), teaching, supervising younger dentists in university outreach programs, doing charity dental work overseas, and advising on policies for governmental programs or insurance firms are among the myriad ways you can stay intellectually and socially engaged in your field and still have the increased leisure you crave.

“There’s a tremendous amount of opportunity these days that most dentists aren’t even aware of,” says Dr. Houlihan. “You can probably work as much or as little as you like while still doing clinical work.” One friend, he says, accepts only summertime locum tenens assignments of a month or longer in the resort areas of northern Michigan. He moves his family up there, rents a cabin, and substitutes for a dentist on maternity leave or one who’s recovering from joint replacement surgery—then adds on a convenient vacation.

“Golden years” platitudes aside, retirement can be an alluring picture. And after all, not all temptations need be resisted.