What Are Earn-Out Structures in Dental Practice Sales?
An Earn-Out Structure is a sale agreement where part of the purchase price of a dental practice is paid upfront, and the remainder is paid later — depending on the practice hitting agreed performance targets.
In dentistry, earn-outs are common when private or mixed practices are sold, especially where goodwill, associate retention, or patient list stability are uncertain.
Why Do Earn-Outs Matter for Dental Practice Owners?
Earn-outs directly affect how much cash you actually take home after selling your practice.
- Upside: If performance targets are met, you receive the full agreed value (or even more, in some cases).
- Downside: If patient numbers, turnover, or profit drop post-sale, you may only receive a fraction of the deal headline.
Example:
- Headline sale price: £2,000,000
- Upfront payment: £1,400,000
- Earn-out: £600,000 linked to maintaining £1m turnover for 3 years
- If turnover falls to £900k → you may only receive £400,000 of the earn-out, reducing the effective sale price.
Common Earn-Out Triggers in Dental Practice Sales
| Trigger | Detail |
| Revenue Targets | Maintain agreed turnover levels (NHS, private, or plan income) |
| Profit Targets | Achieve EBITDA/net profit benchmarks |
| UDA Delivery | Meet NHS activity targets to avoid clawback |
| Associate Retention | Key clinicians must remain post-sale |
| Patient List Stability | No significant drop in active patient numbers |
Risks of Earn-Out Structures for Dentists
- Loss of control post-sale (you may no longer run the practice but still depend on its performance).
- Disputes over accounting definitions (what counts as EBITDA, allowable costs, or clawback).
- Emotional stress of feeling “tied” to the practice after exit.
- Over-optimistic targets set by buyers.
How Does DentPulse Help with Earn-Out Planning?
| Feature | Function |
| Valuation Modelling | Separates upfront vs earn-out value in real terms |
| Scenario Planning | Models “best case, worst case, most likely” outcomes |
| Profit-to-Pocket™ Overlay | Shows actual after-tax proceeds under each scenario |
| Cash Flow Forecasting | Stress-tests what happens if earn-out underperforms |
| OWS™ Integration | Links exit proceeds to long-term owner wealth score |
DentPulse ensures dentists don’t just chase a headline number — they understand what’s bankable.
DentPulse Tip™
“An earn-out isn’t guaranteed money.
It’s tomorrow’s promise, not today’s cheque — plan your retirement on what’s banked, not what’s hoped.”
Related Glossary Terms
- Valuation Drivers in Dentistry – factors that set headline deal value
- EBITDA Multiples – basis for many earn-out targets
- Capital Gains Tax on Exit – how sale proceeds are taxed
- Profit-to-Pocket™ – converts headline sale value into after-tax take-home
- Exit Strategy – planning before approaching buyers
Glossary Summary Table
| Term | Meaning |
| Earn-Out Structure | Sale deal where part of the price depends on future performance |
| Purpose | Protects buyers, but creates risk for sellers |
| DentPulse Advantage | Models upfront vs contingent payments, shows real after-tax impact |
