Thinking About Selling Your Practice in the Next 5 to 10 Years?
Position it to offer what prospective buyers want most
There are a multitude of factors involved in a practice transition, and finding the right buyer is one of the most important, yet challenging, components. To help the transition process go as smoothly as possible, it is imperative for dentists to plan ahead, and it helps to know what today's buyers are looking for in a practice so that you can prepare your office to appeal to the best buyers and walk away with top dollar.
Here are some recommendations for any dentist who is looking to sell his or her practice in the next 5 to 10 years.
Solidify Your Practice Numbers
In the past 5 years, private equity investment into dental practices has steadily increased, which means you may make more of a premium selling to a corporate chain as opposed to a young entrepreneurial dentist. And a corporation will be more interested in and swayed by the practice's financial numbers than the more intangible factors that sometimes influence individual prospective buyers.
Regardless of the type of buyer, in the current economy, you will benefit greatly from having strong practice numbers when attempting to sell. Having a middle-of-the-road practice with average earnings is simply not going to generate the type of offers that you're hoping to receive. You need to be able to demonstrate both growth and efficiency and have several years of financial statements to back it up. Buyers will be focused on your earnings before interest, taxes, depreciation, and amortization (EBITDA), so consider strategies to lower overhead, streamline collections, and boost profitability.
Think About Your Practice's Branding
Transitioning an entire patient base to a new dentist is no small undertaking, and that's precisely why prospective buyers may prefer a practice with a brand that is a transferable asset. Buyers, corporate or otherwise, are looking for a turnkey purchase, so if the practice is still in your name, it may be time to rebrand to a name that can more easily work for an incoming dentist.
If you're happy with your practice's current name, you may want to consider updating the logo to something that looks more contemporary and modern and ensure that it is updated everywhere from your practice's website and all online profiles and directories to your interior and exterior signage and any stationery or print collateral within the office (eg, letterhead, business cards, etc). It's also a good idea to complete any rebranding efforts well in advance of attempting to transition your practice so that your patients and the community have time to familiarize themselves with the practice's new look before a new doctor enters the picture.
Enhance Your Practice's Appeal
Have you ever walked into a medical office that looked drab, depressing, and run down? I have actually visited one that I've never been able to forget (and not in a good way). In the waiting room, there were dark grimy spots on the wall above each chair, presumably from people resting their heads during the previous years, not to mention water stains on the ceiling tiles that every patient would stare at while sitting there. This is gross, but it illustrates the fact that when areas like the waiting room and operatories are a little (or a lot) past their prime, it doesn't inspire patients to return or refer, let alone a prospective buyer to buy.
Let's face it. If the reception area or operatories appear grungy or even just outdated, it's easy for a logical buyer to assume that the processes, technology, and equipment are probably in similar condition. Don't give potential buyers any reason to question the value of your practice.
Invest in New Technology to Fuel Practice Numbers
This doesn't mean that you need to go out and finance every flashy new piece of dental equipment out there. After all, it's important to invest wisely in order to avoid throwing off your balance sheet; however, acquiring the right piece of equipment can help to boost new patient flow, production, and revenue, positioning your practice as even more lucrative to buyers.
With the advancements in CAD/CAM, digital radiography, lasers, implants, and cosmetic procedures, there are more ways than ever to bring new patients into the practice. This lessens the need to refer as many procedures out and provides a healthy indicator to buyers that the office is thriving and profitable. In addition, offering more modern services helps attract younger patients—a demographic that has a high expectation when it comes to technology.
Start Planning Early
It's good to avoid waiting until the last minute to start planning for a number of reasons. Most importantly, you need to know whether or not you will actually be able to afford to transition at the age that you would like to. It's also good in order to get an idea of what your practice is truly worth ahead of time. After putting in such an incredible amount of time, money, and effort, it's easy for any dentist to believe that his or her practice is worth more than what current buyers are actually willing to pay for it. Finally, it's important to understand that not every buyer is looking to take over a practice entirely on day 1. Some would prefer that you remain on board during a defined transition period.
"Most practice buyers are wanting well-managed practices in expanding communities and a doctor/owner who has a shared vision regarding the continued growth of his or her practice after the sale," says Chip Fichtner, principal of Large Practice Sales, one of the leading practice sale advisors in the nation that helps dentists and specialists monetize their life's work.
Planning ahead affords you the time to form a realistic picture of your individual situation and become involved in shaping the future of your practice. In addition, if you start early and get a valuation that you're unhappy with, you're more likely to have sufficient time to make the necessary changes to increase the practice's value and get to the number that you want. Dental practice sales advisors, brokers, bankers, and transition specialists are all wonderful resources who can provide expert guidance and a wealth of insight into preparing for and structuring a favorable deal.
With your financial numbers up, the right branding and technology, and an early start, you'll be able to gracefully exit your practice and enter the next phase of your life in style.
About the Author
Naomi Cooper is the chief executive officer and co-founder of Doctor Distillery and the president and founder of Minoa Marketing.