While it may be true that you can sell your own dental practice, it doesn’t mean
that you should.
If you are a dental practice owner, chances are that you have invested a lot of time, effort and a ton of money into supporting a successful business, a clinical dental practice and ultimately your most valuable asset. Will you have enough money saved when you are ready to retire? Are you depending on the proceeds from the sale of your dental practice to fund your retirement plan?
It is never too early to lay the groundwork necessary to achieve your
retirement goals.
In my dental consulting practice, I often find that my clients are so used to work, work, work, juggling between managing the clinical and operational aspects of their business, that they haven’t had the time or the energy to start planning for their dental practice transition, and find themselves hoping they will have enough of a nest egg saved up when they retire.
And while I’m not a dentist, I have spent the last twenty years working alongside more than a hundred dentists and doctors from around the world and have had the pleasure of celebrating countless accomplishments. On the other hand, I have also become painfully aware of the unique challenges clinicians and business owners face on a daily basis.
The bottom line is that being a dentist and a business owner is difficult and it can be just as difficult to sell your dental practice. Developing your transition plan usually requires more time, research and financial planning than when you purchased your dental practice.
So, whether you are planning to try the DIY approach to your practice transition or you’re comparing business broker firms, you may want to ask yourself these sanity saving questions.
Do I have a realistic expectation of the market value of my dental
practice?
Being a dentist is not like any other job, it is hard work in a career that is constantly evolving.
Over the last few decades, dentists have been navigating the ever-changing landscape of both the clinical and the business side of dentistry. And while many of the advancements have benefited dentists, employees, business associates and patients; many dental practices find it challenging to keep up with knowing which updates they are required to comply with and then implementing those updates successfully in practice.
Many business owners have put their blood, sweat and years into building a business, making it difficult to remain objective when
trying to determine what the business itself is worth; and for dental practice owners this can create an inflated view of how potential buyers will value a dental practice.
How do I know what I don’t know?
While doing your own research should be your first step, it shouldn’t be your last.
In the beginning you may ask for suggestions from colleagues, or you may search online for ways to determine the value of a dental practice. However, as you know, every dental practice is unique and doesn’t fit in a one size fits all calculation method. For instance, you may assume that your dental practice is worth three to five times earnings before interest, taxes, depreciation and amortization (EBITDA), which has been regarded as an industry standard and may be relevant for certain practices but not all and represents just one of many schools of thought when it comes to evaluating a dental practice.
The point being establishing the correct practice value is not an exact science.
Are you willing to gamble away all that you lose by guessing at your value based upon this archaic rule of thumb? Especially, In
today’s dental climate there are simply too many variables to just say every practice is worth between 60-80% of Collections.
Sound confusing?
I like to think of the evaluation process as a puzzle and within the big picture are very important puzzle pieces, the details and the numbers and ultimately the data that will be used to complete the puzzle, or in your case, list and sell your dental practice for maximum value.
I cannot stress enough how important it is for all dentists to invest in training you and your team in properly using your dental software.
Not next month, not next year, like yesterday.
If you’re still hanging on to paper charts “just in case”, or if you’re thinking, “I’m retiring soon, I’ll let the buyer deal with that.” You could be making it difficult for potential buyers to see the immediate and future growth opportunities they would have, especially when they are faced with having to compare key performance indicators or choose between two dental practices.
The data entered (or not entered for that matter) in your dental software directly affects the accuracy of all of your reports, above and beyond the typical production, collections and A/R, reports. Those reports are then used to create financial statements, in which those details are used to itemize and properly allocate income and expenses in their respective categories.
Investing in and implementing the efficient use of your dental software has both short term and long term benefits, and at the end of the day helps ensure that your practice looks just as good on paper as it does in person.
In summary, consistent data helps build value and buyers confidence, which is why a clean looking practice on paper is worth much more than one with unclear data points.
Would you refer your patient to an oral surgeon to get a root canal? Of
course not!
Business Brokers vs. Local Dental Practice Brokers
Similar to how some dentists prefer the variety of general dentistry and some decide to focus on a particular specialty, there are many experienced general business brokers and then there are local experienced dental practice brokers.
So, while any broker “can” technically sell your dental practice, experienced local dental brokers and transition consultants will have a greater understanding of your specific dental practice and the specific regional market trends that can impact the value of a dental practice, your ability to confidently negotiate with a potential buyer and ultimately the smooth transition of your dental office.
As a dental professional for over twenty years, it is still shocking to me how little people know about their own oral health, let alone, understand the complexities of owning and operating a dental practice, while simultaneously being a doctor! I’m mean truly not too many people or business owners know what it’s like to jump from an emergency exam to prepping a 4-unit bridge to being the director of HR, the team cheerleader, the mediator (and sometimes referee 😖) ….and that’s usually by noon.
So, when it comes to listing your dental practice, you should do your due diligence and seek the advice of an experienced local dental broker or dental practice transition consultant, that not only understands the unique complexities of dental practices sales but can help guide you and your team at each stage of the transition process to ensure you get the best value and return on your investment.
About the Author: April Shoberg
April’s dental career began with managing a large DSO dental company. Her specialty encompassed dental practice operations on a micro and macro level. April writes from her experience to understand owner’s goals and to develop the best plan to achieve the seller’s ideal transition outcome.