Posted on Jul 23, 2012
Image Credit: © Dreamstime.com
Posted on Jul 23, 2012
By Patrick Johnston of McLerran & Associates
How quickly can I sell my dental practice?
What price should I list the practice at?
What will I walk away with at closing?
These are some of the questions that we hear when we meet with potential clients. While there are no “magic” answers, there are common features of valuable practices that will help to provide the answers to those questions. These desired features can be used as a basis for implementing strategies that will maximize the sale price at closing.
One of the first attributes of a dental practice that buyers and lenders look at is whether the practice revenue is increasing or decreasing. We have been told repeatedly by industry lenders that decreasing revenues immediately raises red flags for them. Buyers become instantly wary as well, asking themselves “What in the world is wrong with this practice?”
Conversely, a practice that is experiencing increasing revenues generates excitement on the part of the buyer and the lender. It increases the perception of the value of the practice for the buyer, and allows the lender to fund the transaction at a higher level.
Flat or slightly decreasing revenues, common in our industry today, can be seen as positive given current economic conditions. Reasonable pricing of these practices is important to ensure that buyers are not immediately turned off and that the deal can be taken to closing in a timely manner.
Updated Equipment and Facility
Through pictures or actually visiting the dental practice, the next attribute noticed by buyers is the look and condition of the facility and the equipment. Imagine that you are a buyer who has found a dental practice that has increasing revenues, and is in a desirable location. You walk in to the practice and are struck by the comfortable and modern look, then you walk in to the operatories and it is like a picture from the trade magazine you were looking at this morning. Closing can be a few short weeks away in this scenario.
If your facility has not been updated in the last 15 to 20 years, and you have not purchased new equipment in that time, you can expect buyers to not perceive as much value in the practice.
Stable and Competent Staff
One area often overlooked in the perceived value of a dental practice is the stability and expertise of the staff. Providing the buyer with a trained and effective staff at closing can help that buyer to “hit the ground running” and will go a long way to ensure a high patient retention rate. Stable and effective staff are a key ingredient to a successful dental practice that has a strong new patient flow and increasing revenues.
This is usually easier said than done, unfortunately. Staff management is one of those areas that some dentists can really struggle with. Staff turnover, or even the absence of staff, i.e. “I do all my own hygiene because I can’t afford to pay a hygienist,” do not bode well for potential buyers. This may not kill the deal, but it can cause a buyer to make a “lowball” offer.
What to Do
How do you achieve increasing revenues, an updated facility, and a stable and competent staff? No easy answers here, but the list below will get the process going:
These strategies will take time to implement, and may require the assistance of consultants and coaches. Let us know how our NAPB dental practice transition consultants can help!