Top 8 Tips For Selling A Dental Practice (Even If You're Not Ready to Sell It Yet)
Top 8 Tips For Selling A Dental Practice (Even If You’re Not Ready to Sell It Yet): Part One
Mike Elster, National Transitions Manager at Patterson Dental, has more than 25 years of business of dentistry experience. He has coached thousands of dentists onidentifying and optimizing their practice growth and finding opportunities for successful win-win transitions. In this first of a two-part series, Elster provides insightinto how to get the most value out of your practice when you’re ready to sell.
If you are the owner of a dental practice – no matter how old you are, no matter what stage of your career you’re in – you’re working on selling your practice. Or if you’re not, you should be, because what we’re really talking about when we talk about selling is getting full value out of the practice for the work you’ve put in. And that’s not something that just happens when you put the practice on the market. The return you get tomorrow is the result of the value you create today, and that means you need to be aware of your practice’s value – its current value, its potential value, its unique opportunities – and optimize that value throughout your career as a practice owner.
With that in mind, let’s look at a few of the top things you should do to ensure that the practice you’ve worked so hard to build will be able to provide for a comfortable, secure retirement.
1. RE_EXAMINE WHAT YOU MEAN BY “RETIREMENT”
As we enter an era where the average 70-year-old is fitter and healthier than a 50-year-old of a generation ago, it can seem premature to bring your earning years to a close in your mid-60s. Thirty years is a long time to be retired, and in fact studies are showing that more and more retirees eventually go back to work. Some do it for economic reasons, but most go back because they just need to keep doing something that gives purpose to their still-vital lives. So, when you’re thinking about how you’re going to withdraw the equity you’ve accumulated in the practice, remember it doesn’t have to be an all-or-nothing scenario, and 65 doesn’t have to be a finish line. Instead of looking at it as work vs. retirement, why not think in terms of gradually adjusting your work/lifestyle balance?
The idea of cashing out and leaving might seem appealing now, but think about this: working shorter days, 2 days a week, maybe 40 weeks a year, in the facility ofyour dreams, doing just the cases you love to do, without the pressures of ownership, earning 70 percent or more of your current income while enjoying semi-retirement status. Why not do that? Why not stay engaged with the profession in an ideal way, especially if it means you can offset drawing on your retirement funds?
2. MAKE THE NECESSARY INVESTMENTS
Decades ago, few people outside of IBM had any firsthand interaction with computers. Today, the average teenager has more computing power in his or her smartphone than was used in the Apollo moon missions. We’ve come a long way in a generation. We’re seeing that “digital divide” in dentistry, too. New dentists today are training in a high-tech world and are comfortable taking a digital approach to diagnosis and clinical delivery. Practitioners who came of age before the digital revolution have adapted to varying degrees: some have embraced the new technologies wholeheartedly, some have been content to perform the “classic” dentistry they were originally trained for and most fall somewhere in between.
The point is, most buyers today have high expectations for what they want in a facility. Not surprisingly, it’s the practices in top condition that attract top buyers and fetch top dollar. It’s natural for owner-doctors who are looking toward retirement to want to scale back reinvestment in the practice, but the fact is, if the facility doesn’t make a good first impression – if a prospective buyer is mentally calculating how much it will cost beyond the purchase price to upgrade – the value of the practice will be significantly suppressed. It’s not just technology, either. If you have operatory chairs that haven’t been replaced since the Nixon administration, you’re not exactly positioning your practice as a desirable frontrunner in the marketplace.
On the other hand, it’s remarkable how much a few key upgrades can enhance a practice’s value. And don’t forget that it’s called reinvestment for a reason – strategically planned facility improvements should stimulate additional growth in the practice, giving you the opportunity to improve productivity at the same time you improve the practice’s tangible assets.
3. CONSIDER SELLING WITHOUT SELLING
It’s a little understood fact that the most successful owner-dentists “sell” their practice more than once over the course of their career. It goes back to the idea of getting full value for the patients and not letting yourself get handcuffed by the success you create. It’s about optimizing the value you get from the practice and recognizing that you don’t have to wait until the end to extract that value. Many dentists are fooled into thinking that as long as there is any down time in the schedule, they can’t justify bringing in another practitioner, but the fact is every schedule will inevitably have some down time. For the most part, though, when you add patient hours you tend to fill them. Capturing that excess value early by bringing in an associate and selling part of the practice means you can create even more growth and the upward spiral continues. It’s a matter of recognizing when the practice is ready to support another provider and timing your transitions to capitalize on those opportunities. That way you’re compounding the value that’s in the practice and the return you get on exiting is several times what you would get from a one-time sale.
In the next issue of Best Practice, I’ll discuss steps 4 to 8.
For a complimentary 1-hour phone consultation with Mike Elster, call (800) 444-6162, or e-mail firstname.lastname@example.org.