For years, dental restorations, oral surgery and cosmetic enhancements have filled your days. Now, you're thinking about selling your dental practice. You're ready to replace your explorers and radiographs with adventures and time in the sun.
You're not the only one, either. Research shows that an average of 5,100 dentist openings are expected to crop up every year between 2021 and 2031. This can be attributed to retirements or doctors transitioning to part-time work as they look for prospective buyers or partners.
Before you begin the process of selling a dental practice, though, focus on increasing its valuation. Here's a rundown on how you can boost your business valuation to maximize the proceeds from your dental office sale.
Let's jump in.
Plan Ahead for Your Dental Office Sale
One of the best ways to increase your dental practice's valuation when selling is to plan ahead. Delaying the exit planning process may cause you to receive offers that are far below your expected range.
Receiving lower-than-anticipated offers may happen due to variables outside of your control. For instance, the market may not be as strong as you initially thought it would be.
However, this can also happen because of the lack of a viable plan for making your practice more enticing to buy. For instance, investing more in your company's operations and infrastructure before initiating the sale.
Developing a plan takes time, so the earlier you can start, the better. As a general rule of thumb, plan for approximately six months to a year to prepare your company for selling.
Decrease Your Dental Practice Expenses and Boost Your Profits
Seek out ways to boost your office's valuation by improving its operational efficiency.
Analyze your practice's existing processes. Then, look for areas to better control your inventory and cut costs without impacting your operations or outcomes.
The more efficient your practice is, the better your chances of increasing your profits. The offers you receive are dependent on your profit. The higher the profit, the higher the offers.
Also, avoid taking significant amounts of cash out of your practice before you sell it because it decreases your balance sheet's retained earnings. The retained earning amount is the amount of your net income amount that you have not distributed to shareholders.
If your office's balance sheet has great retained earnings, prospective buyers will view your business as healthy and profitable. As a result, they'll be more willing to purchase it.
Develop a Strong Strategic Plan for Your Practice
Create a detailed strategic plan to increase your dental office's valuation. Focus the plan on creating teachable and repeatable processes. Concentrate on empowering your employees.
You'll struggle to find a buyer if your dental practice cannot function without your leadership.
Also, as a leader, place greater emphasis on empowering, motivating, and training your people. This is especially important for your management team.
If your team has internal conflicts, strive to solve them before you sell. Keep your rate of employee turnover as low as possible before you sell.
All in all, a professional, strong, and well-trained team will add value to your dental practice and therefore make it more appealing to buyers.
Continue Investing and Improving Your Dental Office Equipment
Consider investing in brand-new equipment if it's not up to date to make your dental practice more appealing to buyers. In addition, fix any issues that your existing equipment might have. This will immediately boost your company's value.
Promote Your Dental Office's Uniqueness
Market your dental office effectively by driving up its valuation.
When marketing your dental practice, showcase to prospective buyers what makes your dental office stand out from the competition. For instance, consider asking your practice's long-time patients for testimonials. These comments should explain why you are their top choice for dental services.
In addition, have an active digital marketing strategy for your practice, including a plan for selling itself on social media. If you have an existing online presence, your future dental office buyer won't have to build their online audience from the ground up, making your practice more attractive to potential buyers.
Likewise, actively market your practice's services to customers through text messages and emails, for example. Nurture the relationship with your list of patients.
A thriving sales and marketing function generates a steady flow of traffic and leads. Translating to more revenue growth. This will make your practice more valuable in the eyes of prospective buyers.
Develop a Defensible and Diversified Patient Mix at Your Practice
Increase your dental office's value by diversifying your client mix.
For instance, tap into new markets by offering new services. For example, if you currently don't offer teeth whitening consider adding this to your mix of cosmetic services.
This will draw more patients to your practice and ideally produce more recurring revenue. Practices with broad client bases can deliver scalable sources of cash flow and recurring revenues. This is invaluable and increases dental office buyers' interest in investing in a practice.
According to the marketing industry's Pareto principle, or 80-20 principle, businesses have high customer concentrations if 80% of their profit comes from just 20% of their customers. This is generally not what buyers what to see, as it indicates risk.
Instead, it's wise to have a good mix of patients as well as tangible results showing this mix works for the practice.
Implement Robust Financial Controls and Processes at Your Dental Office
Increase your dental practice's valuation by implementing strong financial processes.
Dental practice buyers are looking for well-managed offices poised for long-term success. In light of this, the area they will likely evaluate first is your financial controls and processes.
Given the above, have a well-organized set of financial statements and books. In addition, a chief financial officer or controller should oversee this information.
Dental Practice Financial Forecasting
Furthermore, provide a forecast for the practice's cash flow in the future. This is important because it tells your prospective buyer if they can consistently make payroll. Likewise, they'll learn if they can fund critical projects down the road.
Also, avoid putting forth an aggressive forecast you cannot support with historical figures and facts. By doing this, you are overstating your company's future value and decreasing your practice's value.
If you can't justify your upside, you won't appear credible. This usually leads to lowball offers from buyers.
Include documentation to back up what you're projecting when you present a forecast to a buyer so they can. The ability to verify your assumptions increases their truth in doing business with you.
Managing Cash Flow at Your Dental Office
When selling your dental practice, present to your potential buyers a system they can use to collect their receivables, or the money they are owed.
Concentrating too heavily on your practice's financial statements can easily cause you to overlook cash flow problems. Unfortunately, this may lead to financial surprises. Buyers want to steer clear of these.
Avoid these issues by effectively managing and sharing accurate information about your practice's cash flow situation.
Also, keep in mind that dental office buyers appreciate sellers who know their revenue numbers. Sellers who closely monitor their finances review their key financial performance indicators each week or month.
By doing this, you outperform other dental office sellers and instantly increase your company's valuation.
Identify Volatility in Your Dental Practice
Another way to boost your dental office's valuation is to identify and resolve any volatility you may be experiencing.
For instance, you may be experiencing volatility in the area of your sales and profit margins or employee, customer, or supplier turnover. These problems may be attributed to poor oversight or weak relationships, for example.
Before selling your dental practice, examine each area of volatility and then formulate a strategy to mitigate it. This is critical because buyers desire to work with sellers who know where their weaknesses are. They also want sellers to have plans in place for addressing these issues.
You can easily boost your company valuation by ticking these boxes as you sell your dental practice.
Make Your Dental Office More Organized
Increase the value of your practice to buyers by implementing digital methods and technologies to maintain organization. Organized practices operate more efficiently and win buyers.
For example, replace your paper patient chart system with an electronic health record (EHR) system. This type of system should ideally feature reminders, forms, and alerts to help your office run more smoothly.
Strengthen the Dental Management Team
Strengthen your management team to boost your dental office's valuation.
Before you sell your practice, ensure the right staff, like your office manager, are leading your office. Sophisticated buyers understand that a business's failure or success rests with its management.
To do this, you'll need to hire, structure, and incentivize a high-quality management team. Communicate your vision with these leaders.
Potential buyers may quiz your office manager to find out if they share your vision. If their message doesn't align with yours, this may expose a company disconnect and a weak link to buyers.
Avoid this dilemma by briefing your management team on your vision and goals. Then, make sure they can articulate this information if questioned by a buyer.
Reevaluate your management team if a majority is made up of family members and friends. Potential buyers might be leery of purchasing your practice in this situation. That's because a business dispute there could result in a personal one.
Prepare to justify family members' and friends' place in the practice if you want to keep them on the management team.
How We Can Help with the Process of Selling a Dental Practice
If you're selling a dental practice, attractive practices to buyers focus on boosting their sales and decreasing their expenses. Promote your practice's unique selling points as you market it.
Fortunately, at Burleson Seminars, we have helped numerous dentists, doctors, and other professionals partner with private equity or sell to a local buyer, leaving strong legacies for their profession, communities and families. We can do the same for you.
Get in touch with us to learn more about our services and let's develop a winning exit strategy for you today!