Thinking of selling your dental practice in 5 years or fewer? Here’s what you need to know
There are several things to take into consideration if you're thinking of selling your dental practice within the next five years. Selling can be a smooth undertaking, and these tips will help.
There are nine important points that potential sellers need to be aware of when preparing to sell their dental practice. Follow these important guidelines, and selling your practice should be a smooth process for all involved.
1) Location – This is the No. 1 thing today’s buyers care about. They have a very clear vision of where they want to practice, and they will rarely stray far from it. Over 90% of buyers want to live within 45 to 60 minutes of a metropolitan area. If you live in a rural area, it may take you longer to sell your practice. You will need to start the process at least a year ahead of when you want to sell.
2) Technology – Digital technology is a requirement for the majority of buyers. Young dentists are overwhelmed by the thought of being a new practice owner. The thought of having to install digital technology, train the team, and work through the learning curve while paying practice overhead, personal expenses, and student loans is more than most of them want to deal with. Practices without digital technology take about three times longer to sell than practices that have digital technology.
3) Equipment – If you're more than five years away from selling your practice, update any equipment that's in poor shape or that you cannot find replacement parts for. Do it now so you can take advantage of the tax benefits.
4) Patient base – A potential buyer will be concerned about your patient base. How many active patients do you have? This is the number of patients who have been seen in your practice during the past 24 months for recare. A buyer will also want to know about your insurance and financial policies. What percentage is PPO, capitation, indemnity, Medicaid, and fee-for-service?
5) Practice Overhead – Take a look at your profit and loss statement with percentages beside each category. Two categories a practice purchaser will find particularly interesting are:
Staff overhead is the No. 1 category a purchaser will review. Ideal staff overhead is between 26% and 28%. This includes wages, benefits, and payroll taxes. This does not include owner or associate compensation.
Lease or mortgage is the second most important category to a potential purchaser, and ideal lease or mortgage overhead is 5%. Also, check your lease to make sure it’s transferrable. If it’s not, try to renegotiate it now. Make sure the terms are renewable. The buyer’s bank will require a lease of at least the term of the loan.
6) Hygiene – Do you have a healthy hygiene department? Does your hygiene department produce 30% or more of total practice production? If not, you may want to consider hiring a hygiene coach. This is a sticking point for many buyers.
7) Online reputation – Another area that buyers scrutinize is the practice reputation. What does your online reputation look like? Google your name and find out. You don’t want to be surprised when a buyer points out a negative review about you.
8) Practice hours – If you're thinking of cutting your hours and want more time off, bring in a part time associate. This will keep your patient base and practice revenues from declining. If practice numbers decline, the practice value will also decline.
9) Patient point of view – Every now and then, walk in through the patient entrance. When you walk in the front door, do you feel welcome? Is the reception area warm and inviting? Park where your patients park. How does the parking lot look? Does the practice have good curb appeal? Is the shrubbery overgrown or outdated? If so, think about planting some flowers or colorful plants. You’ll receive compliments from you patients and make the practice more appealing to purchasers.
Mary Fisher-Day worked as a dental assistant, scheduling coordinator, and office manager for 17 years, then returned to college to study business management. Mary consulted with a well-known practice management company, which led to her developing The Dental Business. She then joined The Snyder Group, which later merged with Henry Schein Professional Practice Transitions. Mary has a proven track record of helping dentists make wise business decisions, and she loves the challenges The Dental Business brings. Contact Mary at email@example.com.