Volume 60: Dave’s Top Ten List for Vendors
As a dental practice appraiser and broker I am fortunate to be in a position where my daily activity is a window into what works and what does not work in terms of value creation in a dental practice. As practice values continue to soar, buyers are being very careful (as they should be); therefore it is more important now than ever that you and your practice are ready when the time comes to sell. This article will take a page from Late Show Host David Letterman’s monologue and enlighten you about my “Top Ten List” for Dental Practice Vendor’s.
10. Location/Premises - Dental offices are located in a multitude of different kinds of locations. Buyers want visibility and new patient flow. This means that the walk-up over a bank will be a tough sell. It also means a practice in a professional building with strong new patient flow due to excellent internal marketing is appealing. The inside should be attractive and well maintained but does not have to have all the latest hi-tech gadgets. There is no one size fits all.
9. Be Educated - Most often, selling a dental practice will be a once in a lifetime experience. Take the time to understand the market and where your practice fits into it. Learn how to make it appealing to buyers. Be realistic in your expectations and have a plan for how the transition will go and what you’re going to do after you sell.
8. Have balanced financial metrics – Many dentists only look at their financial performance once a year at tax time when they see their accountant. As you prepare to sell be aware of how the revenue comes in and where the expenses go out. Look at hygiene revenue – is it over 30 per cent? Is the rent expense 6.5 per cent or less? Are staff costs around 26 per cent of gross? All of these factors are very important as are many other financial metrics.
7. Surround yourself with experts – Selling a dental practice is a complex undertaking. You will likely have shares of a Dentistry Professional Corporation (DPC) to sell, capital gains to consider, staff and a landlord to deal with, diligence to comply with. It is extremely important to consult with professionals that know what they are doing. Your accountant, lawyer, financial advisor and broker all play an integral role in a successful outcome.
6. Time it Right – I do not mean to say that you should try and pick the top of the market. I mean you should be mentally prepared for the life change that selling a dental practice means and you should not wait until it is too late. Once your practice starts to decline, the new patient flow starts to dry up, and you start feeling tired, it is a slippery slope that is hard to reverse.
5. Staff Considerations – Once you are gone, your staff becomes a very important link to the patients for the buyer. Have good people and deal with any bad apples before you sell. It is important that you have the right number of staff for your practice size (no “floaters”) and that they are paid market rates. If they are overpaid, you will have to deal with that before a sale is concluded.
4. Have Contracts – The days of handshake deals with people are sadly over. It is imperative that if you have an associate, you have a good contract drafted by a dental lawyer. If you do not, the value that your associate brings to your practice will not only evaporate, it may actually be an impediment to you concluding a sale. Deal with this right away. Additionally, your practice value will be enhanced if you have written employment contracts with your hygienists and your other staff members.
3. Focus on Hygiene – The hygiene revenue produced in your practice is a key value driver and a real focus for buyers. You should strive to keep it at 30 per cent of your gross or more. Hygienists should be paid at the market rate for your area and should be able to produce three times what they are paid per hour.
2. Have a good Premises Lease – Landlords have become increasingly difficult to deal with during transition periods. Your lease should have a term, including renewal options of 10 years or more, should not have a demolition or relocation clause, and should be assignable with the landlord’s consent which should not be unreasonably withheld for a fixed fee.
1. Plan Ahead – As the previous nine bullets indicate, there is a lot to do in order to be prepared to sell your practice. Your goal should be to obtain a fair price and provide the buyer with an excellent opportunity for a successful transition. This will take time to orchestrate so I recommend you begin discussions with the experts about five years prior to your ideal sale date.
The sale of your practice, while a complex undertaking, can and should be a very rewarding process. It will allow you to receive value for what you have created and leave a legacy that has benefits for your staff, your patients, and the buyer.
David Lind is a Principal and Broker of Record in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices. He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: email@example.com
The Professional Advisory
- One Year Later
- Dealing with Unsolicited Offers
- Covid-19 Practice Sales Update
- When is the Right Time to Sell Your Practice and Why?
- Partnership Pitfalls
- The Real Cost of a Dental Practice Set-up
- Smaller Practice Realities
- Dental Market Update - 2019
- Creating Your Own Most Valuable Practice (MVP)
- Small Practice Economics
- The Market is Very Efficient
- How Can Dental Practice Values be Rising and Declining?
- Hygiene as a Value Driver
- The Value of a Good Team
- Is it Time to Move?
- Staging A Dental Practice
- The High Cost of Dying
- Patients - Attract and Retain
- Should I Stay or Should I Go?
- Is There a Buyer for Every Practice?
- Good, Better, Best - The Market has Spoken
- Buying Time
- Patients, Patience, Patients
- A Real Patient
- Why Do a Practice Valuation? I'm not Selling
- Irrational Exuberance or The New Normal?
- Do dental equipment and dental technology affect a practice value?
- Finding and Being a Mentor
- Bigger is Better
- Dave's Top Ten List for Buyers (Vendors should read this too!)
- How Well Do You Know Your Practice?
- Dave's Top Ten List for Vendors
- What will happen to dental practice Values in the next 10 years?
- Your Premises Lease is an Important Asset
- What are Associates Thinking?
- There is Life Outside the GTA
- When Is the Right Time to Sell My Dental Practice?
- Mergers are a Viable Option
- Is Your Associate an Asset or a Liability?
- Has your Practice Facility Kept Up With Your Billings?
- The 100 per cent of Gross Myth
- The Past, The Present and The Future
- Caveat Emptor
- Overpaid Long Term Staff
- Selling your Practice in Stages
- A Potential Pitfall of Selling Shares
- Value in Your Practice Through Balance
- Only Trusted Staff Can Defraud You
- To Own or Not to Own Practice Real Estate? That is the Question.
- Coping With A Large Patient Base
- Successful Dental Practice Transitions
- Taking Care of Business
- The Investing Dentist Phenomenon
- Two areas to focus upon that could negatively impact the value of your practice
- Organize your Debt in Order to Sell your Practice
- Having a Better Team
- How Do I Prepare My Practice For Sale
- How Do I Prepare My Practice For Sale? Part 3
- How Do I Prepare My Practice For Sale? Part 2
- How Do I Prepare My Practice For Sale? Part 1
- Advice to My Son or Daughter Graduating from Dental School
- Transition - What to Expect
- Discussion on Digital X-Rays
- Partnerships and Shotguns
- Strategic Planning - How to Get Started
- Calling All Vendors - Practices have Gone Up in Value
- Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
- Matrimonial Practice Valuations
- Purchaser's Guide to Affording a Practice
- Location Improvements Throughout Your Career
- Small Practice Valuations
- Partnerships – The Best and The Worst
- Changing Location When the Opportunity Comes Along
- Visual Presentation of Your Practice
- Presentation of Charts
- Your Premises Lease Can Be Your Worst Enemy
- How to Select an Appraiser for Your Practice
- How Are Your Billing Ratios?
- It Pays to Invest in Your Tangible Assets
- The Importance of Separate Financial Statements
- Five Time Frame Levels to Sell a Practice
- 12 Suggestions to Safeguard Computer Data
- How to Buy a Visible Practice
- Why is there a shortage of good practices today?
- The Importance of Equipment in the Purchase of a Practice
- The Balanced Practice
- Will My Practice Be Saleable in The Future?
- Buyer Be Aware
- Excess Profit - The Second Key
- Patients and Profits are the Keys
- Plan Ahead