3 Tips for Building Value in Your Dental Practice Before a Sale
April 28, 2021
At a Glance:
- Think Ahead: Whether you’re in the startup phase or retirement is still years away, it’s important to be proactive about building value in your dental practice to prep for a sale or transition in ownership.
- Lay the Foundation for Success: There are three tips you should consider if a sale is in your future, all of which will help make your practice more attractive to potential buyers.
- Expertise Matters: To maximize the value of your business and start the planning process, contact Aprio’s National Dental Practice today.
The full story:
The key to owning — and ultimately selling — a successful dental practice is thinking ahead. Many of the elements that determine a practice’s worth are established early on in a dentist’s career. Here are a few important things you should consider if you plan on selling your practice in the future.
1. Establish brand value
Remember that the value of your dental practice is in your brand. Your brand includes the patient experience, your staff’s experience and your reputation in the local community. Not only is a strong brand important for gaining and keeping patients, but it is also what buyers pay for when the time comes to sell your practice.
If you are in the startup phase of the practice lifecycle and currently in the process of opening your business, consider building a brand that is not exclusively tied to your name. While it is important to be personally known for being a great dentist, it is more important to be able to transition your practice and patients to a new owner when the right time comes. Consider how you can build a brand that will resonate with the community even after you’ve left your practice.
2. Build a structure and organization
The second tip to consider is building a solid operational structure and organizing your staff members’ responsibilities. As a practicing dentist, you simply do not have time to do everything yourself and assigning a well-defined set of responsibilities to your staff will help a new owner feel confident that they can walk in and succeed. By having documented procedures for insurance billing, patient collections, scheduling and supply-order controls, you’ll increase the chances of successfully transitioning your practice to the next buyer, thus increasing its value.
Another attractive selling point is updated, automated and digital systems; these also will help ease the new dentist’s transition. The more prepared and organized you are, the more likely buyers will be interested in your practice once it’s on the market.
3. Protect your profits and drive EBITDA
When it comes time to sell your practice, it will also be important for you to have detailed and well-organized financial records. Buyers want to review things like earnings before interest, taxes, depreciation and amortization (EBITDA), gross margins, industry averages and even your lease agreement. Beyond that, they’ll also be looking at your patient base for things like active patients, procedure type, accepted insurance policies and accounts receivable.
It is common for practice owners to pay their employees and bills, and then take home the rest of the practice’s profits in tax-advantaged ways. While this may sound like a great idea at the time, it can obscure how profitable your practice is in the eyes of potential buyers. Consider making your take-home pay a predictable recurring expense and leaving the remainder of your practice’s net income as profit — and most importantly, make sure you clearly identify a strong EBITDA target.
The bottom line
If you are considering exiting and transitioning your practice, contact Aprio’s National Dental team for expert guidance and assistance. We can provide advisory services to help you determine the appropriate steps to take, while our Capital Advisors team can support you with sell-side representation and help you find the right buyer for your practice.
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About the Author
As partner-in-charge of Aprio’s National Dental Industry Practice, Brad McKeiver arms dentists with real-time financial data about their practices. He has helped numerous dental practitioners make informed business decisions that focus on driving increased practice profitability, growth and value.