Dental practices are extremely valuable assets. For many dental professionals, the value of your dental practice will represent the single largest portion of your nest egg. With a little planning and with the development of a proper exit strategy, you'll be able to significantly increase the value of the practice.
Before you can begin to try to get maximum value for your practice, you first need to understand what drives value in the practice on an ongoing basis. Is it more revenue? Is it more patients? Is it your team or office? The answer is YES. Let's explore.
Growing Dental Practice's Receive the Maximum Value
Buyers will reward a dental practice that is growing. What do growing practices have in common?
1. Strong Base of Existing Patients
A growing dental practice will have a solid base of existing patients. These patients are the bedrock of the dental practice, and are important for recurring revenue. A buyer would like to know exactly how many active patients you have on your books, along with an average production per month.
2. Established Systems
Buyers will want to know that the entire practice has solid systems and a process in place for everything. These systems include operations, human resources, marketing, and patient growth.
When you have systems that are complete and work well, then the value of your practice will be increased.
Dental practices with established systems in place are easier for a buyer to assume the day-to-day dental practice operations.
3. New Patient Growth
It may seem odd, but new patients are just as important to a dental practice valuation as current patients. The reason is that new patients represent the future revenue and growth of the practice. A marketing system that can quickly and efficiently attract new patients is a huge plus.
No investor wants to pour money into a business that’s behind the time ands isn't as profitable as it could be.
Make sure your marketing efforts are following industry best practices to attract new patients. Does your website generate leads? Does the website allow for easy communication? Do you track leads and marketing referrals from your website (Google Analytics, HubSpot or others)? Are you active on social media? Make sure that your website is not only producing results but that there is some way to measure the results.
3. Strong Dental Team and Office Management
Team and office management is important to the success of any dental practice, but even more so when trying to attract a buyer. A well-managed dental practice team with a good leader will be able to continue producing significant revenue long after the current owner has moved on.
Buyers will want to know the dental team is working well together and that everyone- from the front office staff, to the doctors, to the assistants- are all on board to continue.
Does the dental practice need a new dentist? Sometimes a new dentist is needed because the practice is very busy and appointments are hard to come by, and occasionally a new dentist is needed when the practice needs to make a transition away from an underperforming dentist.
Whatever the reason, you'll want to establish a new dentist well in advance of going to market with the practice. This gives them plenty of time to complete training, and ensure the services provided are in line with your expectations.
4. High Patient Satisfaction Numbers
Potential patients want more than just a good cleaning and check-up. They want education, preventive care, and access to high quality providers. The higher the percentage of patients who are satisfied with your patient care (and the more they would recommend your practice to others), the more attractive your brand will be to potential buyers.
The practice you are trying to sell needs to have a good reputation. Good reviews will help to make the sale of your dental practice successful by increasing buyer confidence in your services and your team.
5. New Technology
Potential buyers want to know that the practice they are buying is ahead of the curve when it comes to new technology. Make sure your practice is using the most current and up to date equipment. If the practice has outdated equipment, and dentists are taking longer to accomplish procedures, this decreases the value.
For example, if your dental practice is not using Solea, or has outdated equipment for other procedures, this may be viewed by buyers as something that needs to change.
6. Office Space
When it comes to selling a dental practice, the office space (and location) usually plays an important role in the sale price of the practice. The reason is location, location, location. Dental practices located in highly desirable areas with potential to add or change services will be more attractive to buyers than those that are not.
If the practice has not been renovated in a while this may hurt its value and buyer appeal since it doesn't look fresh and new and it’s also not "current".
If the location is great, but there are renovations needed in order to have a great looking space, you may want to consider doing some work on your dental office space.
Make sure to keep good records of any maintenance or repairs that need to be done. It's always smart for practices to keep up with preventative maintenance to ensure the practice will continue running smoothly after you are gone.
The Bottom Line
To sum up, in order to maximize the value of your dental practice, you should focus on leads and marketing referrals, have a strong dental team and office management, make sure your patients are satisfied and have up-to-date technology. Additionally, it's important to have a great office space and location.
Take the appropriate time to fine tune your business and tie up loose ends before beginning to recruit buyers. This maximizes the business valuation and leaves the business in good condition for the next generation of practice leaders. An exit strategy doesn’t just protect your investment; it protects your legacy.