Sell your Dental Practice
selling your dental practice: preparing an Exit Strategy
>> Most Dental practice owners aren’t thinking about selling when they first open <<
Which is why we’ve created this guide, after reading the guide to selling your dental practice, you will understand how to determine:
The timeline to selling your practice.
Who your potential buyers are and what they are looking for.
How to maximize the value of your practice and make it attractive to buyers.
What options are available to help you achieve these goals.
>> A COMPREHENSIVE GUIDE ON PREPARING FOR AN EXIT FROM your dental PRACTICE <<
As an established dentist and private practice owner, you may be considering what the next steps are as you move toward retirement or into another business endeavor. You have worked hard to build your practice, so naturally, you want to know what is going to get you the most value when the time comes to sell. Most practice owners aren’t thinking about selling when they open their doors to help patients, which is why we’ve created this guide. After reading this you will understand how you determine the timeline to sell, who your potential buyers are, how to maximize the value of your practice, and what options are available to help you achieve these goals.
>> SET YOUR GOALS AND ESTABLISH A TIMELINE <<
The first step in this process is to establish what your exit goals are. There are two options;
1. Establish a legacy business, or a business that you manage distantly but provides an ongoing passive income source.
2. Sell the business outright to the best candidate.
Fortunately, the path to achieve these outcomes are the same. In either case, you will need to take the time to prepare your business today so that you can step away from the day-to-day operations tomorrow. Selling is a process that takes time, especially if you’re looking to maximize your asking price. The market to sell is very strong for dental practices, but your dental practice must be enticing to garner the interest of a potential buyer.
When evaluating your business, you’ll also need to think like a buyer. This means your dental practice must have an established business foundation that includes a healthy cash flow, a strong client base, a well-designed space, and resolved debt. We find that most practices need work in many, if not all of these areas. If you are one of these owners, expect the process of preparing to sell to take approximately 2-5 years. This gives you time to get your systems in place and demonstrate long-term sustainable growth to prospective buyers.
>> UNDERSTAND WHO YOUR BUYERS ARE <<
There are many different types of buyers. Large clinics with multiple locations can often generate interest from private equity firms, but for smaller practices and single locations options may include:
• Selling to a current employee
• Selling to another dentist in your area
• Merger or Acquisition by a larger local clinic
• Corporate Acquisition
Understand what role you want to take in the practice moving forward, if at all, so you can determine what buyer makes most sense to you. Take the time to speak with several different types of buyers to establish the best fit for your exit goals.
Working with a Broker or Advisor - regardless of who you sell to, it will benefit you to work with an advisor or counsel throughout the process. Be sure to look for a firm that is well versed in private dental practices and commercial real estate. An advisor can offer you valuable insight from their experience working with other practices that have sold. They will also help you lay the foundation for an optimal deal structure based on the goals you have. Their experience in business analysis is invaluable, naturally you want to see the greatest return from the business you have worked hard to build. The primary goal of an advisor is to seek out a capable buyer that is a good fit for the kind of exit you’re seeking.
Doyle Law is uniquely positioned and experienced to be able to help you sell your practice.
>> KNOW WHAT BUYERS LOOK FOR <<
Buyers look for an established practice that provides good patient care, has a reliable staff in place, and an owner that is available throughout the transaction, and sometimes beyond. A buyer seeks certainty in their investment, which includes diversified referral sources and payer mix, a history of business growth, and the potential to continue on a positive growth trajectory. The following section addresses the preparations you will need to make if you want to maximize the value of your practice before you sell.
The most important factor when selling a practice is you, the owner. An owner who is ready to exit must demonstrate that their practice is capable of continued growth without their direct, daily involvement. As an owner, your goal should be to implement systems within your practice that your staff can be trained on and will allow you to step away from the business. Business systems can be purchased or created, what is most important is consistency. Develop a standard for each process so that every member of the team understands their role and how to perform it. These systems also allow for tracking which help those looking to buy compare your practice financially to others. There are three key areas in a practice that need systems and processes:
Clinical Care
Training
Reporting
>> DETERMINE WHAT YOUR dental PRACTICE IS WORTH <<
The purchase price that your practice can bring is determined by your business’ earnings before interest, taxes, depreciation, and amortization, in other words this is the profit of your practice. Those who are savvy in the financial industry use the term EBITDA. Any buyer you encounter is purchasing your dental practice’s earnings - so this will be the primary focus when putting together an offer. The offer you will receive when selling your practice will be based on a multiple of your EBITDA. Transaction multiples are used to value a company.
Currently for smaller dental groups, a multiple of 4-7x EBITDA is average, while a dental group with a greater number of locations could fetch a multiple in the teens.
Many factors will affect the transaction multiple, including:
• Number of locations
• Location(s) Desirability
• Diversification of Referral Sources
• Proven Business Model
• Payer Mix
• Revenue/Profit Trends (Growth)
• Reputation
• Staff Turnover
• High Accounts Receivable
• # of Years in Business
>> BUILD A BETTER FUTURE - MAXIMIZE YOUR dental PRACTICE GROWTH <<
The Dental Industry and field is a mega-industry and if trends continue, high growth and profits are predicted to continue in the coming years. Today is the best time to start preparing your dental practice to maximize its value. To do this consider multiple strategies to increase value so it brings the largest multiple when you are ready to sell.
