Whether you’re hoping to sell your practice ASAP or just planning ahead, you have probably thought about the person who will eventually take over.
After all, that person will hopefully care for your patients for years to come.
Have you considered what they want from your practice — and what you can do to make your practice more attractive to them?
Through my work with ADA Practice Transitions™ (ADAPT), I’ve worked with hundreds of prospective buyers. Some are just out of dental school while others have been planning a purchase for years.
When you get down to it, they all want the same thing: a financially sound practice where they can do the type of dentistry that excites them and keeps them engaged.
However, that can be a bit nebulous. So how can you demonstrate that your practice will allow a buyer to succeed?
Think about the story that your practice tells a potential buyer. What does a buyer see or infer when they look at your practice, from the physical office to the financials? By looking through a buyer’s eyes, you can begin to identify things that need a bit of sprucing up. Consider how your practice stacks up on these 5 key attributes.
A clear transition plan
Before you put your practice on the market, make sure you understand your own goals and timeline. Buyers want clarity about your plans. No one wants to be promised ownership year after year with no results or have you renege on the deal at the last minute because you decided you really weren’t ready to give up clinical dentistry. Carefully consider your personal and professional situation and make some tough decisions. Think about your personality and how willing you are to watch YOUR patients being treated by a different doctor. Talk (and listen) to your family; they probably have some strong opinions about what is best.
After doing some soul searching, map out your ideal plan. Start by answering some of these questions:
- Do you want to sell 100% and walk away, or prefer a gradual phase-out over a couple of years?
- Are you willing to mentor a buyer if they would like some hands-on help learning certain skills or how to run a business? (See: Is the Mentorship-to-Ownership Pathway Right for Your Practice?)
- If you own the building, do you want to sell it at the same time as the practice, or are you willing to become a landlord, with all that it entails? If you lease, is it transferable to a buyer?
Buyers will closely examine the practice financials. After all, this is arguably the largest purchase they have ever made and they will rely heavily on bank financing to make it happen. Clean and organized financials will go a long way towards making them comfortable moving forward with an offer for your practice.
If you are looking to sell within a year, go ahead and get a third-party valuation that allows you to understand what the fair market value is for your practice. Remember, the practice income needs to allow the doctor to support the practice expenses, pay back the loan within ten years, and afford a reasonable wage that supports their lifestyle. (Learn about practice valuations.)
Your accountant can help you understand what your numbers mean and how they stack up against industry standards. For example, your lab fees might be relatively high if you do a lot of prosthodontic work. Your facility costs might be very low if you own your building and don’t pay yourself rent. Make sure you understand how these discrepancies will play out to your buyer. For example, if you do not pay yourself rent because you own the building outright, you need to realize that the buyer will have to add a facility cost to their anticipated fixed expenses, either as market-rate rent back to you or as a mortgage on the building. This will have a significant impact on their bottom line and may affect the offer they are prepared to make.
Buyers need to know that they can at least maintain, and preferably increase, the productivity of the practice — and that they can do all the procedures your patients expect. They also want to see that you have strong policies and procedures that keep the office running smoothly and ensure they will get paid for the work they do. Put together some documents that can help them assess this, including:
- Average treatment wait time
- Average hygiene wait time
- Staff turnover rate and tenure
- New patients per month
- Production report broken out by procedure
- Referral patterns
- Office procedure manuals
- Collections policies
Sharing a few representative weeks’ schedules can help buyers assess your procedure mix and pace so they can determine if they can comfortably step in.
Today’s buyers seem to want a minimum of three operatories, but many prefer more. If your space is on the smaller side but you’ve considered adding an operatory — maybe you already plumbed that storage room — get a quote for the buildout. Sharing that estimate can reassure a buyer that the space can expand to meet their needs and plans.
Buyers also need to be able to picture themselves in the practice. That’s easiest to do if the space is clean, organized, and somewhat depersonalized. Now is a great time to clean your practice top to bottom and consider some easy, inexpensive improvements. A fresh coat of paint can go a long way! And be sure to clear out the clutter. No one wants to see cabinets and storerooms stuffed with old journals and dusty equipment.
Take a good look at your equipment. If you can reasonably expect the compressor to function well for another five years, great! But if it is being held together with duct tape and chicken wire, go ahead and replace it. This will give you peace of mind that it won’t break down in the middle of a procedure and the prospective buyer will not have to address the cost of replacement in their offer.
Think about it like selling your house: you want to do as many low-cost improvements as possible to make the space show its optimum potential.
The single biggest factor in many practice purchases is location. While you can’t change your office’s location, you CAN help buyers see what makes the location great, particularly if they’re considering relocating. Ask yourself:
What makes my office location great? Are you on a busy street with good signage and plenty of parking, near lots of other businesses? Are you one of just a few general dentists in town? Do you share a building with other medical professionals who send referrals? Tell buyers what makes your location especially successful.
What makes my area a good place to live? That could mean good schools, plenty of parks and recreation opportunities, a reasonable cost of living, and so on. Buyers also want to know that the area’s economy is stable — or better yet, growing. Mention any new developments, warehouses, factories, or other investments that show demand will increase.
Are there any loan repayment programs available? If you work in an area considered “underserved” by the National Health Care Service Corps, your buyer may be eligible for federal loan repayment programs. Many states have similar programs. Do a bit of investigation so you can inform potential buyers, as these programs can be very enticing.
Many of my owners are terribly concerned that younger doctors will not be able to take on practice ownership due to high debt loads and a perception that “younger doctors don’t want to be owners.” You may be surprised that a full 86% of graduating dental students aspire to practice ownership within ten years of graduation!
Don’t discount these younger docs. They have ambition and a strong work ethic, and they want ownership. Lenders are willing to loan to docs as soon as six months after graduation (under the right circumstances). As I have said before, now is a great time to purchase a practice.
Remember: any potential buyer wants to know that they can build a successful career and life in your practice. If you’re considering a sale, try to see your practice through a buyer’s eyes and make smart decisions that can help your practice appear as attractive as possible. And if you're ready to begin the process, create your free ADA Practice Transitions profile now to find the right buyer.