The Best Way to Sell a Dental Practice

Looking for the best way to sell a dental practice? Here’s the answer no one wants to tell you: You have to prepare.

The image that comes up in your head about selling a practice is stacks of cash! An amazing offer! Vacationing for years!

And our clients do get those things but they have also done the really un-sexy, hard work ahead of time and worked with us, their dental practice transitions broker, to check all the boxes and make sure the practice is ready.

Our most experienced advisors at Practice Transitions Group would say the best way to sell a dental practice is to prepare. Here’s how:

1) know your finances in and out

2) work the hardest you’ve ever worked and

3) make the aesthetics of your practice look great.

Let us break it down for you.

After an incredible sale, Dr. Alice Bui is now able to be more present in her family and practice pediatric dentistry in the business she built.

1. Know your finances in and out.  

  • Pull a profit and loss statement (P&L). When you go to submit your tax return, whoever is assisting you with bookkeeping, whether it’s yourself, your CPA, or QuickBooks, should have access to your P&L. 
    • It’s not ideal, but you can also look at your collection reports and practice management software, which is a very decent predictor of the practice’s income because it will track all of the money that comes in. As a result, it’s fairly close to your P&L.
  • Make sure your payroll reports are in sync. Before you list your dental practice for sale, understand what you’re paying and how you’re keeping track of your taxes. Sometimes, a practice’s payroll data doesn’t align with the income reported. For example, don’t state you’re paying staff x but just reporting y and without accounting for z or taxes.
    • Another item to consider is the benefits you’re providing to your employees. When it comes to selling your practice, 401k contributions should be addressed since they may either help or hurt you.
  • Depending on the type of buyer you’re trying to target, don’t incur any crazy expenses
    • Don’t go out and spend $40,000 on a major piece of equipment. 
    • If you’re selling to a dental service organization (DSO), these large corporations will purchase it on your behalf if it really does need to be updated. 
    • If you’re selling to another doctor, he or she may have different preferences in practicing or with technology.  
    • Regardless of who you sell to, you get paid off of profit, and big equipment purchases lower that number. 
    • Don’t subscribe to stuff you don’t need. This is a subscription/stuff/expense a new buyer will be incurring.

The bottom line: expenses will affect your profit reporting and what a buyer will pay for your practice. Trust that the right buyer will be looking for your practice exactly as it is – without the fancy equipment and the cool subscriptions.  The best way to sell a dental practice is to have command and fluency in your finances ahead of listing.

2. Work the hardest you’ve ever worked. 

  • Do this to get the highest valuation you can get. Strong and continuous cash flow indicates consistent months of cash in the bank (balance summary). You don’t want to see any significant drops here.
  • Growth is always going to be key. It appeals to both buyers and lenders. For example, if you take time off or take additional vacation time, your practice pricing will be affected. Banks frequently look at historical data, starting with the previous 12 months and then moving on to the following 24 months.
  • Be very, very, very, very consistent. Don’t have any holes. Make sure you’re there and showing up and seeing as many patients as you can. Make sure you’re not leaving operatories open because you’re only as good as your last day. That’s how you’ll get valued.

The bottom line: The best way to sell a dental practice is when you’re going strong and have the energy to invest. Don’t wait to plan for this when you’re tired or after your front desk person quits.  

3. Make the aesthetics of the practice look great.

  • Have a solid web presence. Five-star ratings online are ideal since it helps the practice appear more professional. Your online presence will be a buyer’s first engagement with you. The way someone answers the phone, your social media accounts, and the way your waiting room appears are all things that are frequently overlooked.
    • A lot of doctors often walk through the back door, not the front door, and don’t get to see what a patient or potential buyers will see. Before you list your dental practice for sale, tidy up closets and clean out the clutter. These simple steps really do impact how valuable a buyer will find your practice. 

The bottom line: The best way to sell a dental practice is by having it tidy – online and in office.

Your credibility and your reputation are affected by whether or not you take these first three steps. Once you’ve followed up on these items, you can then begin to consider if you want to stay around for some time, or retire right away and think through who you want to buy your practice. (There are corporate buyers / dental service organizations and there are private buyers.)

Morgan Burrell

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