Maximizing Practice Price

Maximizing Practice Price

By: Bruce Johnson, DDS

 

If you are considering selling your practice, always try to plan at least three to five years prior to the date that you hope to sell. We would all love to obtain the maximum price for the sale of our practices and I have listed some major points to help you achieve that goal.

1. Do not take your foot off the pedal. It is very common for those getting ready to sell to start slowing down by taking more time off and decreasing the working hours. Anything that decreases your overall production will result in a decreased value for your practice.
2. Try to keep your existing staff happy and motivated! You may want to consider pay raises or bonuses. I feel bonuses based on production level would be best rather than just hourly pay raises that the new buyer would need to maintain. If it is out of the standard range that may not be viewed favorably by a new buyer. Also, I do not recommend sharing your plans to sell with the staff. People are often afraid of change and sharing your plans too soon could cause some staff to start looking elsewhere. Staff turnover prior to a sale is not something a new buyer wants to see. Your plans to sell should only be discussed with your broker, your immediate family, accountant, and attorney.
3. Clean up your accounts receivables and eliminate all credits. Stay on top of collecting from both patients and insurance companies. Call those patients with outstanding balances and do everything you can to collect monies owed. Run your credit balance reports and reach out to patients to whom you owe money. You want to keep clean credit balance reports and stay current on your state’s process and procedures for unclaimed property.
4. Make your practice look attractive. Fresh paint, nice carpets, and new or recent countertops. Clean out storage areas and move your personal belongings to your home or to a storage facility. The outdoor landscape needs to be attractive. So, consider a landscape company to help. Make sure your outdoor signage is visible and clean.
5. Do not buy expensive dental equipment like a CEREC or a Cone Beam CT because you will likely not recover that investment. But do make sure you have the basic equipment that buyers want. Most everyone expects digital x-rays so consider updating to digital technology. An existing dark room with dip tanks will be viewed less favorably. Evaluate your office computer system and software. Your broker will be happy to provide guidance and best suggestions if some of your systems and office equipment are dated. Make sure handpieces are all in good working condition. If dental chairs are over ten years old, considering having them reconditioned. Buyers will often decrease their offer to allow for major updates.
6. If you are leasing your place of business, make sure your lease is current and has at least seven to ten years left with options. Banks will not loan with a weak lease structure. For example, if your lease expires five years from now, be sure there is at least one or more five-year options. The lender will need to assure the buyer can remain in that space for the life of the loan.
7. Review your fees and make sure they are in the normal fee range. If they are too low, you should work on increasing them to the normal fee range for your area.
8. Review your overall office overhead costs and try to get all categories into the standard range. Avoid running personal expenses/vacations through your practice. Your practice should reflect the true expenses of running the practice. Accountants have ranges in each dental category that are standard in general dentistry.