Optimising your practice value
With changes to the dental landscape becoming more obvious, when it comes to the question of selling your practice the options are wide and varied. In these cases, the question of who advises you on such matters can make a big difference in optimising the value of your practice.
Currently, there are a variety of private equity companies aggressively moving into the dental sector, these, along with the long-established corporates that are expanding their footprint are changing the dental landscape. With this exponential growth, those dentists looking to sell their practice have more choice than ever before. However, knowing how and when to accomplish a sale for the optimum price can be daunting and indecision often leads to no decision, stalemate and a missed opportunity.
Many dentists, used to dealing with clinical rather than business matters, can be overwhelmed at the prospect of lawyers and accountants, so choosing the right adviser, broker or consultant is essential to ensuring a smooth and profitable process. Let’s not forget that even Cristiano Ronaldo has a coach/manager to advise him on how to make the most of his potential.
There are some basic criteria you should always look for when sourcing advice; your adviser must have an indepth understanding of the market, be able to identify an ideal match between buyer and seller, and they must appreciate the motivations, desires, and the philosophy of each party. You should also remember that the transaction itself is a one-off event, but post-transaction and during the transition phase, it is often the case that both parties may have to work with each other for a specified amount of time, so the better matched the parties are, the easier the transition phase is.
Of course, it is ultimately the responsibility of each party to make appropriate choices, but it is invaluable if the adviser is able to solve problems, identify barriers, and deal with objections and issues. The process and resultant solutions are usually a sign of how well the parties are matched and therefore are an indication of how well they will operate and work with each other post transaction. The adviser is in a unique position, able to understand how the problems and solutions are communicated and received and ensure this process is smooth and streamlined.
Indecision often leads to no decision, stalemate and a missed opportunity
The arrival of venture capitalists into the UK dental market in recent years has brought with it a host of new advisers, relying on their ‘background in dentistry’ to attract sellers. An adviser chosen by a practice principal to help with a sale or purchase needs years of experience in practice sales that includes both dentist-to-dentist transactions as well as experience of corporate sales. So, whilst years as a supply rep, banker, accountant or lawyer may look good at first glance, it is arguable as to how much this experience has prepared them for a practice sale to a corporate organisation. It is certainly the case that many so called advisers lack the necessary experience to deal with this type of sale, resulting in a lower purchase price or worse still, no sale at all.
You should question the commitment from your adviser and ensure that their role is more than just as an introducer. An adviser worth their money will be a constant participant, leading you throughout the process. Ask for references to ensure your adviser has the knowledge required to see you through every stage, right up to and including closure.
Most purchases, particularly those involving corporates will use an EBITDA valuation. This is an extensive and thorough process that always takes into account the postsale picture for the buyer. You should make sure you run your own EBITDA calculation in conjunction with your adviser, so that expectations are realistic from the outset. Many dentists are disappointed with the sale price of a practice because their expectations have been missmanaged due to an initial valuation being set too high by their adviser. Every buyer will have different allowances within their valuation process and your adviser needs to know the differences and have the knowledge and ability to run the valuation based on what the buyer is looking for.
When buying or selling a practice, my advice is to choose your broker carefully. Ask questions about their background and experience and recognise their ability to represent you, or otherwise.
As more and more corporates start to dominate the market, the growth in the consultant/adviser market will also grow. But for a dentist looking to sell, this is often a once-in-a-lifetime opportunity, to realise the value of your life’s work and the final decision needs to be yours.