Let it go

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Let-it-goFor many dentists, selling their practice will be a once-in-a-lifetime event, so how can you achieve the best results when venturing into uncharted territory? Richard Martin finds out

It’s an emotional prospect—selling the dental practice that has taken years to build. You want a great outcome, not just for yourself, but also for your staff and your patients. What factors do you need to consider, and what actions can you take to ensure your practice fetches the best possible price?

Firstly, you have to judge the right time to sell, and that means weighing up a number of personal, industry and economic factors. It’s a given that buyers are willing to pay more when interest rates are low, but it can be just as important to sell at the right time of your career.

Simon Palmer is the owner of Practice Sale Search, an online dental practice sales brokerage. He suggests devising an exit plan when things are going well, because when health and enthusiasm begin to dwindle, so does the attractiveness of your practice to potential buyers.

“A dentist has to look at their energy levels for the practice, and their enthusiasm and passion for the profession,” he explains. “If that energy is gone, or declining, the business is not going to reach the potential it could.”

Dr Brad Bell sold his practice in Roseville, New South Wales, to Dental Corporation in May 2014. He still runs the practice, and is not ready to retire: “I’m only 53. Some days that feels really old! But I’ve got a good few years left in me. Having that part done and dusted means it’s not going to be a stress on my life in my sixties. You sell at the top, not on the way down.”

When you’ve decided to sell, it’s time to get organised. Dr Bell suggests that potential sellers get cracking on the paperwork. “The hardest part was getting all those pieces of paper together,” he recalls. There’s plenty of documentation you’ll need to gather: council permit on your practice, tax documentation and financials for the last few years, compliance certificates for X-ray machines, your lease documents and your website details. Unless you have all these to hand, it would be wise to allow a month or two to track everything down.

Many dentists are opting to sell their practice to a dental body corporate. In this scenario, the value of your business is determined by a multiple of your earnings before interest, tax, depreciation and amortisation (EBITDA) figures, which is usually calculated over the last three years.

Valuing a practice for private sale can be more complicated, and the ever-nebulous ‘goodwill’ factor has become increasingly difficult to quantify. Getting an expert valuation is recommended, but Simon Palmer is a great believer in letting the market decide the value. “In terms of a price on a dental practice specifically,” he says, “there is no substitute for competitive tension and seeing what the market will bear.”

Palmer also advocates seeking professional advice—and stresses the importance of relevant industry experience. “There is a lot of hidden wealth, some hidden opportunities and hidden risks in practice sales,” he says. “Getting a lawyer, an accountant, and a broker with experience in dental practice sales gives you every chance of maximising the results of your sale.”

How can you make your practice as appealing as possible to multiple buyers? You might consider an overhaul of your office systems. Sharon Robertson, co-managing director of practice development company Momentum Management, observes that many younger buyers are unwilling to consider a practice that’s run along ‘old school’ lines.

“I hear this from lots of young dentists,” she says. “It’s really off-putting to go and look at a practice and realise it has no systems. There’s no HR, no policies, no procedures, and the OH&S is all over the place. This really devalues a practice.”

Great employees are assets to any practice, and many dentists worry that telling staff about sale plans will generate unrest. Yet the consequences of staff finding out via the rumour mill can be even more disruptive. Robertson advocates a controlled disclosure plan.

“Have a very clear time frame. If you’re going to do a fix-up job on your practice, then do that—and along that journey, have some structured meetings with staff to let them know what the future plans are. Then work out a really good communication plan with the patients.”

It’s important to pay attention to the aesthetics of your practice. Shabby paintwork and dusty piles of magazines could still discourage a potential buyer. “You want to make your practice look as cared for as possible,” advises Palmer. “It’s not just about the figures.”

Palmer also suggests sellers consider making themselves available to the practice post-sale. “Even if it’s just in a part-time capacity, that’s attractive to a lot of buyers. They want to be able to show some continuity with the old owners, and leverage off the loyalty and trust the patients had with that owner.”

Another tip from Palmer is to secure a long lease on your dental premises. “This provides security of tenure so that the practice doesn’t have to move in the next five years.”

Accreditation is another way to help your practice stand out from the pack. National Safety and Quality Health Service (NSQHS) accreditation is increasingly becoming the norm, but Robertson advises going one step further and securing accreditation from the International Organization for Standardization.

“If you go through that process, at the end of it you will have a practice that is in the top five per cent of dental practices in Australia. It really is the pinnacle of standards in business throughout the world, and if you have that then your practice will sell quickly for a really good price.”

Investing in your practice prior to sale may feel counter-intuitive. Yet a little money, time and attention can reap significant dividends, especially when it comes to attracting multiple buyers.

“It’s about the dentist becoming good at business,” advises Robertson. “If you’re a good clinician and you’re good at business, then you will have a fabulous practice and you will get the most value out of your practice.”

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