Simon Palmer, August 2011 - When a potential buyer is looking at a practice for sale and deciding the price they are willing to pay, one of the key things that they will look at is the profitability of the practice, and the outlook for that profitability into the future.

As such, being able to show that the practice and its production and patient base is stable, sustainable and has potential for growth, is enormously important for any seller wanting to maximise interest and their asking price.

But how do you do that? What strategies can you use to maximise this perception of your practice?

General Practice Stability and Security

1. Track record: Being able to show that the:

a. Current production of your practice is not just temporary, but that it has been stable or growing for the past few years.

b. Number of new patients per month has been stable or growing.

2. Long lease: A long lease on your premises is very attractive for a buyer for a few reasons:

a. It means that they won’t have the added expense in the near future of finding, fitting out and moving to new premises.

b. Some of the patients in any dental practice are there due to its convenient location. Maybe it is close to their work or home or kids’ school, etc. A practice that needs to move in the near future risks patients not moving with it.

3. Strong staff retention: A patient base forms a familiarity, loyalty and comfort not only with its clinician, but also with the practice’s front office and auxiliary staff. A practice that has long-standing staff members that are willing to stay on post-sale will have a better chance at patient retention than one that does not.

Patient Stability and Security
Whenever a dentist leaves a practice there will be some patient attrition. In some cases this will be limited to the exiting dentist’s family members. In other cases the impact will be significantly more than this. There are several strategies that you can use to show a buyer how stable the patient base will be in the future:

1. Maximise Leverage: The higher the % of the practice production that is coming from employed/contracted clinicians (as opposed to the owner/ seller), the more sustainable it is if the owner exits.
2. Restriction of trade: Employed/contractor dentists and hygienists should have a restriction of trade in their contracts with the practice, and this restriction of trade should be transferable with the assets of the practice to a buyer.
3. Letter of recommendation: The exiting dentist should offer to write a letter to the patient base telling them of the sale and enthusiastically recommending the new dentist.
4. Stay On Post-Sale: A principal that is able to stay on (even in a reduced or minimal capacity) as an employee/contractor post-sale is attractive for a buyer. It can help to keep a patient base in the practice in a number of ways (obviously, there is only value in the exiting dentist staying on if there is enough work for him to do that without impacting on the work available to the incoming new owner):

a. The exiting dentist can make some introductions and handovers to longstanding clients/ important referrers.

b. Having the exiting dentist’s name remaining on stationery and in telephone directories for a period after settlement helps the patients feel like they are continuing with the same practice, instead of going to someone new.

Showing Potential Growth
1. Any developments in the area that might impact positively on the patient base (a new large medical facility, residential development, industry moving to the area, etc).
2. Any extra services that can be offered. For example:

a. Treatment not offered in the practice/specialist work referred out that could be brought in-house.

b. Hours not worked.

3. Any historical closures of the practice that will not need to be repeated by a buyer. For example, if the practice was closed for 3 months last financial year for long holidays or renovations.
4. Any demographics in the area that have not been catered to thus far ( for example children, a growing ethnic group) that could be incorporated into the practice for future growth.
5. Any excess capacity, both in the premises (a room that could be converted into another operatory) or in the practice (being booked far into the future).