Simon Palmer, September 2014 

11 ways to show potential buyers that your practice is a safe bet.

Whenever a business changes hands there is an element of risk introduced to a business that wasn’t there before as it is unknown whether the new owner will be able to repeat the performance of the previous owner. With a dental practice this risk is often much greater as the seller is usually the largest producer and source of income.

A vendor’s ability to reduce the perception of this risk will have a direct correlation on the interest shown in the practice and the price that a buyer will be willing to pay. So what should a seller prepare and what strategies can be used to maximise the perception that the practice has solid prospects for the future? Here are 11 suggestions.

Financials
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.
c. Practice is not dependent on increasing levels of advertising.
d. Practice has a high % of patients regularly visiting the practice

2. 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. Provided that the non-owner dentists have contracts that are transferable to a purchaser.

3. Showing regular reinvestment in equipment – means they will not have to do major reinvestment in the future

4. Dependence. Don’t become overly financially dependent on any specialised service that would be difficult for others to replicate or on a government scheme or referrer that could end.

Documentation
5. Long lease. A long lease on your premises (or option periods that add up to many years) is very attractive for a buyer for a few reasons: 

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

6. Documented Procedures/Practice guidelines. This reduces the risk associated with losing key staff members

7. Council permit. Ensure that your practice has a council permit in place and is compliant with any stipulations (numbers of practitioners working in the premises, hours of operation, etc).

8. Contracts with all staff. Formal contractual arrangements with staff are usually indicative of a business with less risk as it usually means that the employees and contractors have:

a. Nominated periods of notice for termination
b. Contractual acknowledgement of ownership of patient records
c. Contractual restraint of patient and staff solicitation and competition should the employment contract end.

Transaction
9. Inclusions. Include the business name, trading name, phone number, website and email address in the sale.

10. Be available to stay on Post-Sale. 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. 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:

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 they always went to, instead of going to someone new.

11. Letter of recommendation. The exiting dentist can offer to write a letter to the patient base telling them of the sale and enthusiastically recommending the new dentist.

12. Strong staff retention. A patient base forms a relationship and loyalty 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.