No matter where you are in the selling process, you can never begin too early. The next thirteen tips can help you strengthen your current practice today.
1. Control your fees. Your practice fees should be reviewed and adjusted each year. There are a number of resources available to you for reporting fees by zip code. This is an extremely important and valuable task, as proper management of practice fees can add significant value.
2. Do a cash-flow analysis. The total value of the practice cannot exceed the ability of the practice to generate enough cash flow to make payments on the debt required to obtain the practice and provide a reasonable profit to the purchasing dentist. The net income of the practice is adjusted to add back all income to the dentist/owner and benefits paid on his or her behalf. Owner benefits include deductions for expenses not necessarily related to the operation of the practice, but which were paid out on behalf of the selling dentist.
3. Maintain your production. Sometimes owner/ doctors will start to slow down before actual retirement. This results in an exponential decline in profit and practice value. It is important to maintain the historic growth rate of the practice until the sale closes.
4. Maintain new patient numbers. Practice acquirers hone in on this data point and consider it to be a true indication of the practice vitality.
5. Get your financial records in order. Typica dental practice profit and loss and income statements fail to give a true practice overhead and profit picture. Ask your accountant to group related expenses together for the purpose of determining true profit. If you own two practices, avoid a co-mingled tax statement.
6. Boost your recall system. Hygiene income may comprise as much as 22 to 25 percent of the total income in a typical general dental practice. This percentage can climb to 30 percent or more in practices aggressively utilizing soft-tissue procedures. Generally, the higher the hygiene percentage the better ... unless the practice is one where the doctor is underproducing.
7. Review the condition of the patient records. In the due diligence process, a purchaser usually will review a representative portion of the patient records. The practice owner should maintain les with complete treatment entries, current patient information, and easily discernable treatment plans.
8. Clean up clutter and improve the practice decor. First impressions really do matter!
9. Tune up the dental equipment. Dental purchasers want to see modern equipment in your office.
10. Do not let the lease lapse. Do not let the lease lapse. Do not let the lease lapse!
11. Examine your dental treatment mix.
12. Emphasize the fee-for-service aspect of your business. Practice owners should try to retain the majority of their practice as fee-for-service and very carefully consider the insurance plans they accept. Make sure these plans may be transferred to another provider following a sale.
13. Check with your advisors. Consult with your practice transition consultant about a preliminary practice evaluation. Your advisor should be able to point out any weak spots and recommendations for correcting them.
1. Control your fees. Your practice fees should be reviewed and adjusted each year. There are a number of resources available to you for reporting fees by zip code. This is an extremely important and valuable task, as proper management of practice fees can add significant value.
2. Do a cash-flow analysis. The total value of the practice cannot exceed the ability of the practice to generate enough cash flow to make payments on the debt required to obtain the practice and provide a reasonable profit to the purchasing dentist. The net income of the practice is adjusted to add back all income to the dentist/owner and benefits paid on his or her behalf. Owner benefits include deductions for expenses not necessarily related to the operation of the practice, but which were paid out on behalf of the selling dentist.
3. Maintain your production. Sometimes owner/ doctors will start to slow down before actual retirement. This results in an exponential decline in profit and practice value. It is important to maintain the historic growth rate of the practice until the sale closes.
4. Maintain new patient numbers. Practice acquirers hone in on this data point and consider it to be a true indication of the practice vitality.
5. Get your financial records in order. Typica dental practice profit and loss and income statements fail to give a true practice overhead and profit picture. Ask your accountant to group related expenses together for the purpose of determining true profit. If you own two practices, avoid a co-mingled tax statement.
6. Boost your recall system. Hygiene income may comprise as much as 22 to 25 percent of the total income in a typical general dental practice. This percentage can climb to 30 percent or more in practices aggressively utilizing soft-tissue procedures. Generally, the higher the hygiene percentage the better ... unless the practice is one where the doctor is underproducing.
7. Review the condition of the patient records. In the due diligence process, a purchaser usually will review a representative portion of the patient records. The practice owner should maintain les with complete treatment entries, current patient information, and easily discernable treatment plans.
8. Clean up clutter and improve the practice decor. First impressions really do matter!
9. Tune up the dental equipment. Dental purchasers want to see modern equipment in your office.
10. Do not let the lease lapse. Do not let the lease lapse. Do not let the lease lapse!
11. Examine your dental treatment mix.
12. Emphasize the fee-for-service aspect of your business. Practice owners should try to retain the majority of their practice as fee-for-service and very carefully consider the insurance plans they accept. Make sure these plans may be transferred to another provider following a sale.
13. Check with your advisors. Consult with your practice transition consultant about a preliminary practice evaluation. Your advisor should be able to point out any weak spots and recommendations for correcting them.
About the Author:
Terry D. Watson, DDS, and Frank Brown, JD, LLM, are with Watson, Brown & Associates, Inc., a dental practice consulting and brokerage firm in Dallas, Texas. They are members of American Dental Sales, and can be reached at (940) 455-2299 or by e-mail at fbrown@wb-associates for Dental Practice Appraisal and Dental Practice Valuation Texas.
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