After years of hard work and dedication the time will come to look at selling your practice. The reasons for selling may be varied and include pre retirement planning, poor health, capitalising on the value you have built or proactive lifestyle planning.

What ever the reason there are some essential considerations to take in planning the sale of your practice. They include:

Being aware of what is happening in the dental marketplace over the past 24 months- not just what has happened with the sale of near by practices.

Researching recent practice sale prices within your state to identify a practice similar to your own as an indication of current market prices.

Identifying the buyer segments in the marketplace and the profile of practice each is focused on then assessing your practices fit within those segments.

Obtaining a external assessment of the value of your practice based on its historic profit performance and its benchmarked operating performance level is strongly recommended as a means to make sure your expectations are realistic and as a sales aid. This service is provided to the dental market by Dental Innovations (03 98214990)

Historically options were limited to selling to other dentists as a total sale or a part equity sale. Recent establishment of corporate dental entities has changed the way a successful dental practice is viewed. They are now being assessed on the historic profit the dental business has produced and the potential for future growth. This opens the door to a wider group of buyers who are looking at a dental practice as an investment not just a way of earning a living.

Whilst there has been a dramatic entry into the dental marketplace of corporate entities such as Dental Corporation and Dental Partners competing to quickly accumulate a critical mass of dental practices there have been other corporate entities such as 1300 Smiles, Pacific Smiles Group and Lifetimesmiles quietly going about their business of identifying and purchasing practices with a good profit margin and growth potential and or gaps in the marketplace where they can establish new practices.

Added to the buyer segments are individual investment buyers who see a dental practice with a good management team in place as a very attractive investment that can potentially show returns of 15- 20 % steady profit from a industry that is assessed as “bullet proof” because it is a essential health service.

Then of course there are the individual dentists looking to have independence of choice and control of their own destiny by buying an established practice that suits their choice of dentistry and lifestyle.

Is there such as thing as a best selling option? Not as a general rule but yes for individual circumstances.

If aged over 55 years and in a sound financial position selling to a fast accumulating corporate entities such as Dental Corporation or Dental Partners at a price above historic price sales and with secure tenure for five years to continue earning as an employee dentist can be seen as a good option. Especially if the vendor is astute in investing the sale proceeds and creating additional wealth through capitalising on the value of his/her practice in pre retirement years. Yes, there are some performance aspects that can affect post sale income but long-time successful dentists are usually capable of maintaining their historic performance for a post sale five year period.

Of greater concern is the potential of external management interference and the effect it may have on the practice performance. But if you are after a premium price then you have to accept the strings attached.

The longer term planning corporate entities such as 1300 Smiles and Pacific Smiles Group who are focused on building a retained profitable dental practices portfolio may not pay the inflated purchase price of dental practices but will pay a good market price and may offer a better on going management involvement due to their longterm industry involvement and proven operating systems. The benefits of getting access to the value of your practice before retirement apply to this option too.

A straight sale to a private investor is a new option that has emerged following the focus of profit margin return identified by corporate entities. These buyers look at historic performance and stability and expertise of your practice management team. Some even offer a split shareholding to keep good practice managers involved in driving the business. This trend is emerging in regional Australia. Letting local accountants know that your business is for sale is a good starting point.

If your preference is to sell to another dentist who will offer you a good market price, as well as a transitional exit and who you feel will look after your patients and staff as well as you have, then you will have to be a lot more proactive in the marketing of your practice.

The next option is the partial sale of equity in your business on the basis that you can exit at a time of your own choosing and retain a passive shareholding via your super fund.

With this option it is critical that good management practices and financial control are embedded in your practice and key staff longterm employment is secure.

The final and most recent option has been that some dentists are realising that if corporate entities assess their practices as good businesses to invest in then maybe they should look at retaining the practice as a hands off investment in their retirement portfolio. In today’s business world it is not easy to safely invest and receive a 15-20% return – especially in an industry where you have particular expertise.

The options of a partial sale or retained ownership in retirement are dependent on three key factors. 1: Longterm retention of good staff. 2 The selection of a purchasing dentists or employee dentists who are skilled and productive and have good business integrity. 3: Outsourcing of the business financial administration to an independent industry specialist that can provide accurate and current financial reporting plus performance benchmarking.

(Dental Innovations provides this service to the dental industry via its Business Operating System which is controlled by employed CPA Accountants and skilled bookkeepers Tel: 03 9821 4990)

A retained hands off ownership will become a more frequent choice for dentist practice owners due to the industry introduction of quality Service and Facility Agreements (SFAs) and external financial management services. The SFA’s enable younger dentists to have a freedom beyond an employee dentist in that they can effectively run their own business in an established practice without the payment of goodwill or the management responsibilities of owning a practice. Identification of good young dentists capable of high production and dedicated to continuing education plus external qualified financial management will ensure a longterm vibrant practice and peace of mind for the retired dentist owner.

In summary it is good to see the current evolution in dentistry ownership options.

Previously good profitable dental practices were lumped in with “current market values” but now they can achieve their true value.