CATEGORY 90 AUSTRALASIAN DENTIST Running a successful dental practice demands constant attention. Between patient care, leading a team, managing finances and navigating the increasing administrative requirements of practice ownership, it’s easy to become consumed by the day-to-day operation of the business. As a result, one of the most important business decisions a principal will ever make – preparing for the eventual sale of their practice – is often left until far too late. Whether you intend to retire in two years or continue practising for another decade, the decisions you make today will have a direct impact on the value of your practice in the future. The highest-performing practice sales rarely happen by chance. They are usually the result of years of careful planning, consistent business improvement and a clear understanding of what creates value. Start with an exit strategy Many principals believe an exit strategy is something you develop once you’ve decided to sell. The best time to prepare a practice for sale is when you’re not thinking about selling. An exit strategy should begin well before a practice is placed on the market. It provides an opportunity to identify areas of the business that can be strengthened, improve profitability and ensure the practice is positioned to achieve the best possible outcome when the time comes. Equally important is understanding what type of transition suits your personal circumstances. Some principals wish to retire immediately, while others are happy to continue practising for several years. Different buyers have different expectations, and understanding these options early provides significantly greater flexibility. The practices that consistently achieve premium outcomes are those where preparation begins well in advance. Know your numbers Every principal knows their annual revenue, but do you know your EBITDA? Running a small business has never been more challenging. Principals need a clear understanding of the financial drivers that influence the value of their practice. A busy practice isn’t necessarily a profitable one. Revenue alone doesn’t determine value. Ask yourself: Do I know my EBITDA? Costs in today’s world can quickly erode profitability. What percentage of revenue are your wages, advertising and rent? Benchmarking your practice against industry standards allows you to identify opportunities for improvement long before they become issues. You don’t want to find out you have a problem when you want to sell, as by then it’s often too late. Sometimes relatively small operational improvements can produce a meaningful increase in profitability and ultimately, practice value. Build a business, not just a busy practice Many successful practices rely heavily on the principal. While this often reflects years of dedication and strong patient relationships, it can also increase risk from a purchaser’s perspective. Practices that have established systems, experienced teams and strong associates are generally viewed more favourably because they demonstrate sustainable earnings beyond the principal’s involvement. Have you reviewed your item code analysis? How many new patients are you attracting each month? If you have a hygienist or OHT, are they generating an appropriate return? Creating a business that can thrive without relying entirely on one individual benefits the owner today and significantly enhances long-term value. Preparation creates options Preparing your practice for sale isn’t something you should do a few months out. Meaningful improvements to profitability, systems, staffing, equipment, leases and patient growth require time. The beginning of a new financial year provides an excellent opportunity to review your business and identify where you can improve. Early preparation also gives principals greater control over the process. Rather than feeling pressured by retirement, illness or unexpected life events, they can choose the right time to enter the market from a position of strength. Even if selling isn’t currently on your radar, reviewing your business each financial year is a worthwhile exercise. Ask yourself: u Has profitability improved? u Have my overheads as a percentage of revenue decreased? u Are my systems becoming more efficient? u Would a purchaser view the practice as stronger today than twelve months ago? If the answer to those questions is yes, you’re moving in the right direction. Final thoughts A dental practice is often a principal’s largest financial asset, yet many owners don’t invest the time and forward planning needed for the eventual sale of their business. The beginning of a new financial year is an ideal opportunity to step back from the daily demands of clinical practice and assess the long-term health of the business. Whether your goal is to sell in two years or twenty, consistently improving your practice each year will create a more profitable business today while maximising your options when the time eventually comes to transition. u COLUMNISTS Ian Donnelley By Ian Donnelley Director of Dental Acquisitions Maximising your dental practice sale: It starts long before you decide to sell Ian Donnelley is Director of Dental Acquisitions, specialising in the confidential sale, valuation and strategic exit planning of dental practices across Australia. He works with practice owners to maximise business value long before they enter the market.
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