Selling for retirement
It is advisable to prepare for the sale of your dental practice in advance, especially if approaching retirement, as careful planning may help you to secure a higher offer. Even though some aspects of the selling process cannot begin until your practice is on the market, there are preparations you can make long in advance to encourage a smooth transition and a good deal.
The selling process should begin with a valuation of your practice. The value will be determined by the EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) to assess its performance and profitability.[iii] This will give you a clear idea of what the practice is worth in its current condition.[iv] Once your valuation is complete, you may decide that certain improvements could be made to increase the practice value.
A fantastic way to increase your practice value is to bring in new patients and grow your revenue. Marketing your practice to potential new patients is a great way to do this, increasing awareness within your community and expanding your business.[v] Taking on another associate or a specialist is another way to increase patient numbers as new people come looking for their expert services. Growing your business in the period before you sell will show possible buyers that your practice has the potential for further growth going forward.
Aside from major investments, there are smaller improvements you could implement to make your practice more appealing to buyers. Consider low-cost refurbishments for example, re-decorating may make your practice easier to sell. Another area to consider is your team. Creating a pleasant working environment will increase morale – in turn improving retention. This is very appealing for buyers as finding a practice with a fully functioning workforce will reduce the need for them to find replacements post acquisition.v Especially in a period where recruitment is notoriously tough, a stable and loyal staff will compound your goodwill value. This has to be balanced against not increasing your staff costs to the detriment of your valuation so, in the couple of years running up to sale, consider non-contractual bonuses, vouchers (which can be given up to six times a year in £50 lots on a tax-free basis to employed staff) or staff treats/days out.
Do your due diligence
As part of the process of preparing to sell, you will be expected to complete Due Diligence. This is something that isn’t necessarily needed until you have a buyer, but because it can be time consuming, and much of the required information is known to you as the owner, it will help speed things up further down the line if some of the paperwork can be prepared in advance.[vi],[vii]
Due Diligence will require information regarding the practice’s goodwill – the intangible additional value added to the business such as intellectual property, skilled labour, and customer loyalty.[viii] This includes the number of employees and associates on the payroll, inventory of equipment, and maintenance certificates to prove that everything is in good condition.[ix]
Reports show that there has been a rise in the average price paid for a practice in the UK –increasing from 135.18% to 154.49% when expressed in terms of turnover within the last six months.[x] This landscape makes now a good time to consider selling. Not only this, but due to the shift to working-from-home many people moved to the countryside in the wake of the pandemic. As such, rural dental practices which would have been harder to sell in previous years, are now selling well.[xi]
Help along the way
Dental Elite is an expert in the sale and acquisition of dental practices. From the time you decide to sell, Dental Elite can assist you with a valuation and specialist advice through a Practice Healthcheck – which provides useful advice on increasing your practice value. They can also help find you a suitable buyer from their database of over 5,500 active buyers, and even assist you in completing your Due Diligence along with the other processes involved.
By preparing in advance for the sale of your practice, you can maximise your chances of a smooth and profitable experience. Be sure to implement changes early on, investing in your practice and your staff to maximise your valuation. And, begin preparations for Due Diligence as soon as possible to ease the impact of what can be a time-consuming task.
[i] Dentistsry. Why selling your dental practice now could be your best decision. (Date Accessed 01.07.22)https://dentistry.co.uk/2022/02/26/why-selling-your-dental-practice-now-could-be-your-best-decision/
[ii]British Dental Association. Urgent action needed as millions miss out on NHS dentistry. (Date Accessed 01.07.22)https://bda.org/news-centre/press-releases/Pages/Urgent-action-needed-as-millions-miss-out-on-NHS-dentistry.aspx
[iii] Dental Elite. Dental practice valuation. (Date Accessed 01.07.22)https://www.dentalelite.co.uk/dental-practice-valuation/?gclid=EAIaIQobChMIu5Lcm6LX-AIVVuvtCh26ZAHpEAAYASAAEgIvwPD_BwE
[iv] Dental Elite. Sell your dental practice. (Date Accessed 01.07.22) https://www.dentalelite.co.uk/sell-your-dental-practice/
[v] Cloud Dentistry. This is how to sell your dental practice and retire early. (Date Accessed 01.07.22) https://blog.clouddentistry.com/sell-dental-practice
[vi] Dental Elite. The selling process. (Date Accessed 01.07.22) https://www.dentalelite.co.uk/wp-content/uploads/2017/11/Guide-4-The-Selling-Process.pdf
[vii] Dental Elite. Lawyers tips for a fast sale. (date Accessed 01.07.22) https://www.dentalelite.co.uk/lawyers-tips-fast-sale/
[viii] Investopedia. How does goodwill increase a company’s value. (Date Accessed 01.07.22) https://www.investopedia.com/ask/answers/010815/how-does-goodwill-increase-companys-value.asp
[ix]Retiring Dentist. Dental practice acquisition due diligence checklist. (Date Accessed 01.07.22) https://www.retiring-dentist.co.uk/blog/blogpost/dental-practice-acquisition-due-diligence-checklist.php
[xi]GDPUK. Thinking of selling your dental practice? How the market looks in 2022. (Date Accessed 01.07.22)