Enhancing the value of your business
When selling a dental practice, you want to ensure the best possible terms are secured. Valuations are not always straightforward to understand, but their accuracy is instrumental to the success of your sale. Prior to your sale, you may wish to explore the areas where you could improve valuation, to help boost the attractiveness of your business and thus secure a better deal.
Valuations – what are they?
Essentially, valuations provide an insight into the worth of your business, and there are multiple requirements needed in order to calculate it. Firstly, certain numbers relating to your business will be collected, including: profitability, annual turnover, NHS contract value, UDA value and your associate fees. Other expenses such as materials and lab fees, staff and rent will also be taken into account. The vendor’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) is then calculated, which ultimately determines the true operating performance and profitability of the business. A multiple, which is usually influenced by the market in its current state, is then applied to the EBITDA figure to ascertain the value.
Firstly, where value is more frequently unlocked with ease is through actually growing revenue and ensuring you are not missing any ‘low-hanging fruit’. Some owners spend hours pouring over the expenses but just one or two additional orthodontic cases, ensuring the hygiene book is fully subscribed and/or that Toothbrush and Sundry Sales on reception are actually being promoted, will often increase valuation two to three-fold on what can be achieved by negotiating incremental discounts with your material supplier.
Increasing your patient base is another way of positively impacting your turnover and, ultimately, your valuation. Most dental practices have embraced modern marketing techniques, which include creating a strong online presence either in the form of a website, social media platform, or both. It is safe to say that most patients use the internet to source information about dental practices and their services, which gives you a valuable opportunity to highlight your business. Ensuring that your existing patients are satisfied with their experience with you is also vital – a happy patient is one of the best forms of marketing for a business. If you do not do so already, consider asking patients if they would be happy to provide some feedback on their experience with you – you can then use these testimonials on your website and across other marketing materials. But, do-not be led down the rabbit hole of spending thousands with social media agencies or search engine optimisation. These are often long-term investments and anything you spend on this will impact your valuation so you need to be considering whether they generate a good return-on-investment (ROI), not in revenue terms but in profit terms!
However, assuming you have already fully explored easy growth then you can analyse some of your expenses and how they benchmark against industry norms. Start small – could you see about reducing inefficiencies within the business? For instance, if you identify any issues with stock management and waste, consider ways you can improve stock control. Similarly, if you do not do so already, bulk buying certain products that you use regularly will help to cut costs, too. These are small, easily-implemented methods of helping to boost the value of your dental practice. Consider also cutting costs by being more mindful of electricity and gas bills, which may be significantly more difficult in the current societal climate, but it is still something to think about.
Many dentists have taken the plunge into private dentistry and have handed back their NHS contracts. However, if you are thinking about selling in the near future, timing is key when it comes to reconsidering your NHS commitments. Handing back your contracts should really only be considered if you are in an optimal position to do so, and if the private income you incur is substantial enough to forego your existing NHS income. Expert advice is crucial here, to ensure you make the most appropriate decision for your business and valuation.
Valuations can be a costly ordeal, and although many agencies are providing a free valuation service currently, there can be hidden costs or additional fees depending on certain variables.
At Dental Elite, we offer a free, non-obligation ‘practice health check’, which offers an in-depth analysis of your business. We are also committed to ensuring the selling process is as smooth and stress-free as possible. Dr Luke Thorley, who recently sold his practice, shares his experience working with the team: “I worked with Phil Kolodynski, and it was a superb experience. I accepted the offer as the terms were fair and the buyer plans for future growth. I chose Dental Elite over other agencies because they offered me good advice, were on-hand at every step of the way and helped me gain the best price for the sale.”
Selling a dental practice can be incredibly stressful, but with the right support at your side, you can receive the best possible outcome for your business and your future.