By: Erick Cutler
Don’t end up like your patients.
You know the ones…they wait until the night before they’re scheduled to come in for an exam, scrounge to find the neglected floss container that hasn’t seen the light of day for 8 months, and hope that somehow, they can make up for a year’s worth of negligence in 15 minutes.
They hope and pray you won’t know, but you always do.
So too will a potential buyer know if you, for years, neglected your practice and only recently scrambled to make changes to get it ready to sell. If you haven’t done the work ahead of time to maintain and optimize value in all areas of your practice, you can kiss prospective goodbye buyers.
You want anyone even considering purchasing your practice to see it as a smooth-running machine with happy, productive employees, and a bank full of satisfied patients. You don’t want them to run into a non-compliant practice full of upgrades they’ll need to make, and disgruntled workers ready to bolt the second they feel a change in the wind.
Fortunately, many of the preparations needed to get ready for sale will also build value and make your dental practice easier to manage during your remaining time there (which should be between one and three years, but that’s a topic for another day).
I have put together this list of six simple areas you can focus on to build added value to your practice as you prepare for sale.
Talk To Your Colleagues
Strike up conversations with other local dentists. Anyone who’s been through the sale process before can impart valuable information that will save you time and headaches. Ask for suggestions for quality professionals with whom you should connect and with whom you should avoid. Make sure you take the time to interview those recommended lawyers, advisors, practice brokers, or accountants; not everyone will be a good fit.
Additionally, don’t forget to talk to your colleagues' support staff. Office and practice managers frequently stay on after a practice is sold. They can be a great resource for you to understand the affect that the sale had on the patients, as well as give you insight into finer points like whether relationships with insurance companies and technology vendors did or didn’t change.
Solidify Your Web Presence
Remember, selling your practice is very much about creating dental “curb appeal,” so creating a clean-looking, user-friendly, informative website should be a priority. The great thing about a solid and interactive web presence is that it adds value unto itself and is a relatively simple upgrade to make. Your website is frequently the first place interested parties will look once they decide your practice meets their general requirements, so you don’t want it to look outdated, messy, or sparse.
Make sure basic information (professional credentials, directions and contact info, detailed services, staff bios, testimonials, etc.) is available and easy to find. Additional media such as video, blog posts, testimonials, or even letters from clinicians are always a plus. If you’re starting from scratch or need to completely revamp your site, a simple search for Wordpress dental themes can get you going, with minimal investment.
Tech upgrades, like a functioning patient portal, can be especially beneficial investments if you have an engaged community and are looking to demonstrate that your practice is connected with the future of dentistry.
Tighten Up Your Processes
Workflows matter and buyers don’t want to step into a situation where they have to completely evaluate your processes, make upgrades, and retrain staff.
Simple (though not small) upgrades like investing in a digital X-ray system or upgrading your EHR can bring huge leaps in efficiency and a much more appealing image for your practice. Make sure your staff is properly trained on all software, hardware, and medical equipment, as well as on more general processes like patient interaction and HIPAA standards.
Get Your Finances in Order
The financial health of your practice will be front and center for any prospective buyer. I want to cover four areas of focus to get started.
- Cleaning Up Debt: Buyers don’t want the weight of debt dragging their purchase down, so start today in clearing out as much debt as possible as you lead up to your desired sell date.
- Handling Accounts Receivable: This is an area that brings with it multiple questions. You will be looking at assessing processing costs, aging, and analyzing the value of AR in its entirety — and that’s separate from deciding whether the accounts should be sold at all. That final question has implications on both the buyer’s and your patients’ experience after your practice is sold, so we recommend careful thought and in-depth advising in this area.
- Current Financials Prepared by a CPA: It is crucial that you have current compiled financial statements prepared by a CPA. Potential buyers will most certainly insist on reviewing them. Having them prepared by a tax professional will lend validity to their accuracy.
- Understanding Tax Consequences: A good advisor will be able to help you prepare your practice for the complications of taxation around a sale. Your primary goal will likely be to minimize the taxes you owe. This may involve allocating as much of your sales proceeds as possible to assets that generate long-term capital gains. You’ll also be paying attention to things like goodwill, depreciation of equipment and other items in your practice, as well as dental supplies you acquire as you continue to operate.
You may also want to consider identifying and eliminating any dead weight. This can come in the form of vehicles, equipment, or even employees that don’t have a positive ROI. Ask yourself the hard question, in every area of your practice, of “Do we really need this?”. The answers will likely be difficult, but the cuts will be worth it in the end.
Keep Stellar Staff
You’re likely very close to your staff and want them to be taken care of fairly after you sell. I’m sure you have one or two stellar employees who keep things running like clockwork. You want to make sure that these people are incentivized to stay on throughout the negotiation process and don’t bolt for greener pastures as soon as the word “sale” is mentioned.
This means you’ll need to give them a reason to stay. Monetary bonuses that are contingent upon them remaining in their position after a certain date are one way to accomplish this. The bonuses serve the dual purpose of keeping an essential component in your practice and assuring the buyer that the purchase they’re looking at now won’t change drastically when the deal finally goes through.
If you focus on staying informed and getting quality advice as your prepare for the sale of your practice, you’ll be well-prepared for a positive and profitable experience for you, your staff, and the patients you serve.
Looking to learn more about this transitional phase in your career? We can help. Please contact our Dental Practice Leader Erick Cutler at 214-635-2541 or ECutler@GPPcpa.com for more information. To learn more about Erick, you can visit his bio or Google+ page.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.