By Steve Wolff, DDS – EMA Dental Practice Sales
I don’t mind telling you that I am a long-term believer in Michael Gerber’s E-Myth philosophy. Boiled down to its essence, the message is this; spend some portion of your time working on your practice as opposed to working in your practice. Separate yourself from being the producer and become the CEO. What steps need to be taken to maximize the value, productivity, and profitability of your practice? At no time are these concepts more important than when you begin to imagine a time that you will be ready to retire and sell your practice. Discounting those cases in which the seller may have little or no choice such as sudden illness, permanent disability, and death, there are three components in evaluating a potential seller’s readiness to sell; financial, facility, and fun.
The financial factor has two main components; the practice financials and the owner’s financials. Careful analysis needs to be done to determine if you have accumulated assets sufficient to continue your lifestyle? Do you have a clue about your practice’s value? Is the sale of the practice a critical component to a retirement portfolio or is it just the icing on the cake?
Next is the financial health of the practice. What are the annual revenues and are they increasing, flat, or decreasing? Is there adequate profit for the buyer to make a living and be able to pay back the bank? Are business records and tax returns in good order with all income and expenses well documented? Will the practice sell for enough to cover any remaining debts or liens?
Prospective buyers are more comfortable with practices with good long-term production and profitability, and the practice will generally sell for a better price.
Next, we need to evaluate curb appeal. Is the location still desirable and well kept? Buyers generally want to be able to take over the practice and go to work without having to do renovations. If new patient flow has slowed down, maybe it’s time for some freshening up of the office surfaces. It is amazing what $10,000 in paint, wallpaper, carpeting, and upholstery can do for a practice. You might even feel better and be more productive while you’re there.
Finally, we have what might be the most important and difficult of the factors to consider. Are you still having fun? Are you still comfortable physically with the clinical areas of the practice and enjoying the day-to-day interactions with patients, staff, and colleagues? Can you keep the practice active enough that revenues don’t start to decline? Are you prepared psychologically to quit? Do you have other interests you are anxious to pursue after retirement, or if planning to work as the buyer’s associate, can you tolerate the lack of control?
If after stepping back and assuming the CEO role, you discover that it’s time to begin the process towards a sale or transition, assemble a good team of advisors in order to market the practice in its best light. If working a few more years (regardless of your age) turns out to be the best answer, then enjoy. The world still needs you.