10 Strategies To Increase Your Practice’s Sale Value

10 Strategies To Increase Your Practice's Sale Value

Even though practice values continue to soar, not every dentist will benefit. Without proper planning and preparation, you could end up with as little as 50 percent of your practice’s true value.

Here’s a look at ten strategies that will help increase the sales value of the practice you’ve worked so hard to build and assure financial security in your retirement.

#1 Start Planning Early

It takes time to reap the rewards of change, so starting your exit plan early on will maximize your practice valuation. Don’t wait until it’s too late to make changes that may take up to a year to make an impact. Ideally, practice sale planning should start as early as 3-10 years out..

#2 Increase Marketing Efforts to Increase New Patient Count 

As one starts thinking of retirement, attracting new patients may not be the top priority. However, profitability and success are key factors potential buyers will consider when making a decision to purchase your practice. The national industry standard for offsetting attrition and achieving consistent growth is at least 26 new patients each month. So even though you’re planning on phasing out, you need to maintain a marketing effort to increase your new patient count. 

#3 Raise Fees Annually

In our experience, more than 75 percent of dentists have not raised their service prices in the past five years. That can pose a problem when it’s time to sell. Your new buyer will want to get paid fairly, meaning they’ll have to increase their fees. However, an abrupt fee increase may drive your patients away. Raising your fees on an annual basis will eliminate the potential buyer’s risk of losing your patients, making your practice more attractive for purchase.

#4 Review and Control Overhead – Break-Even Point (BEP) 

In our experience, more than 80 percent of dentists don’t know what a break-even point is. It is the minimum amount of money needed to pay overhead, compensate the doctor, service debt, and allow for a profit. When it’s time to consider selling your practice, assess where you can make cuts without affecting your revenue or your patients. That includes making sure employee wages, supplies, rent, and all your expenses are in line. You want your potential buyers to see the profitability in purchasing your practice.

#5 Maintain/Expand Your Procedure Mix

It’s important to either maintain or expand the procedures that you offer. Don’t be afraid to move beyond bread and butter dentistry. If you’re offering specialty work, keep on doing it. If not, consider offering some new specialized services such as implant work, Invisalign, or dental extractions. That will help make your practice more desirable to your patients and potential buyers. 

#6 Evaluate Managed Care Exposure (PPOs)

If you plan to sell your practice within the next five years, you’ll need to evaluate the insurance plans you accept. When determining the value of your practice, it’s not based on your stated fees but the actual collections. Let’s consider PPOs; the more you accept, the less attractive your practice is to potential buyers. That’s because PPOs pay minimal amounts for your services, and buyers want to profit from their practice acquisition. It’s time to get rid of insurance plans that don’t elevate your business to increase your profitability and practice valuation. 

#7 Make Sure P&L Cash Flows Well – Do Not Show a Negative Income

Cash flow is king, so don’t write off expenses that don’t pertain to your business, such as dinners or supplies for your home. Otherwise, your practice will show negative income, which can be problematic when it’s time to sell it. Your potential buyer will want to see good cash flow, and lenders will shy away from giving loans for purchases of businesses that show no profit. You’ll need to demonstrate at least a year’s worth of good cash flow to show your practice’s true potential. So now’s the time to start.

#8 Upgrade Office Appearance and Technology

It’s essential to make your practice as attractive as possible to potential buyers. Outdated furniture and technology need to be replaced, and never underestimate the power of a fresh coat of paint. Some doctors believe buyers should pick out their technology and office decor. That does not work. Your potential buyers want to hit the ground running and may decide to upgrade later on. Giving your practice a makeover will pay off in a big way when determining its sale value.

#9 Have a Real Estate Lease to Assign 

You’ll need to make sure the lease or building is correctly set up for a buyer to take over. You can’t use cousin Joey, who sells houses, to represent your interests when selling your practice. The lease or sales contract must be set up properly, so it’s advisable to trust your practice sale to a healthcare commercial real estate professional who will ensure you enjoy a seamless transition.

#10 Identify and Track Tax Avoidance Expenses

Did you know that C corps may be double taxed? It’s important to talk to a dental practice-specific CPA to ensure you’re getting correct tax advantages and are set up properly for tax allocations. You’ll also have better insights on ways to avoid unnecessary expenses without subjecting yourself to double taxation.

Start Your Practice Exit Plan Today!

It’s never too soon to start thinking of retirement, even if it’s a decade down the road.

Our motto at KLAS Solutions is “Hope is not a strategy.” Let us help you set a plan in place, which we can adjust as needed. Being prepared early on can make the difference of hundreds of thousands of dollars in your practice’s sale.

Are you ready to get started? Our team is happy to appraise your practice and determine its value today. We’ll update the valuation for free for the lifetime of your practice..

Let’s talk. We invite you to schedule your free consultation today!

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