The Business Blindspot: Why so Many Dentists Struggle to Sell Their Practices for Top Dollar

Author: David Kingsdale, CEO

Introduction

Dentists are highly trained medical professionals and experts in their field. They possess the skills and knowledge to diagnose, treat, and improve oral health. But when it comes to the business side of their practice, many dentists find themselves in unfamiliar territory. This lack of business acumen often becomes painfully clear when it's time to sell, leaving many dentists confused by the offers they receive and frustrated by the process.

Dentists dedicate years to honing their clinical skills, often neglecting the crucial business skills necessary to maximize the value of their practice. They may be excellent at treating patients, but they might not be as adept at managing finances, marketing their services, or understanding the intricacies of a practice sale.

Here are some common business blind spots that can hinder a dentist's ability to sell their practice for its true worth:

Undervaluing the Importance of Financial Records and Taking on Debt: Clean, organized, and readily accessible financial records are paramount when selling a practice. Prospective buyers need to see a clear picture of the practice's profitability and cash flow. Many dentists, however, struggle with record-keeping, making it difficult to demonstrate the true financial health of their business. This can lead to lower offers or even deter potential buyers altogether. Debt can also prove to be a killer. Dentists forget that those SBA or EIDL loans they took out to remodel their house have to be paid back when they want to sell their practice.

Neglecting Marketing and Patient Retention: A thriving practice with a strong patient base is far more attractive to buyers than one with declining numbers. Dentists who haven't invested in marketing and patient retention strategies may find their practice less desirable, impacting the sale price. A consistent flow of new patients and a loyal existing patient base demonstrate the long-term viability of the practice.

Failing to Plan for Succession: Many dentists approach the sale of their practice as an afterthought, rather than a carefully planned transition. Failing to plan ahead can lead to rushed decisions, missed opportunities, and ultimately, a lower sale price. A well-defined succession plan, ideally developed years in advance, allows dentists to prepare their practice for sale and maximize its value. And worst of all are dentists in their late 50s and early 60s thinking they have time to figure it out, they don’t!

Misunderstanding the Valuation Process: Dentists often have unrealistic expectations about the value of their practice. On the one hand they underestimate the practice’s worth thinking all they can do is to sell to another dentist for what is often a low price compared to what a DSO will pay. On the other hand, they may overestimate its worth based on emotional attachment or personal investment, rather than a thorough and objective valuation. Understanding the factors that influence practice valuation, such as revenue, expenses, patient demographics, and location, is crucial for setting realistic expectations and negotiating effectively.

Not Seeking Professional Guidance: Selling a dental practice is a complex transaction that requires expertise in various areas, including finance, legal, and valuation. Many dentists attempt to navigate this process on their own, only to realize they are out of their depth. Engaging experienced professionals, such as a dental practice sales advisor, accountant, and attorney, is essential for maximizing the sale price and ensuring a smooth transition.

Overlooking the Importance of "Curb Appeal": Just like selling a house, the first impression of a dental practice matters. A modern, well-maintained facility with updated equipment and a welcoming atmosphere will be more appealing to buyers than a dated and neglected one. Investing in minor renovations or upgrades can significantly enhance the perceived value of the practice.

The Solution: Shifting the Mindset The key to overcoming these challenges is for dentists to recognize that their practice is not just a profession; it's a business. By embracing a business-oriented mindset, dentists can take proactive steps to improve the financial health and marketability of their practice. This includes:

• Investing in business education: Taking courses or workshops on practice management, finance, and marketing can equip dentists with the necessary skills to run their practice effectively.

• Seeking mentorship from experienced entrepreneurs: Learning from successful business owners can provide valuable insights and guidance.

• Building a strong team: Surrounding themselves with skilled and knowledgeable staff can free up the dentist to focus on strategic initiatives.

• Regularly reviewing financial performance: Tracking key metrics and analyzing financial data can help identify areas for improvement.

• Planning for the future: Developing a long-term business plan, including a succession plan, is essential for maximizing the value of the practice.

By addressing these business blind spots and embracing a proactive approach to practice management, dentists can significantly increase their chances of selling their practice for top dollar and securing their financial future. It's not just about being a great dentist; it's about being a savvy business owner.

If you have any questions about this article or are interested in learning more about selling your practice, please contact David Kingsdale at david@kingsransomgroup.com and visit www.dentyval.com for a FREE Estimate of Your Dental Practice's Valuation.

ABOUT KING’S RANSOM GROUP

King’s Ransom Group (“KRG”) is a private investment firm and M&A advisor, working with companies across the business services, healthcare, and marketing industries. KRG’s healthcare group advises dental practices nationwide in all facets of their sales process to help practices find the best and right investors and partners. KRG’s team has decades of experience founding and operating businesses across various sectors as well as financial expertise having worked at some of the largest firms on Wall Street. For more information, please visit www.kingsransomgroup.com.

ABOUT DENTYVAL

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