If you’ve built up your dental practice over several years, you’ll want to see your input and effort rewarded when you sell the business. At Pluto Partners, we use a relationship-based approach to ensure the best possible deal for practice owners.
It’s easy to assume that any potential buyer will see the toil that’s gone into getting your practice this far, but when valuing a business, a lot goes into determining how much you can expect to receive.
Ahead of the sale, you should ask yourself what you can do to increase the value of your business while doing everything to ensure it’s an attractive prospect for buyers.
Here are some of the key considerations associated with maximising value in dental mergers and acquisitions.
Understanding the Factors That Influence Value
When selling any business, it needs to be valued. To work out the value, we’ll look at your turnover, the value of any NHS contracts, the value of Units of Dental Activity (UDAs), and the outgoings for the practice, which might include lab costs, wage bills, equipment, rent etc.
The overall value can also depend on the following factors:
- EBITDA – EBITDA stands for earnings before interest, taxes, depreciation, and amortisation. A high margin here indicates a lower risk for buyers. To determine value, your EBITDA is multiplied by a factor dependent on the current market.
- Profit margins – Strong gross margins often indicate that a practice has its efficiency run.
- Patient concentration – Having good patient numbers and retention rates makes your practice more attractive to buyers.
- Local competition – The number of other practices operating in your area, their reputation, and the type of services they offer will affect the appeal of your practice.
- The strength of your team – If you’ve recruited a great team of dental professionals who will stay with the practice once it’s been acquired, this can be a bonus.
Identify Opportunities With a Gap Analysis
Before putting your practice on the market, we’ll need to ensure that it meets its business objectives. If your practice isn’t performing as it should, a gap analysis will reveal the areas of opportunity.
At Pluto Partners, we can help assess the potential areas for improvement. Every dental practice is different, and it’s not until we audit and assess the business as it is that we can spot the areas that should feature in your action plan.
With this in mind, it’s important to plan ahead when selling your dental practice. The earlier we’re involved, the more opportunity we’ll have to help you improve your practice value.
Look for Opportunities to Increase Profitability
When you increase your company’s earnings, you’ll see an even bigger rise in the value of your company. It might feel counterintuitive to put that extra effort into driving profits just as you’re about to exit the business, but by changing a few things, you could enhance the value of your proposition.
Effective solutions to boost turnover might include working on improving patient numbers, increasing the number of private services, and building up your treatment acceptance rates. You can achieve much of this through marketing and service.
But increasing turnover will only do so much for your practice value. One of the most effective ways to increase your profitability is to reduce your running costs. Spending less to deliver the same quality of service doesn’t necessarily mean that you need to cut corners. There may be operational inefficiencies that you can address.
A few ways you improve efficiency include:
- Addressing any issues in stock control and reducing waste
- Ordering supplies in bulk to reduce their overall costs
- Finding alternative providers for essential services that keep the practice running, such as gas, electricity, and internet
- Finding ways to reduce lab fees without sacrificing quality
Let Us Help You Maximise Value
At Pluto Partners, we can help you identify the ways to maximise value and plan your exit strategy. If you’re planning to sell your dental practice at any point in the future, get in touch to discuss.
Dr Faresh Desai
Ascent Dental Group
Max understood our business, what was important to us as owners and put us in front of several buyers before we selected our partner for exit and future growth strategy. We could not have achieved the deal without Max and his team at Pluto.