Selling Your Dental Practice? How to Attract Buyers

March 24, 2021

You have spent years building your dental practice and making it what it is today. Long hours and a lot of money and time away from your family have paid off for your dental practice, and your name is well known throughout the community. Eventually, however, you are going to retire or wanting to exit and that means selling your life’s work.

While selling your practice might seem simple at first, there are actually a number of different elements and variables that must be combined to make the dental practice sale amicable for both you and the new buyer, in order to create a win-win scenario. Speaking of the buyers, you must choose the right match for your dental practice to ensure that your exit plan is seamless and quick. Whether you are retiring, looking to change locations or responsibilities, or you just want to raise cash for other ventures, attracting and choosing the best buyer for your practice can help you reach that goal.

With that in mind, we are going to take a look at some of the factors that go into attracting the right buyer for your practice.

Capitalise On Your Business; How Much Do You Want?

Depending on your reason for selling your practice, you will need to decide just how much money you want to place it on the market for; to get the full value of your dental practice, you want to make it as attractive as possible to potential buyers. Remember, they are going to try to negotiate price and terms, so leave them as little room to do that as possible. This means keeping all equipment up to date, ensuring that the building needs no repairs and that it, too, has been updated. Don’t forget to price it fairly to begin with.

The value is currently very strong and is fluctuating with geographical factors becoming a major influence for potential buyers.

Unsolicited Third Party Offers

Unlike leasehold owners, If you own the freehold of the building, you have more options available to you. You could receive informal unsolicited offers from independent or corporate buyers, third-party buyers or even your associates, or someone else entirely who is interested in leasing the property. Having this flexibility can make attracting and choosing the right buyer much easier, but it could also affect the amount that is offered. This could drive your sale price down considerably, so it is something to keep in mind.

Another important factor to remember when selling your dental practice, regardless of the buyer, is that you should always appoint specialist accountants, lawyers and financial providers, and commercial negotiators, like Pluto Partners, who have experience in facilitating sales of dental practices, creating a competitive environment to maximise price. This will ensure a seamless transaction with very few issues. A healthcare business advisor can assist you with this part of the dental practice sale.

Maximise the value

There is a value given by the financials and there are value drivers, unique for every business.

The team, the recurring revenue, customer diversification, realistic scalability and growth plan.

A strong value driver is a realistic plan demonstrating potential for profitability and growth including new services and products in the pipeline.

Cash deferred deals

Cash deferred based on target (we suggest a Revenue target rather than EBITDA target) will depend on the type of practice and revenue stream, not just corporates but also independent buyers structure deals in this way. It’s the way to maximise value and minimise risk on the investment, related to a specific practice.

Between December 2020 and March 2021 we sold and advised dental practice deals with a combined value of £22,000,000.

For some of our latest private or mixed income deals, dental corporates offered an 80/20 structures with two-year tie-in periods and, for the same deal, two independent buyers offered 70/30 with three-year tie-in periods. 

Again, it depends on the practice revenue stream and the buyers motivation and reason for buying. We shift our focus on the multipliers that amplify the value. X EBITDA multiples are important and driven by market and naturally by a competitive environment, but the presentation of a strong Fair Maintainable Operating Profit (FMOP) makes the difference.

Contact Pluto Partners

To learn more, contact Pluto Partners today and speak with a Healthcare Business Advisor who can answer any questions you might have.

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