We are certainly living in interesting times! Lately we hear from more and more doctors, who are of an age where most docs once retired, but who want to keep practicing. Whether the incentive is financial or just the love of the profession, doctors are delaying the sale of their practices longer than ever. The only problem is, as one of my clients said to me this morning, they’re hearing stories from the folks they went to school with about health issues forcing them to retire before they’re ready. Because of this conundrum, the safest course right now is to plan for a sale at least five to seven years before you’re actually ready to pull the trigger. If you have everything ready, and something serious does happen, you can jump right in knowing you’ll get the best possible price for your practice. So what should you be doing right now?
First, look at your production and collections for the last three years. Have they gone up, down or stayed the same? If they’ve gone up, you probably have very little work to do. If however, production and collections have dropped every year in the last 3 years, it’s way past time to get moving. Most nice practices will sell for approximately 75% of your last full year’s collections, assuming the practice can still cash flow. What that means ( in the very abbreviated version) is that a bank lending to someone to purchase your practice needs to see proof that the practice can produce enough to pay the loan, overhead and salary of the new doctor. This proof will come in the shape of your last three years of tax returns. Also, in relation to this cash flow issue, if your accountant has been playing fast and loose to help you avoid paying taxes….stop now! If your tax returns don’t show a strong cash flow, a bank will not believe anything else you might tell them. They only believe what they see on paper.
Next, look at the overall condition of your office. If it’s looking a bit old and run down, it might be time to spruce it up a bit. Even just a new coat of paint and new carpeting or flooring can make a big difference in the sale price. What about your equipment? Is it all working properly and do all your chairs look nice? I’m certainly not suggesting you go out and buy all new chairs and equipment, but a few repairs and re-upholstering can also make everything look new and serviceable.
As long as you’re using a computer and are not still working with paper charts, the software doesn’t really matter….the purchasing doctor will probably want to change it anyway. The use of computers, however, does bring up another question. What kind of marketing are you doing and how much of it is social media marketing? Even if you hate your mobile phone, you need to realize the patients you want to attract are attached to theirs. Do you have a nice website, a Facebook site and a twitter account (just to name a few)? It’s not going to stop your practice from selling if you don’t, but you could be attracting more new patients if you do.
Finally, we need to discuss the nasty word in some more mature practices…insurance. If your practice is going strong and you’ve remained fully fee for service…..good job and keep it up. If, however, the practice is declining and you want a strong sale, we have to discuss insurance participation. Insurance web sites have become the current “in” marketing spot. Your patients will look for a general dentist on their insurance website and will also check if a specialist referred by their general dentist is listed on the website. If you’ve been declining, you need to start participating.
There are any number of other creative ways we can get you ready in time for the sale of your practice. Give us a call today to find out what they are!
