When the writer Steven Covey published a seminal coaching book called The Seven Habits of Highly Successful People it revealed a deep desire for this kind of information; 15 million copies of the big, dense book sold. In my opinion it’s more accessible as an audio book.
One of the highly successful habits is “begin with the end in mind” and this is so important when building a dental practice. Unfortunately most of us build the practice we want with little thought to the end game and who might find it an attractive buy! Many high grossing dentists start squat practices, creating profitable businesses but only because of their input. Over the years I have seen dentists with sophisticated implant and restorative skills gross £500-£800k/year in their own practices!
This delivers a fabulous income for the principal and a real problem to solve when it’s time to sell it. How so? Well, if the buyer is a fellow dentist (rather than a corporate) the question they are asking themselves as they tour the practice, admiring the kit, is, “Which stool will I sit on?” And if it is the seller’s stool, a supplementary question, “How can I do what they do?” These questions generally stop the potential buyer from going any further. Incidentally, the corporates are most unlikely to buy a practice like this (they’ve already got their fingers burned) without a long tie-in of the principal, probably seven years, and only then with the balancing pay-out linked to the principal continuing to hit the same gross.
The only way to make a practice like this more saleable is to consistently reduce the principal’s gross over several years (while lifting all the other clinicians’ grosses) so that the principal’s gross is a lot easier to replace post-sale. Corporate practice buyers and some banks tell me that their rule of thumb in 2017 is that no dentist in the practice should gross more than £300k/year and some are saying £250k/year.
Of course, a better solution is to begin with the end in mind and build a practice where no clinician stands out in terms of a being difficult to replace, with a high gross. Consider that what you want to build is a safe, middle of the road, Marks and Spencer-type practice. No idiosyncrasies or eccentricities, a practice where any buyer can find a stool to sit on and feel safe.
I know, a bit dull. If like me you shiver at the thought of creating anything beige, then wait until you’re on the final run (your last three years of your ownership) and then scale back all those bright colours and embrace the beige. It will get you the easiest and highest sale price.
If you want some help in preparing your practice for sale, contact me for a chat on
e. simon.hocken@breathebusiness.co.uk
m. 07770 403576
Simon