10 Ways to Maximize the Value of Your Practice
Ask yourself these questions to get the most out of your biggest investment.
By Roger P. Levin, DDS
If you were forced to sell your practice next year, what would you need to do to get the most value for it?
It’s a provocative question. Almost every practice is a work in progress. Even highly successful practices have challenges, whether it is opening another location, incorporating new technology, or training the team on new services and processes.
In the next decade, dentistry will undergo a demographic sea change. According to a recent presentation by the American Dental Education Association, nearly 65% of dentists are 45 years of age, with more than a third (34%) 55 years or older.1 Over the next 10 years, many of these 55+ dentists will sell their practices and retire. Obviously, this transition is a major life change and must be approached in a comprehensive, business-like manner. Whether dentists are just starting out or considering retirement, the questions posed in the following 10 areas can help doctors get the most out of their practices.
Facility and Location
Location is a critical consideration for any dentist thinking of purchasing another practice. If you were a new dentist, would you want to start your career at this location? If the answer is “yes,” find ways to enhance the value of your facility and location. Suggestions include updating the décor, painting and wallpapering the interior, and hiring a landscaper to spruce up the exterior. If the answer is a definite “no,” consider relocating to a more desirable location a few years before your target sale date.
Equipment and Technology
How new is the equipment and technology? Are there computers in every operatory? How old is the computer software? If the practice is still using Windows 98, it’s time for a major upgrade.
Equipment and technology are investments in your practice. If a practice has state-of-the-art technology, that will be viewed as an asset by a potential buyer. If the equipment and technology dates from 1990s and before, it is time to start prudently re-investing in the practice.
Reputation
What is the practice’s brand (cosmetic, family, upscale, etc)? Can people readily identify it? What is the community saying about the practice on social networking sites like Twitter, Yelp, and Facebook?
An excellent reputation in the community is a highly valued asset, one that new dentists would love to build on when they purchase a practice. Sponsor sports teams, partner with local schools, and be active in your local business organization.
Patient Referrals and Marketing
Does the practice receive at least one referral from 40% of patients? Has a structured internal marketing program been put in place? Is the practice website regularly updated?
Internal marketing fuels practice growth. A practice that is steadily increasing production quickly gains the attention of potential buyers. A robust internal marketing program generates greater profitability now and a higher sales price later.
Management Systems
Have the management systems been updated or redesigned in the last 3 years? Have systems been documented in writing? If so, can new team members be easily trained with this documentation?
• Scheduling: Are 98% of active patients scheduled? Are no-show and last-minute cancellations less than 1%? Are patients consistently seen on time?
• Case Presentation: Is case acceptance 90% for all cases, including larger procedures and elective treatment? Has every team member been trained on the top three benefits of every service? Does the hygienist educate patients about treatment options during the recare appointment?
• Collections & Overhead: Do you collect 99% of fees? Are insurance co-pays collected at the time of service? Is your overhead 59% or below?
Step-by-step management systems are the foundation of a successful practice. When an office consistently sees patients as scheduled, collects fees at the time of service and motivates a high percentage of patients to accept elective and need-based cases, these are all the hallmarks of a well-run and well-organized practice with a well-trained team.
Production
Is production growing at 15% annually? Or has the practice been flat or declining since the recession hit in 2008? Does hygiene represent 25% of production? Does elective treatment generate more more than 20% of production?
Does the production data indicate a practice that is growing or declining? This is often the first statistic that potential buyers will want to see. A growing practice often sells itself. A practice in decline requires much more work and salesmanship.
The Team
Has the office experienced turnover recently? If so, how many staff members have left and for what reasons? Does the practice have a structured bonus program in place? Has it proven effective in increasing productivity and production? Is there an office manager in place?
A strong team enhances the value of the practice. Turnover is always a possibility when a practice transitions, but when it is done properly, many team members will stay with the new dentist and begin a new phase of their careers.
Interdisciplinary Relationships
Does the practice have strong relationships with specialty practices in the area? Are some specialty procedures performed in the practice? Has the amount and volume of those changed recently? Do patients have positive things to say about their experience when referred to a specialist?
As dentistry continues to evolve, interdisciplinary care will play an even more critical role in the oral health of many patients. Strong, established relationships with specialists can help a new dentist ease into the rigors of practice ownership.
Doctor Leadership
Do you spend 98% of your time providing patient care? If not, are you performing administrative and non-clinical activities? Do you like what you do? Do you enjoy coming to the office every day? How would you describe the stress level—low, moderate, high, or extremely high?
Leadership is reflected in the attitudes of team members and patients. A good leader helps create a positive and productive atmosphere to practice dentistry. Not many dentists want to purchase a highly stressed, tension-filled practice.
Outside Experts
Does the practice regularly use outside experts in the areas of accounting, tax preparation, and financial planning? What other areas could benefit from outside expertise? Practice management, marketing, interior design, software training, etc? Can the dentist make his or her vision a reality without the use of experts?
Final Thoughts
When dentists decide to sell their practice, they obviously want to get the maximum value for it. Asking the questions posed in this article can help you to evaluate your practice and target those areas that need improvement.
Reference
1. Valachovic RW. “Current Demographics and Future Trends of the Dentist Workforce.” Presentation. Institute of Medicine. February 9, 2009.
About the Author
Dr. Levin is the CEO of Levin Group. Visit Levin Group’s Dental Resource Center at www.levingroupgp.com for a wide range of educational materials that will help you increase the value of your practice, including The Tip of the Day, newsletters and white papers.
