Begin with the end in mind - Two part series
Part one., covered the topic of embarking on a practice ownership journey and what some of the key questions should be that a would-be practice owner should ask. In addition, a need and reason for a regular dental practice valuation was discussed, aiding dental practice owners in identifying the drivers of value within their practice, which will ultimately be decisive in the amount of profit the practice makes and its value as an asset.
What is meant by ‘the drivers of value’?
Certain aspects of a practice are more valuable than others as they have a disproportionately large effect on the profitability of the practice. Accountants would call this ‘low hanging fruit’ as it is easily identified, if you know what you are looking for. A regular accountant, the one who does your yearly accounts, will not always take the time to explore the finer details of the business, however an agent who values dental practices for a living should spend this additional time to help identify the opportunities.
Reputable dental agents analyse the practice in detail to arrive at a valuation. This analysis will usually involve the last three years of accounts, associate statements, payroll details, property details, NHS contract details, practice management reports, and much more, which they will use to compile a report that will be discussed with you in detail. This is the perfect opportunity to discover the ‘low hanging fruit’ and furnish you with indicators that could lead to an improvement in the value of your dental practice.
It may seem like a lot of work initially but if you get into a habit of having a yearly valuation the benefit will be threefold:
- It will be easier gathering data for a single year that has passed and the process will keep you on top of your important paperwork;
- You will be far more in touch with the financial success of your business and the expected value you expect to receive; and
- If you start the process of valuing and reassessing your business yearly, you will have the opportunity to adjust your business practices and operations to help increase the value of your business.
You ask yourself but why would the dental agents do this for free? Will they put pressure on me to sell my practice?
A reputable agent will not charge you or put pressure on you to engage their services. The reason there is no charge for the valuation is that the valuation market is awash with dental agencies offering a dental practice valuation, however the quality of the output, service and after-valuation support varies vastly. Once the dental practice owner is ready to sell the business, dental agency they engage during the sales process will charge a small percentage of the sale fee. Always choose an agent with experience in the market and ask for references so you can find the right fit for your business.
The reason why reputable agents do not put pressure on the practice owner to sell is that they know the value of supporting the practice through the growth. As the practice grows, so does its value so that when the owner does decide to sell, whenever that may be, they will choose the trusted partner who has helped them with the growth process and assisted them on the journey.
How can an agent who sell practices help the practice grow?
By valuing the practice yearly, MediEstates can identify ‘the drivers of value’, assist the practice in growing those drivers and review the progress of growing the value of the practice over time. Being part of Henry Schein, as one of the largest global dental suppliers, MediEstates collaborates across the Henry Schein group to facilitate support for practices that wish to grow. This growth is ultimately represented as value growth of the practice and MediEstates can help with the exit from the business when the time comes. In the meantime, Henry Schein’s network can help in a variety of areas ranging from practice management, orthodontics, dental implants, practice support services, and recruitment, offering a full range of services assisting dentists throughout their career, from qualification to retirement.
If you are setting up a dental practice, growing your practice or group, or simply looking for an indication of your practice(s) value, don’t hesitate to contact MediEstates. We have been in the dental market for nearly 20 years and will help you achieve your goals, supporting you on the journey chosen by you.