Maximising success when selling your dental practice

Ads Thanki – When should you start your own dental practice? – part one

Selling a dental practice requires careful planning – Ads Thanki offers his top tips to optimise your exit and maximise success.

For many dentists, building a successful practice takes years of dedication and hard work. However, as they approach the later stages of their careers, the question of what comes next inevitably arises. Preparing for the sale of your practice requires careful planning to ensure smooth operations, maximum valuation, and a seamless transition.

While there is no one-size-fits-all approach, there are several key strategies that can help dental practice owners optimise their exit and secure the best possible outcome. Below are some essential steps to consider when planning to sell your practice:

Review your profit and loss early

One of the first steps in preparing your practice for sale is assessing its financial performance. Ideally, this process should begin 18 to 24 months in advance, though even a shorter timeframe can yield positive results.

Conducting a thorough profit and loss review allows you to identify areas for optimisation and make necessary adjustments before placing your practice on the market.

It is advisable to seek a professional valuation from a broker who specialises in the UK dental sector. They can provide insights into current market conditions, helping you understand the potential value of your practice and how this may fluctuate based on profitability and industry trends. This financial assessment forms the foundation of your decision-making process.

Identify quick wins

Many dental practices overlook opportunities to reduce costs, such as renegotiating supplier contracts for consumables, laboratory fees, and other operational expenses. While these may seem minor, streamlining expenses can significantly enhance profitability.

For every pound saved, a practice’s valuation could increase several times over, depending on the multiple applied at sale. For example, reducing annual costs by £20,000 could result in a valuation increase exceeding £100,000.

Whether managing this in-house or engaging professional cost-reduction services, these efficiencies can have a substantial impact on the final sale price.

Manage debt strategically

Before addressing outstanding debt, it is essential to consult with an accountant to understand the tax implications and financial considerations specific to your situation.

A well-maintained and modern dental practice is attractive to buyers. While it is not necessary to invest in every new piece of equipment, ensuring that your practice is up to date with essential technology – such as digital workflows, radiography systems, and intraoral scanners – can enhance its appeal.

However, be mindful of over-investing just before a sale, as this may not provide a return on investment. Instead, focus on necessary upgrades that add tangible value.

Review and renegotiate your lease

A favourable lease agreement can be a key factor in attracting buyers. Many landlords in the UK may not be familiar with the specific requirements of dental practices, so ensuring your lease is assignable and has a reasonable duration remaining (typically at least ten years) is beneficial, especially when procuring bank funding.

Engaging a specialist in healthcare lease negotiations can be worthwhile. They can help secure favourable terms, ensure compliance with industry standards, and negotiate competitive rates, ultimately increasing the desirability of your practice for potential buyers.

Secure staff and associate contracts

One of the primary concerns for prospective buyers is staff retention, particularly for associate dentists and key team members. Having well-structured, assignable contracts in place can provide reassurance to buyers and facilitate a smooth transition.

Clearly defined compensation structures, including percentages of net collections and provisions for continuing professional development, can enhance the attractiveness of the practice. By securing these agreements in advance, you strengthen the stability of the business and make it a more appealing investment.

Clarify personal and professional goals

The sale of a dental practice is not solely about maximising financial returns; it also involves aligning the process with your personal and professional aspirations. Offers may vary in structure, including upfront payments, deferred payments, or opportunities to retain a minority stake in the business.

Defining your post-sale objectives – whether that involves continued involvement in the practice, mentoring younger dentists, or a complete exit – can help narrow down suitable buyers and ensure a smooth transition that aligns with your vision.

Seek financial and tax planning advice

Selling a dental practice can be a life-changing financial event, and careful planning is essential to optimise tax efficiency and long-term wealth management.

Consulting with financial advisers and tax specialists well in advance allows you to explore structuring options, understand capital gains tax implications, and plan for retirement or reinvestment opportunities.

Conclusion

Selling a dental practice is a significant milestone, and engaging the right professionals can make a substantial difference in achieving the best outcome. An experienced dental broker/adviser can help navigate the complexities of the process, ensuring the practice is positioned optimally in the market while securing favourable terms.

For UK dental practice owners considering an exit strategy in the coming years, now is the time to review your business, address any areas for improvement and take strategic steps to enhance its value.

By planning ahead, you can maximise the return on your years of hard work while ensuring a smooth transition to the next phase of your career.