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Posted by: The Probe 2nd August 2020
Kenny Valentine, Commercial Director M&A Colosseum Dental UK, discusses why it’s so important for principals to be prepared for selling their practice well ahead of their retirement.
When you sell a business, you are often ending your association with that business, as well as selling the organisation itself. In the retail sector, once deals are completed, the vendor will generally walk away and have nothing further to do with the company. However, it is not the same in dentistry.
Many dental practice principals view the sale of their business and their retirement as a significant joint life event – which is not the same as other sectors. It’s not yet common knowledge among the profession that most buyers want principals to remain in practice for a number of years after the transaction. This is because a substantial proportion of the practice’s value is directly associated with the vendor.
Continuity is the greatest commodity
This is not just in terms of monetary value – although there are implications for the asking price if the principal intends to leave immediately after a sale, as they are commonly responsible for a large proportion of the revenue.
The greatest value is in the continuity provided for both patients and practice team members when the principal stays on. For many dental practices, the vendor is the focal point for everyone else. If the principal has run the practice for 10, 20, even 30 years, they will have built strong relationships with their patients, who will trust them and be accustomed to the care they provide. The uncertainty caused by the principal leaving can lead some patients to try a new practice perhaps closer to home. There is a similar risk of associates leaving should a principal suddenly announce their exit, if they are not confident in the security of their job and the environment they will be working in post-sale.
For the business to remain strong beyond a sale, protecting its legacy and patient services, much forward planning is needed to replace the principal.
A phase, not forever
Of course, when a principal sells the practice with retirement in mind, they may want to discuss a potential exit plan with the buyer. In my experience, staying for a minimum of three years post-sale is ideal. This gives time to work out the handover plan with the buyer. It provides reassurance for patients, who appreciate receiving the continuity of care and time to identify, recruit and introduce their successor.
It is worth pointing out that agreeing to stay for three years doesn’t always mean that the vendor leaves the business at this time. We actively want our vendors to stay with the business as long as possible. I have come across many an ex-principal who enjoys dentistry so much after eliminating the pressures of running the business, that they postpone retirement for many years.
It’s never too early to start thinking about your exit plan and begin the conversation. Even if you’re still 10 years away or more from your target retirement or exit date, it is beneficial to start to build relationships with potential suitors. I often speak to principals who have no intention of selling for many years – it’s about knowledge building. These conversations enable individuals to learn about the common challenges and highlight the importance of finding an acquirer who is the right fit for their practice, in turn increasing the likelihood of a successful transaction when the time does come. Furthermore, this research might help you set a goal for your business in terms of growth, revenue and structure – which can take years to implement and develop – helping you get the very most from the sale for a stress-free retirement.
You will likely know colleagues who have sold practices, so why not speak to them about their experience? Find out who they worked with, what the sale process was like and how they chose their buyers. It will also help you understand general buyer expectations so you can ensure that your practice has the appropriate paperwork and protocols in place to meet them. This research doesn’t cost you anything but a little personal time.
A new chapter
Whether you’re considering the next chapter in your life in the near or long-term future, there’s no harm in being prepared. Running a dental practice is a stressful business – especially in such unpresented circumstances that the profession has faced this year. Regardless of how many years away you are from retirement, if you’re thinking of selling a practice with more than three surgeries, find out how Colosseum Dental UK could support you. Just visit the website and complete the form if you would like to know more at www.colosseumdental.co.uk/sell-your-practice.
For more information about Colosseum Dental, please visit www.colosseumdental.co.uk
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