Begin with the end in mind - Two part series
‘Begin with the end in mind’ is a mantra used in dental circles, primarily relating to the clinical outcome of a case. It is what a more experienced clinician (mentor) may say to their less experienced colleague (mentee). The analogy is, if you don’t know where you are going, how do you know if you have got there? As a clinician, you should be able to visualise, communicate, and agree with your patient, what the final clinical outcome will look like. The result is not guaranteed, but once you have agreed on the goal, you will both know the direction you are heading.
Why does this not happen with businesses?
Most businesses, including dental practices and laboratories, develop through the drive and passion of their owner, who sets out in search of more control over their destiny and to provide the best service to their patients. Very few dentists, have set up their business to sell them. Fortunately, many now can sell their business as the landscape has changed and consolidation in dentistry is here to stay.
Consolidation is the process of buying independent dental practices to create a group, usually with centralised administration. Consolidation can be seen everywhere in UK dentistry, Europe, and US, and the process is picking up speed every year due to the influx of buyers. Buyers are other independent practices looking to expand their ownership into a small group, which can range from two to 20 practices. Those small groups, once they reach a certain size will need to formalise relationships between the practices and create a team that will look after the ‘group’. They may decide to sell to a larger group or continue to grow becoming a corporate. This growth is, in many cases, fuelled by private equity funds, as dentistry is perceived as a safe and profitable haven. Groups will go through many stages of ‘growing pains’ on this journey. More on this in a future article.
Coming back to the independent practice owner, who originally did not establish their business to sell it, but with the market consolidating as outlined above, the opportunity to cash in this valuable asset does start playing on their mind. For majority of owners, the thought of selling their business seems to cross their mind in the late forties, early fifties. They usually delay exploring the opportunities for a few years and then dip their tow into the water by instructing an agent to carry out a valuation. The outcome of the valuation (The estimated purchase price) may be a positive or a negative experience, depending on the expectations of the owner.
If the experience is positive, the practice owner may sell the practice and be delighted with the outcome. If the valuation is below expectation, the practice owner will most likely be disappointed. At that point the owner may attribute the negative outcome as the fault of the agent, the fault of the market or some other reason but not the practice itself. Why leave that to chance when the outcome of the valuation can be far more predictable and is fully in the hands of the owner?
Even before you buy a practice, think to yourself, what kind of business do I want to run?
Some good questions to ask yourself before you buy (into) your first or next practice:
- What do I want from this business? A lifestyle or growth?
- Am I prepared to lead/manage a team? How can I develop those skills?
- Do I need a practice manager? Most practices function far better with an experienced practice manager whether the owner realises it or not.
- What kind of patients would I like to treat? How will I attract the patients that I would like to treat?
- How will I handle the non-clinical stuff (property, H&S, compliance etc.)? Will I do it in house or outsource it?
- How will I ensure my practice stays current with IT developments, clinical and non-clinical? How do I invest in technology without the constant threat of its obsolescence?
If you are just beginning to explore the opportunity of owning a practice, some of these questions may be top of mind, and there are many more you’ll encounter as you continue your ownership journey.
If you are a few years into your practice ownership and nowhere near selling your practice, it is still be a good idea to engage an agent and value your practice. Through this process you will gain an understanding of what the drivers of value are that will ultimately influence the purchase price of your practice.
Part 2. will cover the meaning of drivers of value. In the meantime, 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.