By Aaron Schulman
Becoming the owner of a dental practice is an exciting process. After earning a dental degree, passing board exams, and completing a residency, the final step is to actually begin the practice of dentistry. After all of the hard work, the rewards of becoming a dentist with a full array of clients are within reach. If you are ready to buy a dental practice or you are in the process of transitioning out of your career, a few key necessities will help determine the fair market value, whether you’re looking to buy or sell a dental practice.
Even though dentistry has become much more modern, the way that dental practices have been valued has not changed much because numbers are still numbers. It is important to know what patients are active and which ones are no longer active in a practice. It is also important to know the demographics of the patients. The valuation should also include how many hours the dentist and hygienists work with patients, as well as the collections percentages and revenue.
Once the financial numbers are crunched, other steps that should be taken. Valuation must include the dental equipment and the building. Staffing needs to be evaluated, especially if there are family members working in the office versus hired, professional staff. Each dental office should have a proper staff manual that includes practices for reviews and benefits, and descriptions of each job.
When valuation is occurring, it is very important to ensure that the dental office is in compliance with the ever-changing regulations. Dental offices usually have state regulations that need to be followed. At the federal level, dental offices need to be in compliance with HIPAA and OSHA standards. They also need to comply with disposing of hazardous waste, and with radiology regulations. If dental offices are not in compliance, they can face large fines and expensive work to become compliant.
With the changing world, dental offices have other issues to consider. Technology has had one of the biggest impacts on dental practices, and it has changed the valuation, as well. Dentists who have kept up on the latest technology and training (especially in niche areas such as implants) have more procedures to offer to patients. Those who are able to engage and compete in social media have had success growing their practices. It is important to know about the future generations that will be visiting your practice so you can evaluate where you need to be and how to get there.
Having an attractive and informative website is an important asset for any dental practice, especially since more potential clients use the Internet than the phone book these days. The dental website needs to be educational, and should offer opportunities for clients to get involved in the site. Many successful websites include easy-to-read articles, clear photographs, videos, and positive stories from real patients.
Successful websites work on computers, tablets, and smartphones so they can be accessed anywhere at any time. Many dentists include patient paperwork that can be completed online without actually using any paper. Patients can fill out their medical history along with clearances, contact forms, and consent forms online so they don’t have mess with them in the waiting room. Using online forms makes the office more efficient, and it also affects the demographics of the patients by attracting technologically savvy clients who prefer to use technology over traditional paper. When dentists have patients who are more educated, they tend to have fewer accounts move into collections.
Dentists should use social media wisely. It can be fun for dentists to get more involved with patients through social media sites, and patients can become more educated about dental practices and procedures by following their dentist on Facebook, LinkedIn, and Twitter.
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Technology can also help dentists assess competitors. In large cities, dentists often group together to save money on staffing. Many group practices have solid financial backing, and they often hire marketing experts who are employed to draw new patients into the group. It can be challenging for small dental practices to compete with large group practices. When large dental practices roll into town, small practices need to position themselves in a way to protect their market share and continue to add value to their patients.
Lastly, it is important for dentists who want to invest and manage their own practices to understand they are dentists as well as entrepreneurs. It is a well-known fact that dentists tend to lead comfortable lives because they’re motivated toward success. Dentists have to put in their time to become successful, and that time usually involves significant hard work. Some new dentists will pay big bucks for a well-established practice so they can just step in and get to work, yet when they are green they often don’t know the first thing about running a business. Others want to build a practice from scratch that represents their style and personality. Some dentists work in their practices until they can no longer work, where other dentists transition early so they can enjoy retirement.
In conclusion, dental practices are valued with numbers, but there are other additions to include. From high tech equipment, social media and websites, as well as hiring practices, dental offices change with the times. In order to keep current and maintain a growing potential valuation, your practice must stay in step with the times.
Aaron Schulman is an Advisory Board Member of 5th Avenue Acquisitions & Venture Capitalists, who specialize in dental practice transitions. They help both parties through a fair market valuation, confidential listing and transaction, pre-screening and qualifying buyers, and helping both parties transition with peace of mind. You can learn more about them at www.5thaavc.com.
