Become a Bestseller; Who are today’s bestselling buyers and what do they want?

The large majority of today’s buyers are not i-Dentists™. Rather than being in dentistry solely for investment purposes, owning and managing multiple practices, they are hands-on, full-time practitioners who are motivated by most of the same things that existed when my father Roy Brown started a dental consulting business almost 40 years ago.

Today’s buyers want these basics:

  • To “be their own boss.”
  • Have control over their income.
  • Maintain complete authority over business and treatment decisions.

I’ve been accumulating data from buyers since 1974 and the “bestselling” dental practices all have certain characteristics in common:

  • Owned by a solo practitioner.
  • Gross billings in the range of $750,000 to $1,250,000.
  • Normalized (purified) operating cash flow* equals 40% or more of gross.
  • Sixty or more hours per week of preventive scheduling booked three to six weeks in advance.
  • Not located in the highest rent districts, such as a major mall or retail/storefront (although exposure always helps).
  • Do not employ long-term associates who are not on a contract.
  • Not involved in complicated partnerships, such as when a partner wishes to sell and another does not (selling a share of a practice is a very difficult task for any broker!).

*Normalized cash flow does not include “discretionary” expenses, spousal or family wages, or debts. Debt is not part of operating overhead, it is a capital cost of acquisition and generally will be eliminated over time.

The national team of associates I work with also recognizes that dentists who own practices exhibiting these characteristics experience less stress. And similar observations reveal why the group dental practice dynamic can fail. Having worked in the largest-ever Canadian retail dental chain (Tridont) in the 1980s, I can predict some of today’s burgeoning dental chains’ chance of survival.

Conceptually i-Dentist™ is a great business plan if owning and managing multiple practices is the goal. However, for any individual-minded dentist (assuming he or she desires control over the style of practice, as an estimated 75% or more of Canadian dentists do), this style of dental chain will inevitably include a long-term power challenge.

The practices that are more difficult to sell usually display the following characteristics:

  • Employ associates that have long tenure and may negatively influence patients and/or staff after sale.
  • Associate(s) is not on a proper, written agreement.
  • Associates threaten the new practice owner and the open market dictates that the practice will be more difficult to sell, period!
  • Any type of arrangement whereby space or overhead costs are shared with another professional complicate the transaction. Basically, human nature equals potential for future conflict.
  • Long-term staff that’s highly paid and not on a proper, written employment agreement.
  • Purchasers realize that existing staff is valuable, it’s retained in most of the practices sold. However, highly paid or long-term staff can intimidate young purchasers. An established staff is very important for patient retention, but buyers with big loans, household mortgages and/or dependants are going to try to reduce expenditures to maintain profitability. The fear is that reducing wages and/or increasing hours may result in losing important members of the team.
  • Over-sized offices or high-rent locations. During slow times high rents remain the same. Rent should be typically 3 – 7% of gross; if it’s higher, a buyer will be wary of that long-term risk.
  • Practices that are over-capitalized (extravagant leaseholds and equipment) are difficult to sell because the facility is designed to accommodate more than one dentist or suit personal tastes. Yes, purchasers appreciate large, ultra-modern offices with high-tech equipment, but they also don’t necessarily want to start off with the accompanying debt.

These issues have surfaced many times in the course of my business. I’ve performed calculations to support the theory that “bestselling” practices sell for the highest amount when considering alternative practices. The owners of these practices are the happiest, most stress-free individuals. They take more holidays, enjoy the lowest operating overhead and generally work longer in dentistry because of the rewarding work environment.

The choice is yours. Everyone has different philosophies, but any dentist can practice like a “bestseller.”