All the experts are predicting a dramatic increase in the volume of dental practices on the market in 2005. If your practice is one that will be competing for buyers, what can you do to increase its appeal?
Our clients generally follow a very simple formula, often implemented at the appraisal stage that easily covers the costs of the appraisal process. This plan will almost always yield higher sale prices and with an ever-increasing supply of vendors, your practice must be positioned to yield the highest and best price while appealing to the demands of today’s buyers. Witness the popularity of the recent trend in home decorating, makeover and resale television shows. The owners have discovered that a few days of work, typically at minimal cost, can uncover tens of thousands of dollars in hidden value. The same can be done for a dental practice.
The first negative impression to a buyer, and one that has the greatest impact on value, may be the chart review. In many practices there are charts that have been inactive for many years, yet they are still stored in the primary, front-desk chart cabinets. I strongly urge our clients to cull their charts, regularly, and most importantly, prior to sale. Charts that are two years old or more should be moved to storage – they can easily be retrieved if needed. Most buyers prefer to use the criteria of treatment within one year or less to define an ‘active’ chart, so if you really want to impress a buyer, cull your charts down to a term of one year or less. Another option is to use the new 8.5″ x 11″ charts (the preferred chart type of today’s buyers) and to tag them with the last year of treatment sticker. This tag makes it obvious exactly how many patients have been seen in the office during the current calendar year. I have reviewed privacy legislation both federal and provincial, and the RCDSO guidelines respecting patient data. Accordingly, our company does not perform chart audits and I believe that laypersons should not be examining patient charts, at any time, for any reason. However the buyers, being licensed dentists, often wish to inspect charts and provided they have signed a confidentiality agreement, it is usually permitted.
Record or Recall Overdue Patients
If you plan on selling your practice, why not catch up on some overdue patients and fill up the appointment book? Most practices, with the help of a computer, have done a good job of maintaining patient-recall frequencies, but there are always a few patients who have fallen behind. Some of our clients, in their later years, admit they are unable to keep up with the hygiene schedule and are falling behind as they cut their hours. Do your best, and try to book the hygienists as far in advance as possible. While you may not see every one of these patients, a fully booked and thriving hygiene program is very impressive to a potential buyer, and will usually increase the sale price substantially.
Prepare Performance Data
Many dentists do not track monthly, daily and hourly production figures. An appraisal will uncover and record this essential data, and most purchasers will demand to verify it by means of examining the day sheets, monthly production records and the appointment protocol. Income hours per producer, (dentist and hygienist) may be tracked in any given day, week or month by saving the day sheets or by examining the appointment book. Most of today’s dental software programs can produce reports of this nature. Unfortunately, many practices have not maintained the necessary data entry and the reports may not be accurate. The appraisal should identify income earned per hour, per producer, by day, by week and by month. Be assured that the buyer, and his or her accountant and banker will request this data during the ‘due diligence’ phase of the purchase process.
Refurbish and Repair
We often see upholstery on dental chairs, stools and reception furniture that is in need of recovering. There are several companies who specialize in one-weekend upholstery replacements, thus preventing downtime. This is an easy fix that has a huge impact on the very important first impressions of the buyer. Worn or stained handpiece tubing is another easily repairable item. Your dental dealer can usually replace tubing promptly, sometimes during a lunch hour if necessary. Shampoo the carpets; paint the office if necessary (choose neutral colours). Fix the cupboard doors that don’t close properly (hinge adjustments are a very frequent problem), and repair any plastic parts that are cracked (curing lights and the front face of a Statim sterilizer unit often need repairs).
Dust, Clean and Discard
Dust the office, top to bottom. We find dust everywhere. The tops of dental light arms are one of those places few office cleaning staff ever think to reach. Inspect the ventilation diffusers (heating vents) and the cold air returns; they are often clogged with dust. Clean out the cupboards. Much like your wardrobe at home, the rule is this – If you haven’t used it in one year, discard it! This is not an easy task for some of us, because some of us like to save items with nostalgic value. However, when preparing the practice for sale, take these items home or store them away. Old charts, models and X-rays (less than 10 years of age) should be boxed and stored. If you have any out-of-date supplies, discard them – they may leave the impression that you don’t buy current dated material and subject you to a possible quality-of-care issue.
As a commissioned broker, we want to help our clients to obtain the highest price afforded by the market. The appraisal process will usually uncover any deficiencies in a practice. When rectified, most practices will sell for significantly more than the time invested, compared with the price that would have been obtained if put on the market in the original condition. In the spirit of the new ‘makeover’ television shows, see how much you can increase the value of your practice by following these top five tips.
Ontario Dentist – February 2005