Any dentist who owns a business can benefit from taking the steps to create a profitable, exitable dental practice. Whether you would like to sell your practice within the next year, next 10 years, or pass it down to your children, creating an exitable business pushes a dental practice into a valuable asset with intrinsic worth.
Taking these steps can also create freedom for the business owner as it pushes the business further down the path to ‘true’ business ownership. I often talk about the difference between what I call self-employment where the business hangs on the shoulders of one key person and true business ownership that revolves around a team and a set of systems.
And what is the key?
Creating a business that anyone can run by using the systems put in place to manage it.
It’s hard to see the frame when you’re standing in the picture.
Sometimes the easiest way to illustrate a point about dental practices is to compare it to another business. For this example, we will be discussing a roofing business. Most people get into roofing because they know how to install shingles. After a while, they have enough business that they decide to hire additional help. The business owner is still heavily involved the day-to-day operations of the company. Now, this could mean that you have a successful company with a crew of labourers that brings in good revenue. However, it might not be a sellable, exitable business. Most business owners are not roofers and unless you put a turnkey system in place that anyone can pick up and run, you are limiting your pool of potential buyers to roofers with a similar skill set to you.
The key is to recognise that whether you know it or not, this roofing company does have systems in place. They’re just not documented and reproducible. Yet. These systems live in the knowledge and experience of the business owner. From how to quote a new roofing job to how to hire the right employees, there are ‘best practices’ the business owner has developed over time, even if they have not been put into so many words. Once they can be translated to systems that a new business owner could take over, the business becomes much more sellable.
Turnkey systems are the solution.
Turnkey systems make it possible for potential buyers to purchase your business and hire a manager to run it without requiring the insight of unique industry knowledge. This is great for strategic buyers interested in purchasing businesses they can run with a professional manager at the helm. This is also a great way to assuage any doubts or objections a potential buyer might have. For example, if a buyer looking a roofing business is worried because they don’t know anything about installing shingles, the business owner can say, “Well, you won’t need to because my employees know how to do it.” If the buyer sayings, “Well, I don’t know how to quote a roofing job. How do I know how to keep the profit margins intact?” The business owner can say, “I’ve developed this spreadsheet programme. You input a few measurements and information to generate the cost and an appropriate quote so you can protect your margins and never underbid on a job.” With a comprehensive business structure in place like this, it becomes easier to see how anyone interested in purchasing a business might be able to step in and take over the reins even if their background is in a very different industry. It’s possible for them to see how they can run the systems behind the business, even if they wouldn’t know how to price a roof job by looking at it.
The right systems remove doubts and ensure success.
Imagine if you wanted to sell your dental practice, but the buyer leaned across the table to you and said, “What if your dental assistants leave? I need them more than you do because I don’t know how to do dental work.” What would you tell them? It’s situations like these that can ease the pressure on buyers investing in a new business. The ability to show them how to hire good dentists, dental hygienists, and front desk staff, what competencies to focus on, and how to attract top talent, you can show that this is a sustainable business for them into the future.
The 3 keys to an exitable dental practice.
This example of a roofing business also applies to every dental practice. Until an external set of ‘best practices’ and systems has been set into place, the only other person able to purchase and run your dental practice is another dentist with a similar skill set.
- Understand that you do have systems. Ensure that you take the time to put down your thoughts and processes on paper so there’s captured documentation of your acquired knowledge running this business.
- Ensure your team knows their roles. A true business requires a team to work together to succeed. If your team knows their roles, the expectations for their roles, and how each position contributes to the larger picture.
- Create space between you and the business. You do not want to be the source of all knowledge for your business. If you cannot step away for a few days or weeks at a time without the business beginning to fall apart, it is important to start thinking about taking steps to make the necessary changes.
Working toward an exitable dental practice is a great idea for any dentist that owns his or her own business. Doing this creates spaces for you to take time away – whether it’s for a holiday or medical leave. What do you want your life to look like in five years? Ten years? Thinking about how you would like your practice to look in the future can help you design the right systems and structure to get there. Creating these external systems that will help guide anyone to pick up the reins means that your business will have intrinsic value. It doesn’t need to be purchased by another dentist with your specific specialties. It can be purchased by a strategic buyer interested in running the business through a manager.