Selling for 80% of collections is still NOT ENOUGH!! - I will tell you why.

Thu, Mar 17, 2016 at 4:55PM

 

Selling for 80% of collections is still NOT ENOUGH

I will tell you why.

Looking back at current dental practices sales, we have seen sales typically between 60% to 90% of annual collections when the dust clears.  These are dental practices under $2.5 million in production.  A funny thing happens when you start to climb over the $3 million mark.  These high producing practices have transformed from a dental practice into a dental business. 

  • They have processes in place. 
  • They use technology to manage all aspects of the business. 
  • The doctor owner works less clinical and much more as a leader showing the employees the “practice way” of doing things. 

These doctors have removed themselves from much of the clinical work and are still earning in excess of 10% of collections for their limited efforts.  They have made the leap from simply having a job (that would stop if they stopped working) to something much bigger and quite frankly, much more valuable.  So valuable in fact that investors are willing to pay 100% to 150% of annual collections.  They will do this because it is no longer a dental office, but a business that can be run with process and technology.  Investors love a business model that nets them above 10% annually and so should you. You have an amazing opportunity.

  1. First, build your dental practice with solid controls. Monitor your cash monthly. Protect yourself from embezzlement with internal controls. Stay out of bad contracts with good counsel. Reduce debt so you can grow when opportunity presents itself.
  2. Next, grow your dental practice into a dental business. Implement cloud technology to monitor the business. Recruit top talent to run the business. Create a brand that focuses on the clients and less about you. Begin to rely on controls, processes and reporting to ease out of the day to day of the business.
  3. Last, maintain the brand.  With steps one and two complete, you now have the opportunity to continue to earn 10% of collections as a CEO or sell the golden goose to an investor for 100 to 150% of annual collections. Nice choices to have.
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