September 2, 2020
Why to Sell Your Dental Practices as a Package Deal Rather than Individually
Owning more than one dental practice is a good strategy when your businesses are running at full capacity, but what about when you’re ready to hang up the proverbial hat and transition your practices? When it comes time to create a prospectus and valuations for your practices, it may be more advantageous to group the practices together rather than selling them individually. Here’s why.
An increase in multiples is a direct correlation to an increase in the value of your dental practice. When looking at the earnings before interest, taxes, depreciation and amortization (EBITDA) of a practice, these multiples are then used to figure out the value during the process of creating a prospectus. Higher multiples, in turn, result in a higher value.
Economies of scale
The economies of scale for purchasing can be used to help with the overhead of the collective practices. As a result, it can give the buyer more power for purchases the practices make before the transition occurs.
Selling multiple dental practices as a package deal gives the seller more options for the type of transaction under which the deal will transition to the buyer. While options still include selling to an individual, selling more than one dental practice opens the door for offers from different dental service organization (DSO) models, such as a joint venture (JV).
As with any major life decision, the more options you have to ease the transition, the less risk for all parties involved. This is especially true when the practicing dentist is looking to divest themselves of just one of the practices while maintaining ownership in the others. With the complete picture in mind, a prospectus will illustrate why not to put all your eggs in one basket.
Alternatively, if the practices are located too close to each other and the seller continues to practice in close vicinity, a buyer will realize the potential high attrition rate because many patients will simply follow the selling dentist to the other location. Consequently, the seller will be presented with fewer options from which to select.
Contact the experts at Professional Transition Strategies to get the ball rolling on your dental practice valuation to figure out which option is best for you.