6 Tips To Boost Your Dental Practice’s Valuation For PE Investments

November 4, 2022 | 4 min read

Private equity (PE) money is flowing into the dental industry. PE activities in healthcare increased by 21% in 2020 amidst a 14% drop in overall global PE investments. The dental subsector continues to get the attention of healthcare investors in 2022, and we expect the interest to persist.

Why is the dental subsector so attractive to investors?

The dental industry has been experiencing stable and consistent growth. It’s also immune to economic fluctuations as most people consider oral care essential. Additionally, the fragmented market opens up many opportunities for PE groups to offer liquidity to individual practices seeking to consolidate practice management and optimize their practices.

Considering a potential PE offering? Here’s how to prepare your practice to maximize its value: 

1. Create a 3- to 5-year Plan

Dental practices often start to see interest from PE investors when they reach $10 million in revenue. But the point at which you decide to take a PE deal may vary depending on your unique circumstances. You should develop a roadmap to achieve your objectives, regardless of your criteria.

A 3- to 5-year plan can help investors understand your intention for the business and how it aligns with the PE firm’s interest and strategy. The timeframe also allows you enough time to protect your assets, such as critical staff, to maintain the value of your practice.

2. Invest in Infrastructure

Investors consider how your facilities, equipment, and infrastructure can support growth when determining the value of your practice. By moderating compensation in the early years, you can allocate more funds to improve the marketability of your business down the road.

Consider how your infrastructure helps deliver a competitive patient experience and meet consumer expectations. You must invest in physical equipment as well as digital tools to manage patient records, communications, and billing processes cost-effectively. 

3. Keep Your Business in a Sell-ready Shape

Plans can change — you may have a roadmap to get your practice ready for sale in 5 years, but unexpected events may happen (e.g., your partner decides to retire due to health issues) and necessitate a transaction earlier.  

You don’t want to be scrambling. Well-prepared business financials that show your practice’s profitability and opportunities can position you favorably during negotiations. Keeping your business in a sell-ready shape can also help you align day-to-day operations with your 3- to 5-year plan.

4. Establish Consistency Across Locations

If you have multiple locations or are planning to expand, you should ensure replicability across all offices (e.g., same look and feel, workflows and procedures, and staff training.) You should also have a practice structure that can keep every location running like a well-oiled machine.

If you’re investing in new locations, focus on markets with high growth potential (e.g., demographic with high disposable income and willing to pay for high-margin procedures.) The initial setup may cost more, but the payoff can also be much higher.

5. Build Your Online Presence

Potential buyers will most likely visit your website and check out your social media profile to determine if they want to have a further conversation. A strong and consistent online presence can help reinforce your practice’s value and attract more interest.

Also, online reviews and testimonials are a good indication of your practice’s reputation. Good reviews instill confidence in potential buyers and demonstrate that your practice has what it takes to attract and retain patients.

6. Grow Your Patient Base

More patients equal more revenue, which is key to raising your practice’s value. You should have a marketing plan to acquire new patients. Besides promotional channels, leverage the power of word-of-mouth marketing by asking your existing patients to refer others to you.

You can’t grow your patient base if you have a leaky bucket — you must increase your patient retention effort by upping the ante on patient communication to stay top of mind. For example, automate recare reminders, reach out to patients with incomplete treatments, and make it easy for them to book an appointment through an online scheduling feature.

Maximize Your Practice's Value with tab32

tab32’s all-in-one solution helps you deliver a modern patient experience to attract and retain more patients. Meanwhile, our automation workflows and billing features help you streamline operations and ensure a healthy cash flow to improve cost-efficiency.

Request a demo to see how we can help you set a solid foundation to support your 3-to-5-year plan and keep your practice in sell-ready shape.

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