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Planning an exit strategy may sound negative to some. “If business is good, why do I need to think about selling,” they might think. But, they don't realize that an exit strategy is more about preparing and optimizing for a good outcome rather than get out of a bad outcome.
You don't get into your car, start driving, and then decide where you want to go. Instead, you decide where you want to reach first, and then and only then do you get into your car.
Planning an exit strategy for your dental practice is no different. Without it, you may often take directions that are contradictory, and end up going around in circles. Once you do have a defined exit strategy, you may start going in a straight line towards your goals.
There are many advantages to planning an exit strategy, but the most important benefits are clarity and focus. While operating your practice, you will have to make many important decisions. “Should I hire more staff or look to expand geographically? Should I spend more on marketing or focus on cutting costs? Should I increase my capacity or better utilize my existing resources?” These are examples of just some of the decisions you will have to make.
Without the clarity of a clear and well-defined exit strategy, you will find it difficult to make these decisions with any confidence. On the other hand, having an exit strategy in mind will give you the following benefits.
Efficient dental practices are worth more than poorly run practices. That statement alone should explain the importance of developing strong and efficient SOPs in your practice. Regardless of your exit strategy, well-defined procedures will help you lower costs, develop better patient relationships, maximize your resources, and grow your practice.
Every dental clinic starts with the aim to make money and be successful. But, how would one define the success of a dental clinic? By gross revenue, EBIDTA (earnings before interest, taxes, depreciation, and amortization), number of patients, market value, or net profits? The answer depends on the end goal—the exit strategy.
When selling your practice, the primary valuation metric that is used by most appraisers is gross revenue, goodwill, brand, and other non-quantifiable factors are important too, but revenue trumps them. Keeping this in mind, you can define your strategies and business growth plan based on your exit strategy.
A healthy marketing plan is essential to the growth of your dental practice. But, what do you optimize your marketing for? Revenue, number of patients, ROAS (return on ad spend), or profitability? Just as knowing the KPI of your dental practice is important, so is knowing the KPI of your marketing campaigns.
If you have a clear exit strategy, you will have a clear vision of what your marketing should achieve. If you're looking to sell your practice, then it would make sense to optimize your marketing to achieve maximum revenue—even at the cost of a lower return on investment, as gross revenue is the primary metric used in valuing dental practices.
Every dental clinic aims to grow, but growth can be measured in many ways. A higher number of patients, better goodwill, higher revenues, more locations, better-qualified staff, and the most up-to-date infrastructure, all are signs of growth. Aiming to grow in all directions can spread your resources thin and ultimately lead to no growth at all. With the focus of an exit, you can aim to grow your practice in the right direction and plan your entire growth strategy around it.
Knowing your exit strategy makes it easy for you to make business decisions. Whether it be expanding your practice, hiring staff, defining or updating systems, improving infrastructure, or changing or improving your branding, everything hinges on your end goals.
Let us take a simple example. If you already have an established dental practice and thinking or starting another, how do you structure the finances, patient records, inventory, and other business assets? If your end goal is to sell your practice, you'd want each of your branches to be self-sufficient and independent working units, which will make them easy to evaluate and sell.
We've discussed plenty of advantages of planning your exit strategy in your dental practice. And, if you look closely, the advantages tie into all the important aspects of running your dental practice. This goes to show how important an exit strategy is—it completely defines your business practices and gives you a clear path to follow from day one. To conclude, we'd like to say that no matter what your exit strategy is, it is always wise to have one.