Selling Your Dental Practice or DSO? How To Set the Stage For Success.

September 8, 2022 | 4 min read

Selling a dental practice or DSO is complicated. Understanding the many moving parts can help you navigate the process effectively and make your practice more attractive to potential buyers.

Here’s how to set your exit strategy up for success:

Prepare Your Dental Practice For Sale

Buyers don’t want to purchase a practice only to find that they have to clean up a big mess. Here’s how to prepare yours to make it easier for potential buyers to say yes:

  • Reduce outstanding patient balances: Increase your collections and minimize the accumulation of new balances. 
  • Clean up old fee schedules: Improve the operational cost-efficiency of your practice and avoid confusion when buyers review your documentation.
  • Track down outstanding claims: Review your submissions to ensure that all claims are paid—this is also good for your cash flow and balance sheet!
  • Boost the number of active patients: Re-engage with old patients and have them update their information to build a high-quality database.
  • Standardize your systems: Update your tech stack to make it easy for potential buyers to become productive quickly or merge it with their existing platforms.

Make the Dental Merger and Acquisition Process Easy for the Buyer

Dental merger and acquisition (M&A) happen when a dental practice or DSO acquires another to integrate their assets and patients into a single operation. Knowing how you can collaborate with the buyer for a smooth transition can make your business more attractive. 

  • Provide the potential buyer with financial reports to facilitate the due diligence process.
  • Offer documentation on your practice’s operating procedures, employee responsibilities, practice management platforms, and philosophies of care.
  • Keep your team informed about the M&A process and foster a collaborative environment to support a smooth transition.
  • Be prepared to negotiate asset purchase and employee agreement.
  • Work with the potential buyer to transition internal processes and patient databases to eliminate silos, streamline processes, and reduce redundancies. 

Provide Potential Buyers With Key Metrics

Potential buyers want to know about your practice's performance to feel confident about the deal. Provide documentation on the following to promote transparency and build trust:

  • Practice valuation to demonstrate the revenue and profitability of the business.
  • Cash flow model to show your practice’s long-term viability.
  • Aged account receivables to illustrate how well your practice collects payments.
  • Lease agreement to prove that the facility for operation is available for the expected duration.
  • Reports on productions and collections to show how individual treatment contributes to your cash flow.
  • Earnings before interest, taxes, depreciation, and amortization (EBITDA) to show the practice’s overall financial performance.

Highlight Attributes Important To Buyers

Capture potential buyers’ attention by communicating critical aspects of your practice they’d find most valuable:

  • Low overhead and operating expenses because they correlate with the practice’s profitability.
  • High collection rates as they're the foundation of healthy cash flow.
  • An efficient technology stack, which can help improve operational cost-efficiency.

In particular, modernizing your practice or DSO with the latest technologies can help you increase its valuation and tick some boxes for potential buyers. For instance, automating workflows and increasing employee productivity can help buyers feel confident that they won’t be paying employees to perform low-value, repetitive tasks and drive up overhead.

A cloud dental software can help you keep all your practice data in one place to generate clear financial reports to build trust with buyers and demonstrate the value of your practice. One with a patient communication module can help you deliver an outstanding patient experience and retain more patients to make your business more valuable. 

Set the Stage For a Profitable Exit

Savvy investors and buyers evaluate the viability of a dental practice or DSO against many criteria. It could take a few years to execute an exit strategy—the more you do ahead of time to make your business profitable, the better position you’ll be in at negotiation time.

An advanced, all-in-one dental practice management platform, such as tab32, can help you automate workflow, improve operational cost-efficiency, elevate the patient experience, improve collections, and streamline claim submissions to improve your key metrics and attract more buyers.

Request a demo to see how tab32 can help you set the stage for dental M&A success.

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