Dentaltown July 2021 - 62

Knowing your numbers
Why don't more doctors know what their practices are worth? Because doctors
naturally gravitate to the clinical aspects of the practice, not the business aspects.
Hopefully, you also focus on things like team training and patient experience, but how
much time do you spend on business management and fi nance functions?
Another thing you may not realize is that when you fi rst incorporated your practice,
you may have declared a certain number of shares of stock, or perhaps used the typical
default of 1,000 shares. As you've been growing your practice, producing more income
and making profi table investments, the value of your business has been steadily
increasing over time. And while you may not think about it this way, the value of those
shares has been increasing simultaneously. But since that fi rst day, have you reassessed
the value of that stock? Probably not, and those approaching you to buy know that.
In private equity,
the people with the money will likely never step foot in your
offi ce. Do you think they'll care about your employees, your patients and your
community the way you did to grow the practice? Not even close. Regardless of what
you're told, none of that has anything to do with why they want to buy your practice.
As a fi rst line of defense, here are two critical do's and don'ts that will help protect
you against such an attack:
It does cost
money to have
a business
professionally
appraised, but
the result will
be a pleasant
surprise because
most doctors
undervalue their
practices.
62 JULY 2021 // dentaltown.com
DO
PAY TO HAVE YOUR BUSINESS
PROFESSIONALLY APPRAISED
You'd never sell a house, nice car, boat or other big-ticket item
by letting the buyer set the price. You may negotiate on it, but fi rst
you'd do your homework to get a good sense of what the asset is
worth. So why would you sell your biggest-ticket item of all-your
business-without getting a handle on its value?
Yes, it does cost money to have a business professionally
appraised, but the result will likely be a pleasant surprise because
most doctors undervalue their practices. If a buyer says they'll get
it appraised for you, that's a clear confl ict of interest, and your
interest is not the priority. The private-equity buyer wants you to
sell for as little as possible, so they can resell for the biggest profi t,
or keep the practice running at a high profi t margin for a few years,
before stripping out the heart. Having the buyer do the appraisal
is just allowing the fox in the henhouse. You'll be given allegedly
fact-based information but you can't trust it, because the business
wasn't assessed from your vantage point as a steady revenue stream
or for its long-term growth potential. Private equity couldn't care
less about the long term.

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Dentaltown July 2021

Table of Contents for the Digital Edition of Dentaltown July 2021

Dentaltown July 2021 - Intro
Dentaltown July 2021 - Cover1
Dentaltown July 2021 - Cover2
Dentaltown July 2021 - 1
Dentaltown July 2021 - 2
Dentaltown July 2021 - 3
Dentaltown July 2021 - 4
Dentaltown July 2021 - 5
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Dentaltown July 2021 - Cover3
Dentaltown July 2021 - Cover4
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Dentaltown July 2021 - IAOS_Book_1
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