
Dental Practice Heroes
Where dentists learn how to cut clinical days while increasing profits - without sacrificing patient care, cutting corners, or cranking volume. We teach you how to grow a scalable practice through communication, leadership, and effective management.
Hosted by Dr. Paul Etchison, author of two books on dental practice management, dental coach, and owner of a $6M collections group practice in the south suburbs of Chicago, we provide actionable advice for practice owners who want to intentionally create more time to enjoy their families, wealth, and deep personal fulfillment.
If you want to build a scalable practice framework that no longer stresses, drains, or relies on you for every little thing, we will teach you how and share stories of other dentists who have done it!
Dental Practice Heroes
Built to Sell: Increasing the Value of Your Practice
A sellable practice runs smoother, earns more, and stresses you less. But what does it mean to have a sellable practice? In this episode, the DPH coaches share the seven signs your practice is sellable and explain why you should build a sellable practice even if you never plan to sell. Learn how to increase the value of your practice, what metrics matter to buyers, and how long it takes to make a practice sellable. Tune in to find out if your practice checks all the boxes of a sellable practice!
Topics discussed in this episode:
- The benefits of building a sellable practice
- What healthy businesses have in common
- Characteristics of sellable practice
- How long it takes to build a sellable practice
- Increasing the value of your practice
- When to sell vs. keep building
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Take Control of Your Practice and Your Life
We help dentists take more time off while making more money through systematization, team empowerment, and creating leadership teams.
Ready to build a practice that works for you? Visit www.DentalPracticeHeroes.com to learn more.
Have you ever considered selling your practice? Well, even if you never plan to sell, this is a question you should be asking yourself, because a practice that's built to sell is more profitable, more efficient and gives you, as the owner, a lot more freedom. In today's episode, we're talking about why sellable doesn't necessarily mean it's for sale, and what you can do to make your practice more sellable, and the surprising way we instantly increase the value of our practices. And then you'll find out if your practice is ready to sell with Dr Henry's seven-point checklist. Let's get to it.
Speaker 1:You are listening to Dental Practice Heroes, where we help you to create a team and system-driven dental practice, one that allows you to practice less and make more money. I'm Dr Paul Etcheson, a dental coach, author of two books on dental practice management and the owner of a five-doctor practice in the south suburbs of Chicago. I wanna show you how being intentional about ownership can create a practice that supports your life instead of consuming it. So if you're ready to create a true business that runs without you, you're in the right place. Let's get started.
Speaker 1:Hello and welcome to the Dental Practice Heroes podcast. I'm your host, dr Paul Edgiston, and I'm joined by my DPH coaches, dr Henry Ernst and Dr Stephen Markowitz both very accomplished business people and dentist practice owners and we're taking apart just topics that we think are valuable for owner dentists trying to teach you how to scale your practice, because I think that's what ultimately we want to do scale our practice, live better lives. So today we're going to be talking about how to make your practice sellable, even if you don't want to sell, because if you have no intention of selling, there's still value in making it sellable. So I'll go to you first, henry. I mean just to give the listeners an idea. Henry has sold his practice about four or five years ago. We're on to six, six years ago. I have sold my practice now, four years ago, and Steve's just still plugging along. Go, steve, but Henry, what do you think? Why should we make our practice sellable and how do we do it?
Speaker 2:Yeah, it's only going to make you better. It's kind of like the equivalent of you know, when somebody has their house and they've had it for a long time and all of a sudden they're going to sell it and all of a sudden they do all these repairs and all these upgrades that they never did before when they lived in the house, the owners look back and say, gosh, why didn't we do this? Like four or five years ago? We could have lived in this nice thing here. So it's kind of like the same premise it's only going to make you better.
Speaker 2:There's a book called A Built to Sell and it's talking about. It's actually the title of the book is Creating a Business that Can Thrive Without you. John Wallerow is the author and I read that long time ago and it really kind of hit home is what we're trying to bring here is make your business look at it from an outside point of view, make it sexy for somebody who'd want to buy it. Obviously we could talk EBITDA and making that as optimal as possible. That's obvious. But I think one point that really hit home for me is about whenever you're going to sell your practice. You know, usually they look at what's called a T12, the last 12 months of revenue and financials and that's what they based the sell off of.
Speaker 2:And I remember about a little over a year before I sold my T12 came into effect, I took myself out of the practice. I went from about three and a half or four days a week to two days a week and what happened was most dentists, when they do that and you tell them, recommend that they get really nervous and really scared. Oh my God, my take-home pay is going to go down. Well, what happened was when I did that, the revenues went up, the business got better, my take-home pay was higher and the people who eventually bought my practice told me they told me this after the sale. They said listen, one of the things we really gave you a high EBITDA, we gave you a high multiple on your practice because we know that you built a true practice.
Speaker 2:It doesn't depend on you. The moment you took yourself away and the practice revenues went up. That was evidence that you built something that didn't need your two hands Because, if you think about it, somebody who's gonna buy your practice is looking for you know what are their risks. The biggest risk would be if I bought a practice that had one dentist that was producing 80% of everything. That's a huge risk. What happens if that dude walks out the next day? So to make your practice a real business, look at it from all different aspects, and I know if you're not familiar with the business aspect certainly people like us can help you with that kind of stuff and try to make it as good as possible, not just on the looks part of it but on the financials and the steadiness of the practice.
Speaker 1:Yeah, I love that analogy you shared. So what do you think, Steve?
Speaker 3:Any business that is healthy is sellable, and I think that's what's most important as we think about this. What does a healthy business look like? A healthy business is growing. A healthy business has healthy profit. A healthy business takes care of its customers, takes care of its team members, takes care of its shareholders, is able to continue to grow in its revenue and continue to take care of it all of its stakeholders through its profitability. It will always be sellable.
Speaker 3:So when we are talking to our, our team members and they want, they want raises, which is great, but there better be profit there for us to be able to give the team members raises from. Or if we want to invest in technology or we want to redo the office, the aesthetics, so that everything looks up to date, there better be profit there, or we can't do it. So, at every phase of your business, if you're continuing to grow and you're continuing to be mindful of your EBITDA profitability, whatever metric you want to use, it will always be sellable. There will always be a market for healthy businesses. We just are in a market right now that we're super lucky in that it's such a niche market. We either sell to specific dentists or to specific people who own dental organizations. Those are only two people who can buy our practice. So there's always going to be a need if the asset is healthy, even if we're not selling a sellable practice.
Speaker 1:All these goals of sellable practice is just nice to have. I mean, who doesn't want a practice that runs without them? Who doesn't want a practice that is systematized and doesn't need you in there for every step of the way? Who doesn't want a high profit practice, a great culture practice, something somebody could just buy and just take over? And like you said, henry, with your practice sale, same thing with mine. They really liked that I only worked two days a week and took off like 12, 14 weeks every year. They were like this shows us that you are not so essential here. And I'm like well, I know I'm really important too, but because my ego got hurt by that. But you know, it's like some people would say well, I don't want to work just two days. I really love the dentistry, I love the, but I could. You've got the freedom to do it. And I think that's what comes from making a sellable practice. And when I think of sellable, I think of systematized leadership, systematized leadership systems as far as systems and protocols, but also just it's culture too.
Speaker 2:Well, plus, we all I'm gonna use the house example Most of us that own a house, no matter what level we're at, most of us have a good idea of what the value of our house is right now. And it's a good exercise to know what's the value of my practice right now, today, and there's different ways you can go about it. But I think that's a healthy thing to do as you go along this process here, as healthy thing to do as you go along this process here, as you're building it to sell, be careful of what you build also, because eventually this is the and I know, paul, you were in the same thing. I know, steve, you would be in the same circumstances we were in a situation where I couldn't sell my practice to one dentist. There's no bank that would ever finance that person for that much unless they paid cash. So eventually, like I build a practice so much where I was kind of limited to only selling it to an organization Because I hear this a lot with some clients is some clients say, hey, I want to do what you did and I want to build my practice, build it to sell in the next two or three years and make the highest amount that I can and that's fine, there's nothing wrong with that.
Speaker 2:But kind of I always have like the list of because I've seen behind the curtain now like what are these organizations looking for? So if you're that type and you want to make it like a perfect thing for somebody, you know there's certain things they look for. They look for a minimum of six ops. They look for multiple doctors. They don't want to buy one doctor practice because there's risk. They don exposure.
Speaker 2:They want to have high Google reviews. They want to have leadership systems in place. They want to have an EBIT of at least a million dollars. Right, if you have all those things checklist, then you're going to be one of those types. If that's your desire to have a really high multiple selling practice. So that would be for those people out there that want to grow and do that kind of thing. Those are the things that you would create like, oh, I don't have a leadership team, got to get that in place, right? Oh, we don't really focus on reviews, get that in place. This is all not just the money part of getting your house in order if you're going to build it to sell.
Speaker 1:That's the kind of practice when you get all those things, you can go to the market and when somebody sends you an offer, you could just look at it and just go get real Just like a total dick, because you got them Like they want you. That's a great practice.
Speaker 3:I interviewed a doctor this morning and she's been out for a couple years and we just started talking and I was asking her why she was looking to move on from her practice that she's been at for the past couple years and she's like, I'm just not that busy. I was like, oh well, how many new patients are you seeing on a month, or how many exams are you doing? And she said well, my doctor, the owner doctor, my boss, doesn't really believe in tracking those types of things. He thinks that's too corporate. And I said I'm so sorry to hear that.
Speaker 3:We definitely track those things and anyone who wants to actually know what they need to improve should track as much as they can. So when we're not making our practice sellable, our team members know that and they're going to look for somewhere that can take care of them the way they want to be taken care of. And she wasn't interviewing with me because he was doing such a great job. She was interviewing with me because he wasn't. And I bet there's many other people at that guy's practice that were doing the same thing.
Speaker 2:I've never seen a successful dentist that does not know their numbers like verbatim. Like you know, we can have these comments what's your new patients per month, what's your profitability, what's your EBITO? As soon as people start answering every single question like that, most of the time I don't see those people because they're too darn successful. We see the people where I don't know. Well, do you have any sort of metric system that you no. I run some reports no-transcript. So those are the people that are never going to be successful.
Speaker 1:Yeah, so true, I'm just thinking I'm going to go to Henry From startup to sale. What is a reasonable amount of time someone could get to that level where they build it up and they sell it? How many years?
Speaker 2:Yeah, that's a great question. I mean I was I don't know if I was lucky or just lucky and knowledgeable at the same time but from the day that we opened the door until the day we had an eight-figure sale was less than five years. Now that's not like super realistic, I think, but it shows you it can be done and I didn't have the intention to sell until I was about maybe eight months before I sold it because I learned the value. I had somebody who kind of sat me down and said, hey, let's look at the value, let's look at what your future looks like. But I think I think I could realistic say seven years is realistic If you have the systems, if you have the knowledge and you act appropriately when the numbers are telling you something, when the numbers are telling you it's time to expand, when you're at capacity capacity and I was really lucky because I was supercharged and every time we expanded you know we expanded three times, really three and a half.
Speaker 2:Every time I was under the same roof, so I never had to water down my leadership team or anything like that. I was always lucky in that regard. So maybe if I had to do it a different way, maybe I'd say seven years is realistic.
Speaker 1:Yeah, I think that's a good time frame there. I mean, for me it was eight. But then I look back at all the inefficiency and all the transition points, like bringing on my first associate and then the expansion from five to 11 ops. How I hesitated, I think, an extra year or two both of those times. So I think I probably would have been right around that five, six year mark.
Speaker 2:And the beauty is again always having options in life. And I know you could attest to this, Paul. If, hypothetically, in a year you want, you know what I need a challenge in life, I'm going to start all over again. I think about it. Now you've been through the pitfalls, you've had the knowledge, you've learned from like what not to do. You could probably supercharge that half at least half.
Speaker 1:Yeah, I think I could too, and I think about doing that sometimes and never picking up the handpiece, never being like. Well, I want to see Dr.
Speaker 3:Richardson, it is important for us to also remember that the equity that we have in our practices as practice owners, we're actually supposed to get a return on that investment. It's, in theory, it's no different than owning stock of Google or Tesla or any other stock that we own. It's just in our own business, and most dentists think that when I sell, I die own. It's just in our own business. And most dentists think that when I sell, I die. And you guys are proven facts Like you still go to work at the same practice that you sold years ago.
Speaker 3:So just because we are getting a return on our investment and taking some of that equity and turning it into cash now doesn't mean that we no longer have to go to that practice or can't go to that practice. There are many different ways to do it. The goal of any investment is to get a return and maximize the return on the investment. At the same time, it doesn't necessarily mean we have to take the greatest offer. I'm sure both of you guys could have taken higher offers for your practices, but what has allowed you guys to stay there, I'm sure, is that you sold to the person or the organization that aligned with how you want the next phase of your life to look like.
Speaker 1:Yeah, so true. I think, Henry, you did take a lower offer. I did the same as well.
Speaker 2:Yeah, I had a higher offer but that person they didn't vibe with me. The dude looked like the character from Goodfellellas, the short character, joe pesci's character looked exactly like him I do too, and a hard four yeah so, uh, what am I?
Speaker 2:a clown? So yeah, my clown to you. To add to your point, steve, like now, when I go to work, I mean all the stuff that I didn't have trouble taking care before. I don't even have to worry about that. Sometimes I find like I feel like I go to, I like going to work more than I ever have because I'm just taking care of the people that I've taken care of for years.
Speaker 2:I get all the specialty stuff to me like wrapped up in a basket. You know I go to work and there's like three implant case that's there and I'm meeting them for the first time, you know. And so I like it and it can be done and it shows you all the stuff that can be done. And while we're on the subject of getting your practice sellable, if you go through that exercise, even if you're not going to sell, it allows you to clean up stuff too, because I know you went through this, paul. So when you go through this process of selling, you got to clean up your books, because the next person who buys it is not going to have, you know, who knows what you're putting on through your practice. Some people buy their car payments or this or that, and then the next person is not going to have that. So essentially that opens up more EBITDA that there really is there, but you're hiding it, if that makes sense.
Speaker 1:I probably had $130,000, $140,000 worth of stuff going through there that I didn't even realize was there and I'm like, oh, this counts too, and they're like, yeah, oh, yeah.
Speaker 2:So then, when your account produced a report, it showed a certain amount of profitability, but in reality it was really a lot higher than that.
Speaker 3:Yeah, if you're going through it and you have a hundred grand in credits like that's probably something wrong with your AR system.
Speaker 2:So I always think it's important to go through, know your value, know where your numbers are at and make sure that you have the healthiest business that can survive without you Using that example, if you had $100,000 in just credits and you said yourself, dude, I need to clean this up, and you take a year or two to clean that up. Let's say, hypothetically, we're going to get a 7X multiple on your cell. You just cleaned up $700,000, not $100,000. You cleared $700700,000 from bottom line. That's pretty good use of your time. Yeah, absolutely.
Speaker 1:Steve, are you ever, um you ever, going to join the sale?
Speaker 3:club At some point I will. Uh, I'm still having fun. This is going to be corny, but I, I still love it and I, um, I don't, I think you're addicted?
Speaker 3:Yeah, probably it's a lot of. I mean, we talked about therapy before we press record Um, I, um. We are built to to sell um and know that at some point there's gotta be someone who is more equipped and a better leader than I ever can be, and we'll take it to the next site. Um, just start. I'm just not there yet and I'm I'm enjoying the ride. So that's what I've told myself. As long as I'm still having fun and I feel like we're doing good stuff with good people, I'm not going to stop.
Speaker 2:I think sometimes you see on these forums, why in the hell would a dentist that's in their 40s ever sell to a DSO? Well, you know what? There's a lot of whys, you know. For me, it was taking my chips off the table and there was all the risk because every time we expanded it was always my name on that dotted line. I had all the you know, the loans and all this stuff and I had all the risk because none of my other doctors had any sell.
Speaker 2:So there's something to be said. I answer that question with well, what about me taking risk off the table and getting to live the true life that I really want to and not being tied to an office and having the luxury to say you know what, with this cell, I'm gonna live two blocks from the beach and I can still go to a practice two days a week. So there's something to be said about that, because I think too many times there's a stigma of oh, the doctor sold, he's selling out, he's giving up, he's done. No, it's like life you can do what you want to and make it your own.
Speaker 1:Well, what's interesting about those posts? Because they're all over the place. I mean, once a week someone is posting, oh, I think, like three, four times a week, dude, why would anyone sell and then work five more years back and stuff like that? Here's what I say about that is the people it doesn't make sense for didn't have a sellable practice. You know what it is it's like, because the thing we talk about your practice and my practice, henry, your whole organization, steve these are sellable practices where it makes a lot of freaking sense.
Speaker 1:If you're looking for some lifestyle goals, such as taking some risk out, liquidating some of the equity in there and just moving to some different assets and stuff like that. I mean there's a lot that makes sense for it, but it doesn't make sense for the solo doc, in my opinion, who's got a $1 million to maybe $1.5 million practice. That doesn't make sense to me. That's where I think everyone gets that bad taste with the DSO thing is the people that are picking those practices because I don't see the benefit of them being part of a group.
Speaker 2:I just there's not enough scale. Yeah, the best way that was told to me is whatever you get on that day of sale. If you could be fine with just that amount and never get another penny, then you're good Right. And all this other stuff is cherries on top. And knock on wood, my organization has lived up to everything they said they were going to do and I get nice bonuses every year, you know, and stuff. So. But I think that it's. It's a bad stigma that's out there and I see that at least three or four times a week and everybody loves to jump on that bandwagon.
Speaker 1:It's it's frustrating, but I don't even respond to it anymore.
Speaker 2:That person that had the million dollar practice that maybe has a certain amount of EBITDA. They're probably better off selling to another dentist and maybe continuing that tradition and maybe staying on board a little longer, and that's their why and that's what makes them happy.
Speaker 1:They do the noble thing. Those people do them. They do not. They don't sell the DSO and when, when they sell their house and they get a higher offer, they're like no, I'm going to take the low offer, cause I got, I got principles and morals.
Speaker 2:I want a dentist to buy my house for a lower amount.
Speaker 1:Exactly, I want to sell for the least amount possible, because I am going to be a martyr for this industry, ladies and gentlemen, and you will thank me and respect me for that, and let's just, let's just villainize the. We're the freaking villains, dude. We're the villains. So, yeah, I love this episode, man. I think that was so great. And, man, I almost want to go back and checklist those things. I think you listed seven, eight things, henry, that were just great. Go back and listen to that. The seven things that make your practice sellable. I think those are goals we should all strive for. So if you're looking for some help to do that and you want to have a more sellable practice, to live a better life and possibly cash out, you don't have to, but you get the freedom to do so. If you want to Try working with one of our