How do you know when to sell? It's always a question that a lot of practice owners contend with.

Do you sell because the market is high? Do you sell for personal reasons? Or do you look at bringing in a partner and working yourself out of the business?

As you might expect  the answer is always -  it depends.

The truth is there’s no hard and fast rule about whether it’s a right or wrong time to sell.

Coincidentally, the biggest mistake I see most dental practice owners make is they try to “time the market” to sell when they think they're going to get the most money from the practice.

Sadly, you can never time the market. But you can look at market conditions to see if the conditions for selling are favorable, or not. It’s important to realize that at any point in time, there are both positive and negative indicators.

Some of the considerations right now are:

• As we exit the pandemic, staffing has never been more difficult than it is now. Wages are climbing and staff are more willing than ever to leave your practice in search of a workplace that “better fits their values”
• The economy is starting to pick up again and is almost back to pre-shutdown levels. Many economists are predicting increasing economic growth through 2022 and 2023.
• Inflation currently exceeds 4% and is now at a nearly 30-year high. Originally considered “transitory”, economists now admit that the inflation rate will stay about the Fed’s 2% target for some time. This will negatively affect your practice as costs increase.
• Insurers are typically slow to increase fee schedules. This means that revenue will remain flat as costs increase, lowering profitability. Practices that focus more on insured patients will feel the effects of this more than practices that are not as insurance-centric.
• Supply chain issues have caused shortages of some supplies and cost increases. It is anticipated that as supply constraints ease, shortages will end and costs will be generally lower.

All of these will affect the valuation of your practice because like all businesses, valuations are determined by both revenue and earnings.

If your revenue declined during covid but you were able to keep earnings relatively constant through aggressive cost-cutting and expense management, that's a very positive sign for a buyer which will entice a motivated buyer to pay a premium price for your practice.

Conversely, if revenue dropped by 20% and earnings dropped to zero (this wasn’t uncommon), a buyer may not be willing to make an offer until they see some recovery of earnings or your practice resumes those profitable procedures that may have been restrained by supply chain limitations.

All of these factors contribute to the decision to sell. It is interesting to note that 2021 was a record year for business acquisitions in the United States and according to KPMG, 2022 will set new, higher records.

For dental practice owners, this signals that funds for acquisitions are available and with multiple purchasers competing, your odds of getting a premium offer are quite high.

Ultimately, the most important decision is that you want to make a point of selling when it's right for you because the time to start thinking about selling is immediately after the first time you think about it.

Will you be thinking about selling or stepping away from your practice in the near or long-term future? To discover all your options, call 703.298.1690 or click HERE to schedule a Discovery Call NOW with Stan Kinder for the best options whether selling or retiring.