With 2024 well underway, we can look back on the cold climate of last year with a quiet sense of relief. Now, after this economic winter, we’re seeing the first green shoots poking through. Energy and optimism are returning, and the marketplace is reawakening. The buyers who lay dormant during 2023 are beginning to raise their heads.
The marketplace for dental practices has significantly changed in the last few years. Around the turn of the century, many deals went through at around 30% of a practice’s turnover. Now, it’s typical to see deals of £1 million and upwards. At Hive, we regularly help with practice sales in the multi-millions. This is therefore fundamentally a different game, with far higher stakes ones where, unfortunately, we see little mistakes turn into big outcomes, often due to a vacuum of advice.
If you’re a practice owner, there will come a natural point in your career when you start thinking about selling. And, if you’re selling for such a large amount, it’s more important than ever that you work with people who are solely concerned with your best interests. So, with this in mind, how can you know who is best to work with, and what you should look for?
When you’re buying or selling a practice, you’re throwing yourself into an inherently dysfunctional marketplace. However nice they are, every buyer wants to get the best deal possible, finding increasingly creative ways of wringing out every penny (trust me, we’ve seen them all).
My latest favourite is a headline price “agreed” but only on the basis of 10% compound growth for five years. The trouble is, this represents a 60% increase. So a deal agreed for £5 million isn’t really a deal agreed for £5 million on your current business; it’s £3.1 million. Of course you can grow it, but why not grow it for yourself and enjoy the spoils, rather than line someone else’s pocket?
This isn’t a bad thing, from their perspective – in fact, it’s entirely understandable. It just means that as a seller, you need to learn the rules of the game you’re playing before you begin.
Brokers, too, bring their own complications. We work with recommended and regulated brokers that we know and trust, simply because we’ve seen so many problematic relationships with others. This is particularly the case when brokers suggest a buyer pays their fee. On paper, this seems good (it’s saving you money, right?). But it’s worth asking the question: if the buyer is paying their bills, who are they really working for? On top of this, busy brokers might be tempted to rush through sales at a less-than-best price. After all, to a broker more concerned with their own pocket, 90% of many deals is clearly preferable to 100% of fewer.
At Hive, we regularly support clients with their practice sales, averaging around one transaction every fortnight. From being so frequently in the field, we know that it takes a team to achieve the best result. Countering all the pitfalls of working with a lone broker, we can offer a breadth of expertise across multiple in-house experts, as well as a symbiotic relationship with approved brokers and solicitors.
Knowing when to sell can be just as important as how you do it. If you’re looking ahead, we offer a purpose-built strategic review for owners who are thinking of exiting. From this, we may not even advise selling straight away – instead, it can pay to choose the right time and dynamics. We’ll help to make sure you have the best possible leverage in a future deal, which could mean holding off to focus on priming for sale with short-term marketing, specific problem solving or building a bank of evidence around your financials. These are all small levers that we can use, based on our depth of experience. It all comes down to the principle of aggregation of marginal gains.
Above all, if you’re thinking of selling, do speak to us first. In the shifting sands of business sales, it pays to have your best team on your side. And with more than one person working on your deal, you can trust that you’ll get the best outcome – away from any conflicting personal interests.
