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a blog by Chris Barrow

Why it might take you 8 years to sell your business

My latest series of workshops has featured your's truly delivering a one-day Masterclass on "How to sell your dental practice".

Not that I'm in any way anxious to see my clients disappear from coaching, nor do I think that delivering this the day after Sarah Buxton's HR Masterclass is an appropriate response to the minefield of Employment Legislation!

I have had a few Owners expressing the view that their senior managers have been a little unsettled by the title of my day - so to reassure them - the longer title would be:

"How to sell your dental practice for the best value, on the best terms and at the right time - any time in the next 20 years that suits you."

We have also had the opportunity of welcoming Zoom guests from the world of professional services, to share their opinions and expertise.

A fascinating, unexpected (and yet obvious) realisation has been that most of my clients don't regularly chat to accountants, lawyers, agents and buyers, whilst I do - and it's an incorrect assumption (on my part) that dental practice owners know HOW to talk to the professionals.

Possibly the biggest revelation for me, during this workshop series, has been my misconception (now firmly put to bed) that an Owner doing ZERO clinical work at the point of sale could look forward to sailing off down the road, cheque in hand, when the deal was done.

Not any more they won't - some dental corporates are now looking for the Owners to stay on as caretaker managers during an earn-out period - facing the paradox of working to performance targets in a business that they no longer own.

There is also disruption in the acquisitions market, caused by new corporate buyers suggesting that those earn out targets will be based on EBITDA and not the traditional straight turnover target.

Given that, if you ask 12 accountants for a calculation of EBITDA from a set of accounts, you might get 12 different answers, that seems to be a Pandora's Box for future opening.

During my workshops I have attempted to set the scene for what is likely to be the biggest decision my clients will ever make in their professional lives - and yet their lack of knowledge and understanding is scary.

I'm advising clients on their sales (and purchases) all the time - and so I understand the language and the traps, pitfalls, obstacles and barriers, as well as the shortcuts to success.

People ask me how much in advance of a sale they should start to prepare?

My answer today:

  • If you turnover is less than £1 million - three years to build the business to an attractive value - then sell to an independent buyer;

  • If your turnover is more than £1 million - three years to build the business to an attractive value - then five years for your earn-out.

So, if your sales are over £1 million - you had better start planning at least 8 years before you want your money and your freedom to enjoy it.

And you had better hire a business coach to help you.

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