In 2008, the economy retracted and, over-night, everything seemed to be worth significantly less. Dental lab owners ready for retirement found themselves taking on more responsibility as they juggled staffing and workload swings. Over the last 3 years, the economy has recovered and businesses have regained some of the value that was lost. However, many dental lab owners who were ready to retire 4 years ago are still waiting. According to LMT Dental Lab Owner Demographic Study, 43% of dental lab owners will be eligible for retirement in the next decade.
There are steps one can take to ensure a lab stands out in this buyer’s market. Prospective buyers evaluate income, assets, technical expertise, and goodwill. The more transparent this information is to prospective buyers, the more appealing the lab will be, not to mention that this information helps to ensure that the asking price is where it should be.
Income is generally the strongest determiner of the lab’s sale price, so the more that is known about it the better. If income trended down during the recession, check to see how it compared with others over the same time period. Stock portfolio performance is measured against the industry benchmarks, lab income is no different. If the industry was down 5% during a given period, being down 3% takes on a different meaning. Further reports that break down income by department, product, and geographical area will also help to clarify the numbers for a prospective buyer. Solid lab management reporting will provide income analysis from a multitude of perspectives.
Assets are easy to measure as they are tangible. To add appeal, compile comprehensive records. A good computerized lab management system will have provision for storing equipment records with suppliers and a calibration and maintenance history.
Like asset tracking, complete employee records should be available within the lab’s management software, including education status, courses attended and credits, and positive and negative comments made with regard to performance at the lab. Good production reports should also outline what each technician is grossing the lab and what they produce. Reports should provide a picture of the role and efficacy of every technician in the lab.
While income is the key determiner of sale price, there is no income without customers, and customers are generally not keen on seeing their lab change hands. Complete customer and communication records are essential to a smooth transition. The more information the prospective owner can access, ranging from technical preferences to buying patterns to personal details, the more confidant s/he will feel that customers’ needs are known well enough to be met by new management. It is also imperative to have accurate, comprehensive financial records and detailed sales breakdowns.
DAMAS/ISO compliance is, in itself, a step toward preparing for the sale of a lab. In addition to the benefit of advertising compliance to customers and prospects, it means the kind of information a buyer wants – methods, techniques, and detailed information about every case and customer are tracked.
If a pattern is emerging, it’s that information in an owner’s brain is worth much less than documented information that can when needed. As great as it feels to be indispensable, this is one time when an owner must be dispensable, and the more dispensable the better. Getting as much information out of the owner’s (and all employees’) heads and documented prior to sale will provide assurance that the operation of the lab can continue into a predictable and prosperous future.
Ironically, preparing for the sale of the lab, just like fixing up a house just before selling it, always makes one wonder why they waited so long. The reports that appeal to a prospective buyer are the same reports that reveal the past and present of the lab and point to its future.
Preparation is the key to exiting your business on your terms and receiving a price close to your asking price.
Call me for a confidential consultation as you begin preparing to move on to the next phase of your life.
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Contact Cecil Williams
For more information call me at 888-925-5055 ext.206
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