How Poor Data Quality Erodes Practice Sale Value

When patients visit your dental office, they choose your practice above all others around you. This decision is a reflection of the quality of service and reputation that you have established. Your brand messaging or online reviews may initially draw in patients, but they will ultimately make a long-term decision based on the quality of care they receive after one or two visits.

If you’re considering selling your dental practice, potential buyers will look for the same level of trust in your business. They’ll be interested in the brand, operations, and net income. During due diligence, they’ll delve deeper into aspects of your business that your patients don’t see. This in-depth examination can sometimes uncover unclear metrics, causing potential buyers to question the market value of your practice.

Your dental practice’s critical data is stored in your practice management software and financial reports. Well-organized and maintained information helps potential buyers and advisors evaluate your practice. Many motivated sellers have disorganized reports, which can lower a practice’s value or presentation. These issues may include the following:

  • Mixing personal and business expenses in the Profit and Loss statement.
  • Revenue that is not associated with specific providers.
  • Poorly categorized expenses and unclear overhead percentages.
  • Inaccurate active patient reports that inflate the numbers.

For instance, imagine a hygiene-focused practice with two hygienists contributing a substantial portion of the practice’s production. A buyer should be able to quickly identify the specific procedures each Registered Dental Hygienist (RDH) performs and whether periodontal codes account for one-third of the hygiene production, ideally.

With accurate employee reports, a rapid analysis can also reveal if each hygienist generates approximately three times their salary. Hygiene production can often generate sufficient revenue to cover practice payments for the new owner. Precisely presenting this data can reassure nervous buyers and bolster their purchasing decision.

Boost Buyer Confidence With Reliable Reports

When a buyer encounters disorganized data during the initial analysis of your practice, their confidence may waver. They may question if there are other hidden issues and may lose trust in the broker if they hear uncertain explanations for unclear metrics. As a practice transition specialist, it’s essential to have accurate data to support an attractive practice. Buyers can quickly lose trust in a potential transaction, but numbers always remain truthful and offer reassurance.

Conversely, transparent and trustworthy reports that accurately reflect the practice’s branding, operations, and finances can generate momentum toward achieving your desired exit plan. As more and more baby boomers and younger practitioners consider their exit strategy, buyers have a wider selection of practices to choose from. Large dental service organizations (DSOs) expect enterprise-level data to ensure future practice growth, leaving no room for uncertainty. In today’s metric-driven business environment, every buyer desires a straightforward story that is consistent throughout the complex reporting options available in practice management software.

When faced with similar practices to choose from, buyers are more likely to choose the practice with the most reliable data. For example, your practice may have an excellent reputation, a modern setting, and a friendly staff. However, if the internal reporting is disorganized, you may be at a disadvantage.

Start Improving Data QualityToday

Optimizing your practice data should begin well before potential buyers start showing interest. At DDSmatch, we strongly believe in assisting sellers in maximizing the value of their businesses through effective optimization. Our guidance can help your team and CPA refine your reporting, ensuring you receive the total value your practice deserves. Whether you plan to sell your practice in a few months or a few years, the time to enhance your sales appeal is now. Adopting the right approach allows you to enjoy a favorable return on your practice investment and sell it when you’re ready. Reach out to us today to schedule a complimentary call to review your goals and how you can help you maximize your practice value.