practice | MANAGEMENT
Why are they selling? Why good business owners sell strong businesses By Simon Palmer
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ne of the first questions that a buyer will ask when a business is for sale is Why are they selling? When the business is strong and the vendors seem young and healthy, buyers will often show some incredulity and/or suspicion about why it is for sale. There seems to be a misconception out there that a successful business owner will only ever buy, grow and accumulate businesses. That when they decide to sell one, it could only be if they were retiring, sick or if there was something wrong with the business that the buyer cannot see yet... This is an incredibly narrow and pessimistic view of what it is to be a successful business owner. Successful businesspeople sell their businesses for many reasons that have nothing to do with the underlying prospects of the actual business being sold. Any successful business owner should consider selling any business when they realise that one of the following has occurred:
82 Australasian Dental Practice
1. If they realise that their time and/or resources is better spent elsewhere
2. If they realise that the business is worth more to someone else than it is to them
ne of the things that makes a person or company successful in business is that they seem to understand the inherent opportunity cost of their time and resources. Every business owner has limited/finite time and resources and needs to decide where to allocate them. Not every business opportunity operates at the same ratio of time/effort to profit/return. Some businesses are more time hungry and require more effort than others. When a successful business owner is selling a business, it is often because they could allocate those resources to another business that they already own (that needs more attention or investment) or to another business that they wish to buy. This doesn’t mean that the business they are selling is not good. The business may be an excellent business, but just isn’t a good fit for their circumstances and their business holdings/portfolio at the time.
a. A dental practice that is turning over $700,000 per annum with 0% profit can still be a good job for a dentist who is the owner-operator (taking home 40% of the $700,000 (less lab fees)), but without any profit, it may not be a good business for a third-party owner (who still needs to pay a dentist the 40% of the $700,000 (less labfees) to do the work). That is to say, some practices are worth far more to an owner-operator to run and work in, than to a third-party business owner. b. Some businesses are full of opportunity that the current owner simply lacks the skill, time or inclination to realise. To give an extreme example, a dental practice with a $1 million turnover that is referring out all crown and bridgework or implant cases or simple orthodontics is worth far more to another owner who can offer these treatments, than to its current one.
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May/June 2022
