For sale: How to sell your dental lab

Selling a dental lab: 5 questions to ask yourself image

The consolidation of the dental lab industry presents a potentially lucrative opportunity for independent operators. But selling your dental lab requires forethought and planning. Ask yourself these five questions to get the selling process started…  

1. Why do I want to sell?

Your motivation for selling your dental lab business is important. It will help to define your goals, which will in turn direct your overall sales strategy. 

For example, is selling  your lab part of your succession plan as you look towards retirement? Do you want to retain a stake in the lab, or are you looking to cash out? Are there partners involved? Do you want to protect the future of your current employees? Do you have family members involved in your business? 

These are all important questions that may come into play as you go through the selling process. Get your motivation and goals straight from the outset and you’ll save yourself potential angst later on.

2. How do I value my dental lab business

Coming up with an accurate valuation for your dental lab business can be quite complex. There are three common business valuation methods to consider, but your choice will rest on the current financial health of your lab.

For example, if you are currently in a strong financial position with high annual turnover, an income-based valuation may be best for you. On the other hand, if cash flow is currently a problem for your dental business but you own a lot of equipment, an asset-based valuation could give you the best result.

Your choice of valuation method will rest on the current health of your dental lab business.

3. Do I need some help? 

Seeking help is always a good idea. A proper business valuation requires expert skills. For starters, you’ll likely benefit from employing an experienced account — if you don’t already have one — to gather all the financial reports you’ll need for an accurate business valuation. 

Your next stop should be to a business valuation specialist. They’ll get to know your business and guide you on which valuation method is best for your circumstances, or may recommend a combination of methods.

Finally, a business broker — particularly one that specialises in the dental industry — will help take your lab to market and represent your interests in negotiations with potential buyers.  

4. Who might buy my lab?

As the consolidation of Australia’s dental lab industry continues, larger corporate networks are hungry to acquire smaller, independent dental labs. This has created a relatively strong market for now, however this is not likely to last after corporate networks inevitably move out of their growth phase.

Of course, you can also consider selling to entrepreneurs keen to make their mark in the dental health industry. And larger dental practices that might be looking to add in-house lab services to their business could be in the market to purchase a dental lab.

Larger corporate networks are hungry to acquire smaller, independent dental labs.

5. How do I get my dental label ready for sale? 

For starters, if you’re not the sole owner of your lab, you’ll need to ensure your partners or other stakeholders are all on the same page for the sale to be a success. 

It’s also essential that you’ve set the lab up to be able to run without you. All workflows and processes should be documented, and relationships with clients and suppliers should be formalised. While you may have been happy to work on hand-shake deals and long-term relationships, your buyer most likely will not. 

You’ll also need all your financials in order, and be able to provide the data or metrics potential buyers will need to do their due diligence. And it should go without saying that your lab needs to be well presented and prepared to host visits from interested parties. 

While selling your dental lab may seem like a drawn-out process, don’t take shortcuts. It will only cost you in the long run. Rather, commit to the process and you’ll be more likely to secure the price that’s worthy of the hard work you’ve put into building your business. 

Please contact Avant’s MD Richard Salter if you are interested in selling your dental lab business.

This regular newsletter will deliver articles and information for business-minded dentists looking for ways to improve patient care and their businesses.

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