Most practice owners have had little real-world business experience prior to graduating from Dental School. It turns out that there is more to being a business owner than just paying taxes and making payroll. A recent MSN.com article reminds us that creating value in your business is key to survival and longevity. The article, 5 key steps to build your business value reminds us that we need to keep an eye on the big picture in order to build and enjoy success.
- Manage your cash flow to ensure your business is cash positive. By definition, a business should make a profit so whether by increasing your revenue or fine tuning your expenses, make sure that at the end of the day your work has been profitable. I can assure you that it is very difficult to sell a practice that does not make a reasonable profit.
- Ensure that you are creating standard systems and operating procedures for your business. How long could your practice run without you? Rather that storing operational systems in your head, now is the time to formalize and memorialize them.
- Decide from day one what is your plan of exit or your succession plan. Practices that are managed from the beginning to have equity and profitability are much more liquid and transitionable than those that are thrown on the market a few months after the owner decides to retire. Make a plan, keep your foot on the gas and work through to the finish line.
- Reduce the riskiness of your business. Yes, everyone presumably has malpractice insurance but what about data security, fraud and disaster planning? Are you overly dependent on one source of revenue, vendor or service? Do you have the proper directives in place for your health, practice and personal belongings? Sadly, the answer is often “NO”.
- Review your business numbers and reports. We are repeatedly surprised by the number of docs who manage their business by its checkbook balance. “If I have money in the account, I must be ok.” If you have any hope of transitioning your practice to the next generation, identifying and understanding key statistics is vital. Bankers, Lawyers, Accountants and even the Tax Man will all have an interest in your business and it pays to be aware of what’s happening with your numbers. There is a reason they put those reports in your software package. Make good use of them.
A healthy business is based on service, solid systems and positive cash flow. Look closely at how you can start building value today.
Steve Wolff, DDS