Dr. Allen Nazeri walks through a real case: a dentist's practice dropped from $4M to much lower production, got a $700K offer during divorce proceedings, and lost 80% of its value. He explains why systems and owner independence matter for valuation.
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Hi, guys. This is Dr. Alan. Hope all is well today. I had the question coming in from a dentist who's trying to sell his practice for a while, for almost a year and a half, and nothing is happening. And all of a sudden he gets this low offer. He's very upset and he wants to know what he needs to do to increase the valuation of his practice. So I thought I'd do a quick video on this to help answer some of these questions and hopefully help you guys out there who are working every day and building your practices. Well, the scenario is this. The dentist is going through divorce. He's in a major metropolitan area in the US the practice did $4 million a year.
Prior to COVID 19. Now his production is way down, obviously, and the practice previously was doing was stable at about 1.4 million. Three years prior to that, the doctor sees some sort of advertisements from LVI and he goes to Las Vegas Institute. He becomes very clinically trained, so his production revenue goes up, which is absolutely phenomenal. It's wonderful. But then the problem he's having is he cannot find a replacement doctor that can fill in his shoes and take over this business. That's why now he's getting an offer for $700,000, which is 20% of his revenue. And he's all upset and he doesn't know what to do and so forth. So let me share this with you now. Number one, you need to have an exit strategy early on. An exit strategy does not mean you want to sell your practice. You do not know when would the time come that you have to transition your practice. Okay? So it's very important that you plan ahead. It could be a divorce, it could be a health issue, it could be legal problems, it could be bankruptcy, it could be fallout between partners. So you need to have a plan and the valuation of a practice. Just like, you know, leadership, you cannot become a leader in one day. It takes, it's a process. It takes daily effort of doing things right and so forth to be a good leader or.
Proofs to someone you are in love. You know, you cannot do that by just telling them you're in love. It's your actions that shows that valuation works the same way. It's the actions that you take now that can build a multimillion dollar practice and you can get a high valuation out of it. So my recommendation is that you start early, you focus on your exit strategy early on and try to build systems in place where you can increase that valuation. So let me give you some ideas of what you can do, number one, you need to obviously get rid of yourself, okay? If you're trying to sell a business, okay? If you are the business, the chances are somebody is not going to pay you for the money because they know if something happens to you.
All the revenue is gone. So you need to build a system that is not just about you, it's about other doctors doing the work. In this example, if this doctor would have sold his practice when he was doing 1.4 million, he would have probably get 1.4 million or even higher than what he's doing now. Okay? So that's number one, get rid of yourself. Fire yourself from practicing dentistry. If you're going to continue in clinical dentistry, make sure your revenue is less than 15, 20% of the total revenue. Number two, build great business systems documentation. Okay? All of this falls into your IP assets. See, IP assets are an important part of a practice valuation. 20, 30 years ago, practice valuation was solely dependent on a goodwill of a practice, how many charts it has, what's the projection of patients coming in and so forth. Okay? Right now with the explosion of social media, practice can have a lot of patience in a very quick amount of time. Okay? So I'm not saying it's not important. It's not as important to have, you know, 10,000 charts. But what's important is to have a documented process as how you're growing the practice, how you're attracting patients, what are the business processes, what are the clinical processes in your practice and let them to be documented in a way that the layperson can sit there, read it and understand it. Okay? That is an absolute important if you want to build value. The third thing is strategic partnerships. Strategic partnerships are different than financial partnerships. Okay? Financial partnerships are important, but it's not as important. Strategic partnerships, why? Because you can find financial partners anywhere. You can go to the bank, they can become a financial partner, you can go to your mom and dad and get some money. That's a financial partner. But strategic partner is someone that you can rely on their resources, you can leverage each other resources to grow your business. Okay? So strategic partnership is absolutely very important. Now I have a coaching program that I help the doctors go through building strong values for their practices. And it's a 12 to 18 month program, okay? And I go through various number of programs to help them not only immediately increase their sales and revenue, but also build a sustainable growth. If you're interested in that, please feel free to inbox me and I will be happy to share that information with you. But again, please remember, you have to start early. You cannot expect to be, you know, wanting to sell your practice now, and all of a sudden somebody comes in and gives you several millions of dollars for your practice. Okay? Build your practice every day based on the principles that I will be happy to share with you one by one every day and make that practice absolutely attractive and valuable. Again, this is Dr. Allen. Thank you for reaching out. If there are any questions or anything else I can address for you, please put in the comments below or inbox me. Thank you. Take care. Have a good day and be safe. Bye.
