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CATEGORY AQUISITIONS

How inflation is impacting on your profit

By Ian Donnelley, Dental Acquisitions

W ith over 14 years of unparalleled expertise and a portfolio of more than 200 successful transactions, Dental Acquisitions is your go-to authority for mastering the complex, ever-shifting terrain of the dental market. e dental sector has shown extraordinary resilience amid challenges like the COVID-19 pandemic, but as we move into a post-pandemic world, it’s crucial to understand and adapt to new hurdles like sta ng shortages and soaring in ation. e evolving economic landscape e dental industry did not merely survive the COVID-19 pandemic; it adapted and thrived. However, new economic realities are setting in. Dental practices are now dealing with unprecedented sta ng shortages exacerbated by immigration restrictions. is new landscape is also complicated by an in ationary environment, putting further pressure on nancial resources. Employee wages have seen signi cant increases, but so have other operational costs. Whether it’s insurance, targeted advertising campaigns, accounting, IT, lab costs or the procurement of dental supplies—expenses are on the rise across the board. e modern dental practice owner needs to be a jack-of-all-trades. From clinical excellence to managerial prowess, you’re required to navigate a broad spectrum of responsibilities. ere’s the delicate matter of human resource management — demanding emotional intelligence and tact—and then there’s the operational aspect. Ensure your practice can o er a full range of treatment plans so you can keep as much work in-house as possible, HR contracts, hiring & ring and anything else that comes past your desk. e challenge is nding the time to work ‘on’ the business while also working ‘in’ the business, a dichotomy that has become increasingly di cult to manage. A deep dive into valuation Over the past year, our valuation team has assessed over 100 dental practices. Alarmingly, a signi cant number fell short The multifaceted role of a dental practice owner

of being in optimal nancial health for a lucrative sale, primarily due to escalating operational costs. is surprising trend contradicts the traditionally stable nancial outlook that made dental practices an appealing asset class for bankers and investors alike. As we head deeper into the 2024 nancial year, it’s paramount for principals to dissect their FY23 nancial statements and compare them with previous years. Ask yourself: u What percentage of revenue is cons umed by wages, and is this sustainable? u How e ective is yourmarketing strategy in terms of ROI? u Are your associate dentists pulling their weight by bringing in enough revenue to justify their commission? u Are your practice fees evolving in tandem with increased operating expenses? If your fees have remained static while your costs have in ated, your practice’s nancial health could be at risk, potentially eroding pro t margins by 20% to 50%. You’re working just as hard if not harder for half the money! The critical importance of proactive financial planning For many principals, the realization that their lifelong investment is now worth considerably less than it was just a couple of years ago can be gut-wrenching. Most aren’t even aware of this decline until a formal valuation is conducted. An immediate sale might o er a quick exit but will yield a diminished purchase price. What’s the smarter route? Engage in proactive, strategic nancial planning to bolster your practice’s nancial health. The silver lining: A market still ablaze Despite these daunting challenges, the market remains favourable. Whether you aim to sell your practice to private investors or private equity, health funds or international buyers, competition is erce. Our listings have attracted an average of four o ers per listing over the past 18 months, a testament to the robust demand and the potential for favourable sale terms.

Ian Donnelley

Own your financial destiny Even if selling is not on your immediate horizon, a meticulous review of your pro t-and-loss statements remains critical. Collaborate with seasoned experts—be it Dental Acquisitions, your accountant, or another trusted business advisor—to critically evaluate your operation. Don’t just think because you’re busy you’re making money. Whether your focus is to sell in the short-term, or a longer-term objective, a deep understanding of your nancial metrics and a comprehensive business strategy are your keys to success. Dental Acquisitions has served as a trusted guide through these dynamic for many clients with incredible success. It’s vital you realize the maximum value for your lifelong dedication to your dental practice. u

You can find Ian Donnelley and Dental Acquisitions at www.dentalacquisitions.com.au or call 1300 232 217.

AUSTRALASIAN DENTIST 111