The Two Mistakes He Made Selling His Practice

Dr Barry Oulton never planned to leave. He had taken his Surrey practice from £250,000 to £1.1 million, he had a business plan to take it to three million, and he had planning permission to build the room he wanted for it.

I envisaged myself effectively working in that practice till a very ripe, ripe age. I had no intentions to leave it.

What happened instead is the part of practice sales nobody puts in the brochure.

Unfortunately, the group that I sold to were less than honourable and lacked a great deal of integrity. And so I didn't get the earn-out, which was in excess of 400,000 pounds. And they basically got rid of me at the end of my contract.

It was a very tough experience. My wife had a breakdown because of the bullying from the management. I had a breakdown.

He is not bitter about it on tape, and he is clear he is not the only one.

I am not the only one that that has happened to, particularly with some of the groups in the UK.

Mistake one: he did not know his numbers

Barry puts this first, and it is the one with a price tag attached.

Number one is I didn't know my numbers. And had I known my numbers and been on top of my numbers three years beforehand, it probably would have meant that my business was considerably worth considerably more.

Three years, not three months. A buyer is pricing a trend, not a snapshot. If the figures only get clean the quarter before the sale, there is no trend to price.

Most people think about selling the year before they're gonna do it. Because the more time and energy you put into the exit plan, the smoother it will be.

Mistake two: he chose a lawyer on price

I chose a lawyer based on cost. And the advice I got was not ideal.

The cheapest adviser on the biggest transaction of a career. Barry's advice is to invest properly in the people on your side of the table.

It's worth actually investing in good advice and good support.

The naivety he admits to

There is a third thing he raises, and he is honest that it is less a mistake than a character trait.

The second is a bit sad, which is I trust people. And I trusted the man that came and explained that nothing would change and that everything would be amazing. I trusted him that he was with integrity, he was telling the truth. And it turns out he wasn't.

His remedy is specific and easy to act on.

If you're thinking of selling into a group, find three people that have sold into that group and talk to them. If you are selling through a broker, find three people that have sold through that broker and talk to them.

Three references the seller did not choose for you. That is the whole safeguard.

The dependency problem

I put it to Barry that a practice which depends on its owner is worth less than one that does not. His answer was immediate.

How dependent was your dental practice on you? Hugely. Hugely. I mean almost almost a hundred percent.

That dependency is exactly why he was tied in for five years. It is also the thing he now works on first with owners who are thinking about an exit.

If we know that they're thinking of selling three to five years from now, we are absolutely focused on increasing the input of the associates and decreasing the percentage production of the owner operator.

The terms and conditions of an associate led practice when you sell are much better than they are if you're the owner operator.

The uncomfortable implication is that everything which makes you feel indispensable in your own practice is actively reducing what it is worth.

What he would do now

Barry now has a platform that connects the patient management system to the financials and updates every two minutes: EBITDA, cash flow, tax, associate modelling.

Once you've got that information, you can either start to make different choices yourself or you get advice on that information.

You can run scenarios. If I was to tweak the percentage for the associate, what effect would that have?

The point is not the software. It is that a sale negotiated on data is a different conversation from a sale negotiated on a story.

Control information about the numbers and the data about that, that is the most important thing.

The hardest part nobody sees

I asked him what the hardest part of running a practice is that nobody talks about.

Most people that go into it go in naively, thinking that it's the same as being an associate, only you own it. And you don't really realise how many hats the owner is wearing.

Dealing with team, staff issues, hiring, God forbid firing, discipline. You've got compliance and all of that, you've got legal stuff, you've got your patients as well, but then marketing. It is a huge task that most people underestimate.

And then the answer that explains how he got three and a half days a week back.

I should be doing the things that only I can do and the things that I actually want to do because it brings me joy. Everything else, in an ideal world, somebody else should be doing. Because there is somebody on the planet that loves to do the stuff that I don't want to do.

Watch the full conversation on the episode page, or read the longer argument in The $2 Dentist.