"What could my lab possibly be worth--I AM the lab," says a respondent to LMT's Exit Planning survey. Given the number of solo operations and very small laboratories in our community, this is a common concern when it comes to exit planning. In fact, in our survey, those with fewer than three employees are the only lab owners who say their exit strategy is simply to sell off their equipment and shut their doors.
But if you're willing to plan ahead, that may not be your only option. If there's no family member or employee interested in buying your laboratory, a sound strategy is to merge with another lab that is interested in bringing you, any technicians and your clients on board. In a case like this, the perceived value of your laboratory is directly proportionate to your willingness to stay to ensure a seamless transition.
And the more dependent your laboratory is on you, the longer that transition will need to be. Therefore, finding the right buyer--one with whom you're personally compatible and who shares your values, work ethic and business philosophy--is crucial. For instance, if the buyer wants to switch to cheaper materials without informing clients and that makes you uncomfortable, the success of the partnership is dubious.
Compare your price lists and spend time working in each other's labs to make sure there is a good fit in terms of product quality and production levels. Even if you don't plan on working together indefinitely, you need to be able to work with that person at least during the transition. "The most important variant in a laboratory merger/acquisition is the people, not the money," says Rob Gitman, president of Gitman Marketing Associates, York, Pennsylvania.
Just as your personalities should mesh, you also need to consider how your businesses will fit together. For example, imagine the difficulty of merging a boutique laboratory with one focused solely on production. On the flip side, if that production laboratory wants to implement a high-end department, perhaps there's an opportunity there after all. Similiarly, a removable laboratory might be a good buyer for a crown & bridge business if its goal is to go full service.
In any case, be sure the details of your involvement are spelled out in advance: length of transition; specific job description, including levels of responsibility; expected working hours, etc. "The littlest details--even whether or not you get to keep your office--can become sticking points," says Gitman.
Another thing that can get in the way: your emotions. It's bound to be difficult to watch the business you have nurtured now in the hands of someone else. "You have to be prepared for the fact that your role is going to be different and it may be uncomfortable for you," says Chuck Yenkner, president of Business Development Associates, Glastonbury, Connecticut. "The best advice I can give is to stay focused on the end game--whether that's a fishing boat, a beach or just more free time."
For small laboratory owners who are not inclined to seek out a merger or work full-time during a transition, Bob Ditta, CDT, CEO of Dental Services Group recommends another option: find a laboratory in the area that offers a similar quality product and shares your service ethic and work out a deal in which you earn commission on those customers whose work you can transition to the new laboratory. Then, handle introductions, relay client preferences, and help cultivate your clients' relationship with the new laboratory.
"It's not a get-rich plan, but you can earn extra retirement income while taking care of your customers at the same time," says Ditta. "Of course there are no guarantees, but it's a nice bond that laboratory owners and dentists have and you may be able to transfer that loyalty if you handle it correctly."