Over 40% of lab owners plan to retire within the next decade. With retirement on the horizon for so many, selling a laboratory is going to become an increasingly competitive situation. In this buyer’s market, operating a well-run, profitable lab, maximizing its value and standing out from your peers is going to be essential if your exit strategy is to sell your laboratory. Here are some key features buyers are looking at when considering a laboratory acquisition:
* Solid client base. Statistically, even if all goes smoothly, a buyer can lose 10 to 20% of your accounts so he’s going to be looking carefully at your customers: the strength of your relationships, amount of turnover, their location, overlap between your two markets, proximity to retirement age, etc.
And remember the 80/20 rule: generally 80% of a lab’s business comes from 20% of its clients. As a seller, the more you can increase the percentage of clients from which most of your work comes, say to 30 to 40%, the more comfortable the buyer will be about his risk level and financial outlay.
* Strong infrastructure. When looking at a larger lab, buyers want a strong infrastructure—one in which the owner doesn’t control every aspect of the business—and competent, long-term staff members who can effectively operate the lab without the owner.
Building an infrastructure doesn’t happen overnight; it’s at least a five- to seven-year process so it needs to start well before you want to retire. Within that timeframe, the owner should be able to step back and function as a CEO without being hands on. You’ll know it’s working if you can comfortably leave the lab for two weeks, confident it will operate smoothly without you.
Since grooming a management staff isn’t an option in a one- to two-person laboratory, buyers will be looking for a strong team of professional advisors such as an accountant, legal counsel and a financial consultant who know your business intimately.
* Transition period. No buyer has experienced people just waiting to be thrown into a laboratory so most will want you and your employees, especially those who have the relationships with dentist-clients, to stay for a transition period and ideally for the long term.
* Like-minded philosophies. Successful integration of two labs is directly related to the degree of similarity between cultures. Compatibility in terms of personalities, values, work ethic and business philosophy is crucial. Even if you don’t plan on working together indefinitely, you need to be able to do so at least during the transition.
* A niche. Buyers want a unique proposition that sets that laboratory apart from others, such as a focus on removable prosthetics, cosmetics or high-end clientele. So it’s important to distinguish your operation from others in the market.
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