How to Value a Dental Practice
Valuing a dental practice is much more than going to a dental practice value calculator and plugging in some numbers. In many ways, valuing a dental practice is more art than science. A number of variables exist that make consulting a professional the best choice when trying to find the value of your dental practice. Let’s go over some of the ways a professional might go about determining the value of your dental practice.
Simply put, the value of a dental practice begins with consulting various formulas. Believe it or not, there are formulas that help you get started evaluating the value of your dental practice formula. Many of these formulas look at different aspects of your practice. The trick is balancing them all together. By doing this, you get a general idea of what your practice could be worth. However, even legal, written appraisals come with the qualification that there is no standard method for developing an evaluation. Finding the right appraiser with the professional experience and understanding of valuation formulas is important.
So much of the dental practice valuation rests with the discretion of the appraiser. For example, many evaluation formulas take into consideration one to three years of data or even an average of that data. This often produces wildly different results. Determining the most accurate method depends on a wide variety of factors. Often, appraisers who have worked with dental practices for a long time develop a preferential method that they find to be the most useful for buyers and sellers. However, there is no way to tell in advance which formula will be closest to how the dental practice performs once it’s been bought or sold.
How much is a dental practice worth?
The scientific, economic value of a dental practice is only part of the story. Being a valuable dental practice reaches beyond the numbers into realms that are harder to define. A dental practice evaluation that hits some of these points will have a more holistic view of the practice than just what’s in the receipts.
First, you have to consider the amount of goodwill in the community. You can establish goodwill by caring about the patient experience, not just the money that’s coming in. Being seen as approachable, kind, and considerate is the best way to boost goodwill. Many people are afraid of the dentist. Setting people at ease will improve patient attendance and give you a boost to the community.
How unique is the practice? Anything that sets a dental office aside (for the better) can go a long way towards boosting the value of the practice. Unique commercials, fun architecture, or any other gimmick that makes people smile will improve the practice’s value in the community.
The value of the dental equipment is not the be sneezed at. While not as obvious as the “paid invoice” drawer, and not as intangible as community goodwill, the value of your dental equipment is often overlooked. Equipment in good repair, even if it’s a few years old, can add greatly to the value of a practice. The value of the building should also be added to the value of the practice.
Valuing dental practices is a tough job. You must consider formulas with proven results, however choosing what data to use is an art in and of itself. Additionally, you need to factor in intangible values like community goodwill. A professional is best suited to the complicated matter of dental practice appraisal. At Premier Practice, we facilitate all of your dental transition needs, even evaluations of your dental practice.