How Much Is a Dental Practice Worth?
How much is a dental practice worth? There’s more to this question than you may assume. In addition to the tools and property of your practice, it’s important to consider things like reputation and existing customer base. This makes it extremely hard to guess a practice’s value. There are, however, a series of factors that always play into a practice’s valuation.
This aspect of a dental practice is one of the most important considerations in a sale. If the previous owner owned the physical lot and building, the dental practice will, naturally, be worth far more. This isn’t always the case, however. In many cases, the previous owner simply has a long-term lease or rental agreement with the landlord. A practice’s value is tied to whether the owner is willing to pass on whatever agreement they had with the previous occupant to the practice’s buyer. This may mean subletting or coming to an entirely new arrangement. The location also plays heavily into this consideration, whether or not the land and building are part of the actual sale.
The medical equipment sold along with a practice represents a sizable portion of the practice’s value. This covers everything from x-ray machines to desktop computers and patient chairs. Since practices collect these items over time, some may be outdated. Outdated tech does not add as much value as newer machines, of course, but they do increase the value to a limited extent. If the purchaser can move in and actually get to work the next day, then that’s a valuable collection of equipment. Whatever items the previous owner does not include in the sale detract from the practice’s value. A dental practice is worth the sum of its parts, and when key components in daily operations are missing, it definitely lowers the price tag.
Reputation and Customer Base
When you’re figuring out how to value a dental practice, you’ll have to consider how the practice may change under new management. Although a practice’s existing reputation and customer base certainly add to the dental practice worth, they are not hard and fast numbers on which the purchaser can rely. The building and equipment have measurable value, and they appear listed in the final contract. However, there is no way to guarantee that the existing customer base will choose to stay with the new dentist. A dental practice’s reputation changes based on the dentists in office. When those dentists turn, the reputation mirrors that shift. Still, a successful practice with a strong customer base is more appealing, and typically more valuable, than a struggling one. It’s always a gamble for the buyer, but the idea is that where one dentist can succeed, so can another.
Ultimately, dental practice worth is decided by the market. If there are no buyers, a seller won’t be able to make as much as they need or expect. If there are many buyers, the seller may be able to get more than anticipated from competing bids. Even though the particular items in a dental practice have set values, far more considerations go into the valuation of a practice. This is why every case is different. To get the most for your practice, you need to hire the best help.