How Can I Make My Dental Practice More Valuable? 5 Tips

dental tools

If you are considering selling or transitioning your practice, increasing the value of your practice is, or should be, a priority. It can be difficult to know how or to find the time to make changes at your practice. However, it is very important that you take the time to get your practice and facility in the best financial and operational shape possible. Since it is a buyer’s market, only the best practices will sell, and the great ones will sell at a premium. Here is an overview of how to get started:

Start With A Practice Appraisal

The first step in increasing the value of your practice is in understanding the value of your practice, which comes from a practice appraisal. There are many factors used in calculating the value of your practice. At Professional Transition Strategies, we use the most effective method of calculating your practice’s worth by looking at both attributes and challenges and how they have impacted the success of the practice. Some of the factors used include:

  • The practice’s location, visibility and population of city or town
  • Type of medicine or dentistry, revenue sources, active patient base
  • Growth potential
  • Patient attraction and retention rates
  • Reason for sale of practice
  • Projected patient and revenue retention after the sale
  • Condition and age of medical and dental equipment based on wear and tear as well as technical advancement
  • Office décor and condition
  • Long term trends of the practice’s revenue and profit margin

It is important to note that there are two ways to classify assets: Hard Assets and Goodwill. Hard Assets are things like equipment, supplies, furniture, etc. Goodwill refers to things such as a doctor’s status within a community, the practice name, location staff loyalty and longevity, brand awareness, and brand marketing.

The more the seller allocates toward Goodwill, rather than hard assets, the less taxes they pay whenever a transaction closes. Example: A $500K sale with a 50% goodwill allocation, you will pay $113 in taxes, however if you have 80% allocation to goodwill, you only pay $70K in taxes.

Once you understand the value of your practice, you can look for ways to increase the value before you plan to sell. There are many ways to increase the value of your practice, but we have found the following to be the most successful:

Offer Different Treatments:

Offer different types of treatments to patients, for instance, if you are not currently doing implant work, orthodontic treatment or extractions, start offering those services.

Increase Top Line Revenue

If you don’t want to start expanding your services…Increase your top line revenue. This can typically occur through different marketing methods: paid advertising, guerrilla marketing, associates you can network with, etc. Make sure to show track record over multiple years.

Lower Your Expenses

Lower your expenses, as long as it does not come at the cost of your topline revenue or your patients. Please note: This is typically the most difficult strategy.

Upgrade Your Facility

Upgrade your facility. Keep in mind that you won’t get dollar for dollar through this method. Therefore, only go this route if you plan on practicing longer and are not merely redecorating to sell your practice.

Acquire Or Merge

Acquire or merge with another practice- Economies of scale. This strategy will allow you to grow exponentially whenever there are 4+ practices in combination.

Regardless of where you are at in the process of selling your practice, we are here to help. You can learn more about us and the process on our website or reach out to us at any time. To learn more about the different kinds of transitions available, go to our eBook!