How Do I Know the Value of My Dental Practice?

dental practice chairs

Understanding the value of your dental practice can be an asset, regardless of whether you are in the process of selling your practice. At Professional Transition Strategies (PTS), we understand that selling or merging a dental practice is an intricate process, and we are here to guide you through it. The first step is understanding and maximizing the value of your practice. Here’s how.

Why should I know the value of my dental practice?

It is important to establish the value of your dental or medical practice for a variety of reasons, including if you are:

  • Considering selling your practice.
  • Needing a second-opinion appraisal.
  • Bringing an associate or partner into your business.
  • Planning for retirement or estate planning.
  • Determining personal net worth.
  • Planning prior to marriage; prenuptial agreements.
  • Allowing for a fair disposition of assets for estate or disability purposes.
  • Establishing a baseline for future business endeavors.

How is a dental practice value determined?

There are many details that go into determining the value of your dental or medical practice, but a good place to start is to have a comprehensive practice appraisal conducted. This not only helps you understand the value of your current practice, but also helps you to determine ways to make your practice more profitable and valuable. At PTS, 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.

What factors affect the value of your dental practice?

There are many different factors that affect the value of your practice. Some of the factors we look at to determine the value of your practice include:

  • The practice’s location, visibility and population of city or town.
  • Type of medicine or dentistry, revenue sources and 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 decor and condition
  • Long-term trends of the practice’s revenue and profit margin

Should l sell my dental practice?

Every doctor who owns a practice should eventually plan to sell. With proper planning and assistance, many will get paid well for their life’s work; others will miss opportunities because of fear or misinformation and net only a fraction of the worth of the practice. Waiting until you absolutely need to sell your practice because of financial reasons or life events can put you in a rush, which typically doesn’t result in the best value for your practice. Consider selling your practice before you need to so you don’t walk away from a valuable asset.

Why can’t I wait a few more years to think about selling my dental practice?

None of us can be sure we have a few more years to practice at our current level. It is important to sell before your practice declines in net income, patients or revenue as that is a red flag to buyers and financial institutions and could negatively affect the selling price of your practice. Selling out of necessity takes you out of the driver’s seat. The best time to sell is when things are going well. No one wants to buy a practice that is on the decline.

What can I do to prepare to sell my dental practice?

Taking the time to get your practice and facility in the best financial and operational shape possible will be extremely beneficial when and if you decide to sell. Since it is a buyer’s market, only the best practices will sell, and the great ones will sell at a premium.

Regardless of where you are in the process of selling your practice, we are here to help. Contact us any time.