Assessing Your Practice Value
How much is my practice worth?
At the end of the day, your practice is worth exactly what someone is willing to pay for it. That’s not a non-answer. It’s a critical key to getting the fair price you deserve. And it’s something you can actually have a measure of control over. We’ll explain:
Assessing the true value of your practice is an important step in the selling process. After facilitating hundreds (if not thousands) of successful dental practice transitions in every area of the United States, PARAGON has developed an extremely accurate method for determining the greatest value a practice can command in its specific marketplace. If you choose to work with us, your PARAGON consultant will guide you through that same valuation process for your practice. The result will be a price you can confidently expect to receive when your transaction closes.
How can you be so confident? History has shown the amount a buyer will pay for your dental practice is entirely dependent on what they believe, how they feel, and who they trust. If the purchaser believes the valuation analysis is accurate, feels good about you and the staff, completely trusts that the appraiser has been objective and fair, and that he or she can actually make things work, then there is a high probability that he or she will pay the full appraised value. When you’re working with PARAGON, that’s good news.
Because PARAGON represents both buyers and sellers, we are in the unique position to match you with the buyer whose vision, needs and goals allow him or her to fully appreciate the value of your practice and see the true opportunity it represents.
What do dental practices generally sell for?
The circumstances surrounding each dental practice sale can vary widely, from estate sales to partnership buy-ins. In general, healthy and active dental practices with fee-for-service patients and strong new patient flow bring higher valuations. Older practices typically bring less, even though they often represent the best opportunities for growth for the purchaser.
Buyers of general practices are paying 46% to 88% of the most recent twelve-month’s collections (this range excludes duress sales for death, disability or health reasons. Studies show such distressed sales average near 30% of the prior year’s gross collections). Specialists typically pay somewhat less for practices.
Does it matter who does my practice appraisal?
The person most qualified to appraise your practice is one who has actually demonstrated the ability to market and sell practices in your market at their true appraised values. Beware of those who make more money off practice appraisals than they do actually closing transactions. Remember, the appraisal isn’t worth the paper it is written on if the appraiser can’t back it up with purchasers ready to pay the appraised value. All too often, unrealistic ego-inflated appraisals have caused legitimate purchasers to pass on excellent practice opportunities. Most of these same sellers were eventually compelled to sell at a fraction of their original “asking price.”
The moral of this story is to know who you are dealing with. Ask lots of questions, and check references of specific clients (buyers and sellers) who have actually closed their practice sales through a particular firm. Some firms are very open about these references and regularly publish names and past transactions. Other firms may be a bit more wary about giving out names. There’s probably a reason. Ask.
Is selling a dental practice like selling a medical practice?
Perhaps you are friends with a physician who has offered his or her perspective on selling a practice. But medical practices and dental practices face very different market realities — so what works for one doesn’t always work for the other.
Dental practices sell because established practitioners have what young dentists need; access to patients. These doctor-patient relationships are commonly referred to as “goodwill,” and comprise about 75% to 80% of the value of a dental practice.
Medical practices, on the other hand, rarely sell for more than the value of tangible assets. In other words, there is no market value for medical practice goodwill. This is because young physicians can usually start their own practices from scratch, join a large group practice or associate with a hospital and enjoy an immediate patient (and income) flow.
If you think you may want to sell your dental practice at any time in the future, the time to plan for that transition is today. PARAGON can help. To speak with the PARAGON consultant in your area, call Tel:1-866-898-1867. There’s no obligation — just an extremely worthwhile education.
