What’s Your Practice Worth?

This is another popular question that naturally you would like to know prior to initiating a discussion with a potential buyer. For this reason we’ve developed a Dental Practice Valuation Calculator in order to provide you an approximate value of your dental practice. The value is based on the accuracy of the information that you provide.

It is important to mention, there are several popular Valuation Formulas used by Accountants and Brokerage Firms in different industries, including dentistry. And they will tell you about the many methods or formulas involved which may include; “Percentage of Gross Collections,” “Multiplier of Net Income,” “Capitalization of Excess Earnings,” and/or the highly complex “Discounted Present Value of Perpetuity Formula”.

And, while all that may have merit, we would prefer to use a present-day, Real-World Valuation Approach. In essence; the true value of anything is determined by what a ready, willing, and able buyer will pay for something in the marketplace.

Our Dental Practice Valuation Calculator has been programmed based on our experience working with many DSO’s within Today’s Dental Market.

Ways to Increase the Value of Your Dental Practice

Based on many conversations with many DSO’s throughout the country, here below are some simple suggestions to increase the price a DSO would be willing to pay for your practice.

  1. Increase the EBITDA of the Practice: Each dollar of profit has a potential value of 3-5 x’s. Avoid putting personal expenses on the company tab, i.e. Vacations, Car Payments, Hotels & Meals, etc.
  2. Increase the Annual Revenue of the Practice: Work harder to Market the Practice and Increase the Number of Patients seen per month in order to demonstrate that there is room for growth in the area.
  3. Expand the Office Hours: Opening the Office earlier or later on certain days of the week and on a Saturday every other week will also Increase Patient Visits and provide an increase in the Practice Value.
  4. Increase the Number of Operatories: If/where possible, when the practice has less than five (5) Operatories, identify a way to expand this number and it will often result in a higher offer price.
  5. Decrease your Medicare/Medicaid: If/when the practice has over 5% in Medicare/Medicaid receivables, this will often have a negative effect of what a DSO is willing to pay for your Dental Practice.
  6. Reduce or Eliminate Bad Debt: Removing any bad dept from your receivables will strengthen your balance sheet especially if you are able to collect all or a portion of this debt. No bad-debt is good, but a low percentage 3-5% is acceptable and this should not have an ill effect on your practice value.

What to Expect from a Dental Broker

There are different characteristics and offerings from Dental Brokers and Dental Consultants. Some are very qualified and know their surrounding market, others – not so much.

Some Dental Brokers or Practice Consultants will offer you a Practice Valuation that could cost as much as $3,000.00 – $5,000.00.

One of the most common aspects of the Dental Broker Business Model that you should be aware of is how they are paid. Like a Real Estate Agent, the Dental Broker receives a commission from you based on the sale price of your practice – typically 5-10%. For example, if you sell your dental practice for $1.5MM – they would receive between $75,000.00 – $150,000.00 From Your Proceeds. And, some Dental Brokers will also receive a commission from the company who is purchasing your practice. We offer you an introduction to a qualified buyer at no cost. Once you answer the Dental Practice Transition Questionnaire we will Connect you to a very Qualified & Interested Buyer.