Dental Practice Valuations
Practice valuations. One of the most important documents you can own.
As a dentist, the decision to sell the practice you have worked hard to build can be a difficult and emotional decision. The weight of that decision can be eased by determining the fair market value of your dental practice.
If you are a dentist who is ready to sell your dental practice, one of the first and most important tasks is to get an accurate dental practice valuation. An accurate valuation can help to facilitate a faster transition. The worth of your practice is determined by inputs from recent dental practice data including market comparisons, tax returns, asset inventory, and other relevant information. Lenders also look at valuations to help them determine the probability of the success of their loan to the buyer.
Unfortunately, there are many dental brokers who provide free, low-quality valuations just to get you to work with them. In some instances, they will purposely value your practice at a higher than what is realistic just to get you locked into a contract to sell. Don’t get sucked into these sales tactics. Getting a valuation that is not accurate can be a costly mistake. An inaccurate valuation could result in selling your practice for less than it’s worth or you could list it for more than it’s worth and deter prospective buyers. Over-estimating the worth of your practice could cause a loss of potential buyers as well as waste time and money marketing your practice when it will never sell at that price.
Obtaining full financing and an accurate valuation prior to listing your practice for sale reduces the risk of involved parties having differing opinions of a practice’s value.
How do you know if you’re getting an accurate dental valuation? First, it's important to understand the different methods of valuing a practice. Here are some of the most common methods for dental practice valuations:
- Rules of Thumb - This method uses generalizations to guess what the value of a practice is. For example, "a dental practice is worth 70% of its last year's gross earnings". The 'Rules of Thumb' method is an inaccurate method which does not consider the unique elements of each dental practice. Net profit can vary widely, location, and condition of equipment can weigh heavily too.
- Market Comparison - The market comparison method compares your practice with other practices that have recently sold in your area. The theory behind this method is that a buyer was willing and able to pay a certain amount of money for a practice in that area. This is still subject to the issue of practices being different but comparing the current marketplace is important data to utilize when valuing a practice.
- Capitalization of Earnings - This method looks to determine the value of your business’ net income. While this process can be complex, it is one of the most consistent valuation processes available.
TheBased on years of experience, the best dental practice valuations take into consideration the market, capitalization and subjective differences of each practice. Subjective differences include elements such as brand recognition, patient loyalty, etc. Accurately valuing a dental practice is an extensive process that should not be rushed and is crucial to the success of a practice transition. While anyone can create an estimated valuation, a qualified, accurate, and professional valuation requires experience and hard work evaluating the details of the practice. Request an accurate dental practice valuation today.