One of the biggest decisions you can make in your career as a dentist is to sell your practice. Whether you’re moving to a different city or going into retirement, it’s important to get the maximum value for your business. Bringing in a dental broker for the sale is important because they are experienced professionals who can accurately estimate what you can price your practice at. But you shouldn’t be left in the dark about the methods they use in their appraisal. Read on for an introductory course in how brokers estimate practice values.

Cash Flow and Market Value

The most important thing to remember in estimating the value of a dental practice is to remember that it is an estimate. Don’t make the number a permanent fixture in your mind. During the course of the sale process, the amount that you’ll actually sell your practice for will likely change significantly. The initial number is just a baseline to work off of.

To appraise the value of a dental practice, brokers will often take into account a large number of factors to determine its worth. One method is to take the practice’s net income from the prior year. Another method is to use projected cash flows based on observations of collections and costs.

However, cash numbers are only part of the total value of a practice. There’s no hard and fast way to appraise a practice using simple math alone. It’s not just about adding up expense numbers and property value on a spreadsheet. There is a market value to consider as well as potential risks to both you as the seller and whoever the buyer is.

To take the market into account, dental brokers will look at data from other practice sales in your area and incorporate that information into their estimate. One of the other most important things that will factor into their assessment is intangible assets – specifically, your practice’s goodwill, reputation, and client base. If one office has a larger number of people as patients, that will add more to that offices’ value compared to a dentist with fewer patients. 

While it can be tricky to put a price on something that abstract, it is something buyers will consider. After all, they likely want to hit the ground running with patients when the office opens under new management.

Given that intangible asset estimates are foreign to many, it is important to hire a dental broker to take them into consideration when valuing your practice. If you’re thinking of selling your practice and want to get the best value possible, contact our office today to get started.