Towson Dental Brokerage | Appraising Your Dental Practice
Dental Practice Sales & Transitions
The act of appraising a dental practice can give dentists an up to date picture of what their business is worth in the current market. Appraisals are usually performed when dentists are preparing to move to another location or are getting ready to retire. A proper valuation by Schiff Dental Brokerage can ensure you get the best value for your practice.
Avoid “Rules of Thumb”
An accurate dental practice appraisal is not simple. Following “rule of thumb” methods of valuation, such as gross income, net earnings, or inventory will usually result in appraisals lower than the actual value of the practice.
To illustrate this, consider the “rule of thumb” that states that a practice’s value is equivalent to its gross income. Imagine two different practices that have the same gross income. One provides low-cost services to a large patient base. The other provides high-cost, specialized services to a smaller clientele. An experienced dental broker wouldn’t value them both the same despite having identical gross income. This is because the high-cost practice likely has a better location and better-trained staff.
Factors That Affect Appraisal
Dental brokers examine far more than just income and earnings to appraise a dental practice. They will take into account a large number of factors, including:
- The type of practice: Specialized practices, like an orthodontist or endodontist, are valued much differently than general dentists.
- Location: A great deal of value can be added to the practice’s appraisal if it’s in a desirable location. Brokers will examine the surrounding neighborhood and competition in the area.
- Patient base: A practice with a large patient base will not necessarily be valued higher than one with a small clientele.
- The practice’s reputation: Practices with amicable relationships with their community are in high demand, and as such are appraised higher.
- Financial Matters: Financial matters that brokers take into account include effective fee and collection procedures, patient payment terms, and lab fees for specialist work.
Why Is Appraisal Important?
A proper appraisal is required to increase the chances of a fair sale. Focusing entirely on what is tangible in the practice and following formulas can lead to practices being under- or overvalued. Appraisals may actually minimize the values of the building, equipment, and furniture. Instead, a proper appraisal emphasizes the overall value of the practice, including intangible assets like the patient base and reputation. Dental brokers know how to properly take these into account, which leads to more accurate valuations.
Knowing what your practice is worth can help you fetch the best price for it. When you sell your practice, you want to get out of it what you put into it. Our experienced team at Schiff Dental Brokerage can thoroughly appraise your practice and help you get the value it deserves. Contact us today to get started.