No matter what part of the practice lifecycle you’re in, having a practice valuation is one of the most important tools for answering the question, “If I were to sell today, what would a buyer pay me?”
Practice valuations become necessary at different chapters of a dental practice’s lifecycle, such as:
- When considering an expansion
- Bringing on a young associate or a partner
- Transitioning the practice to another doctor
Progressive dentists also include a valuation discussion in visits to a financial advisor and CPA. It helps these professionals answer the question, “Am I ready to retire?” Or “What’s my number?”
Valuations often seem mysterious because for each lifecycle milestone, they require different parameters and methodologies to arrive at a fair market value.
Phase II Dental Transitions recommends using many technical and subjective data points, such as:
- 3 years of practice performance
- Number and nature of revenue streams
- The practice’s cash flow
- Retained earnings
- Depreciation schedules, and
- Practice inventories
- Is it a specialty or general practice?
- Office location
- Fee structure
- What’s the “market pressure?” Is it a buyer’s market or a seller’s market?
- Prevailing interest rates
- Tax laws
To remove the mystery from the process, contact Lynne Gerlach, DDS, FICD, FACD, at Phase II Dental Transitions for a free Pre-Transition Interview.
