3 Reasons Your Dental Practice Might Be Undervalued
When you want to sell your dental practice to a dental support organization, few things are as important as knowing what your practice is worth. If your dental practice is undervalued, you can easily end up selling your dental practice to a dental support organization at less-than-ideal terms.
Your practice must be adequately assessed and valued for optimal outcomes. However, too many dentists don’t fully understand the value of their practice. This can lead to their acceptance of offers they otherwise wouldn’t entertain.
To combat this, we put together a few reasons why practices are undervalued when appraised. Knowledge is power; the more you understand the dollar value of your dental practice, the better equipped you are to sell at a fair price!
1. The Assessor Is Motivated
Many practices receive offers from dental support organizations directly. If you’re a busy dentist trying to tackle all of the operational and administrative tasks in your day, you might be tempted by these offers. You might even look at the quoted dollar figure and think the offer in question might be worthwhile. This might be a good option if you’re looking to sell and are struggling to fit everything you need into your workweek.
However, it is worth remembering that many dental support organizations are motivated when they make an offer. If you are receiving a quote directly from a DSO or DPO, you likely are not receiving the best offer. And why would you? The DSO or DPO in question wants to offer you an offer that will entice you to commit, not the best possible offer. They’re representing their interests, not your own. If you are a dentist receiving an offer from a DSO or DPO, obtain a second appraisal for the best results.
2. An Outdated or Irrelevant Assessment Was Used
You may have done your homework and received a second practice evaluation. That’s a good step and a great tactic to ensure you’re getting the best possible terms. However, knowing what method was used when your practice was evaluated is essential. You might not be familiar with the standard methods for evaluating a dental practice, but a cursory knowledge of common dental practice evaluation paradigms will take you far.
Different practice evaluation methods can influence the total dollar value associated with your practice. Let’s say your practice is evaluated head to head versus others in your market. This look, which compares your value to the value of similar companies in your geographic area, could be helpful in understanding your practice’s value.
However, let’s say you have a better online reputation, patient base or some external factor that makes you a stronger practice than a direct competitor. This market-based evaluation might not accurately assess your business. A custom practice evaluation is in order to make sure that your practice is properly measured.
Inversely, focusing on past collections may not let you understand the actual financial health of your practice. If your assessor uses the wrong practice evaluation method, you might not have a truly accurate picture of your practice’s value. This could result in your acceptance of a less-than-ideal offer from a dental support organization. Be sure you understand the methods used when an outside party evaluates your practice’s value.
3. You Never Were Given Your EBITDA
If you want to sell your dental practice to a dental support organization, you must fully understand your practice’s EBITDA. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a tried-and-true method for evaluating the profitability of a business. Comparing businesses head-to-head is difficult. This is especially true with dental practices.
Any two practices could have completely different client bases, cash flows, future earnings, markets, and asset portfolios. EBITDA helps strip away all of the external noise and focus on the core profitability of a dental practice. If you have not received an EBITDA quote, request one ASAP. Selling to a quality DSO without understanding your practice EBITDA will be tough. Get ahead of this and get a fully comprehensive practice evaluation.
It is worth noting that many DSOs and DPOs will offer an EBITDA assessment, but they are usually motivated to underquote. Accepting their valuation of your practice at face value is bringing a knife to a gunfight; you’re just out of your element and you’re likely to accept a lower offer than you would normally. A dental broker can help you work alongside a specifically trained CPA to get an accurate EBITDA to help counteract lowball DSO and DPO offers.
Call Triumphant Transition Partners Today!
Are you a dentist looking to sell your practice to a dental support organization? Contact Triumphant Transition Partners today! Selling a dental practice is challenging, and many dentists can be overwhelmed by the process. If this is you, partner with a qualified dental broker to represent your interests in the practice sale process.
Partnering with Triumphant Transition Partners will:
- Equip Your Attorneys with Relevant Data
- Grant You Access to Our Qualified Buyers Network
- Give You Consultative Insight Through the Process
- Help You Understand Your Practice’s Value for Optimal Offer Values
Contact Your Friendly Triumphant Advisor for a Courtesy Consultation Today!