4 Common Mistakes That Distort Practice Valuations
Determining value can be a challenging task – and putting a price tag on something as complex as a dental practice is no exception.
Minor errors when establishing a dental practice’s value can compound and result in a distorted assessment. And when you’re looking to sell your dental practice, these distortions can have massive consequences for your business and sales process.
If you want to sell your dental practice on your terms, an accurate and well-researched assessment of your practice’s worth is the foundation you need to build a successful deal. Keep an eye out for these common dental practice valuation mistakes so you can correct them accordingly.
Neglecting Real Estate & Equipment
Your dental practice is more than mere assets, but it’s surprising how common it is for valuations not to dissect asset value more thoroughly. Now, most valuations will examine real estate value and equipment value, but sometimes, a deeper dive is needed.
Dental practices that specialize in specific and niche procedures requiring high-end and cutting-edge equipment, for instance, need to ensure their valuation notes the value of these assets. For best results, ensure that your valuator is well-versed in the dental industry, as the specifics of incorporating the value of specialized assets may be lost on a non-dental advisor.
Using Free Tools Instead of an Experienced Veteran
An experienced valuator with an intimate knowledge of how to value dental practices and all of the intricacies and complexities of the industry is truly the only way to go about valuing a dental practice. Free online dental practice evaluations or DIY worksheets won’t know the industry, making it that much more likely that you make a critical error when trying to put a dollar value on your dental practice.
These tools are quick and straightforward and do have their place. For example, they might help you find a quick, rough estimate if you’re curious. They’re not, however, up to par when you’re looking to successfully close the biggest deal of your professional career and start the next chapter of your life.
Accepting a Compromised Party’s Evaluation
When you’re selling to a dental support organization (DSO), you likely will end up fielding an offer based on their assessment of your practice’s value. Their assessment can provide helpful information, but you should never accept the dental support organization’s offer and evaluation as gospel truth.
Their assessment will likely shortchange you. We always recommend having an independent evaluation conducted so that you have an accurate and detailed assessment of your practice’s worth. This helps you field offers and determine which are worth your time and which you should discard.
Ignoring EBITDA for Other Metrics
There are some key metrics for dental practices – such as collections, revenue, number of patients, and patient growth rate – that you should expect to share with a potential buyer. And while these are all important metrics, there’s another core financial measure you need to be aware of: EBITDA or Earnings Before Interest, Taxes, Depreciation & Amortization.
EBITDA is a core financial factor, one that helps a potential buyer strip away all the noise to focus on profitability. EBITDA helps potential buyers compare different practices on an apples-to-apples basis, regardless of market, size, specialization, debt, and unique conditions. If you don’t know your EBITDA, you need to start taking stock ASAP.
Contact Triumphant Partners for Your Free Consultation
If you want to sell your dental practice, an accurate practice valuation is the first step of the process. Contact Triumphant Partners today for a courtesy consultation. We have decades of experience on both sides of the aisle and bring years of expertise to your transition.
We always represent your interests and are here to be your strategic advisor through the process, from initial listing to close and transition. Contact the friendly team at Triumphant Partners to begin the process and sell your dental practice on your terms!