What Is a Typical Dental Practice Worth?
Selling something without knowing its true worth will always present a problem. Imagine trying to sell a car without knowing the mileage, its overall condition, or if it had suffered any accidents – it’d be near impossible.
Now, take that basic premise and scale it up to encompass something as complicated and technical as a business. The problem becomes that much larger!
Without knowing the value of the business you’re looking to sell, you run the risk of either aiming too high, which can lead to difficulties selling, or setting your asking price too low, which can leave tens of thousands or even hundreds of thousands of dollars on the table.
If you’re looking to sell a business, let alone one as complicated and intricate as a dental office, you need to know its value. If you don’t, it’ll be difficult to determine an accurate price range for your dental pracitce.
Keep in mind – you should always have a custom dental practice valuation completed to determine your unique worth. But it can still be helpful to know the average to gain a better understanding of the range you can expect to see. Read on to learn more about some of the most common factors that impact the overall value of a dental practice.
Factors That Impact Valuation
No two dental practices are the same – a myriad of unique factors can impact the average asking price of a dental practice. The average revenue of a dental practice is $750,000, but several variables should be considered.
Size
Overall collections and patient base size are not necessarily the end-all be-all of dental practice valuation. However, a larger practice, both in terms of patient base and revenue, is much likelier to command a higher asking price. This also applies to a practice with multiple locations.
Geographic Location
Much like any sort of real estate or business, a geographic market can massively impact your dental practice. If you own a semi-rural dental practice in North Carolina, you shouldn’t compare your practice’s value to urban practices in expensive markets like New York City or Los Angeles. It’s critical that you compare yourself to those within your state, but your specific market is often a better measuring stick.
Patient Base Demographics
The specifics of your patient base can also impact your practice’s valuation. A practice with a well-engaged upper-middle-class patient base, who routinely returns to the office and is interested in niche and profitable treatments, will likely be more valuable than one with a lower-middle-class patient base and more routine treatment needs.
Value of Equipment
Dental equipment can fetch a premium. A niche dental practice with highly specialized and cutting-edge technology will be much more valuable than one with more standard accouterments. This sort of specific asset-based valuation can skew your dental practice’s value, so never only look at a top-line number like collections or revenue when trying to evaluate your dental practice’s worth. You truly do need a comprehensive valuation from a dental industry expert to accurately capture the value of this type of equipment. Rules of thumb and free online value calculators just won’t be able to compare to a tailored review by an expert.
Financial Health
Not all dental practices of comparable size and patient bases are worth the same. The overall financial health of comparable practices is quite pertinent, as two practices may look similar on paper but have unique financial issues to consider. One practice may have more debt. Another might have a higher profit margin. We always recommend getting an assessment of your practice’s EBITDA, or Earnings Before Interest, Taxes, Depreciation, & Amortization. This is the gold standard for comparing two dental practices, as this assessment helps potential buyers focus on the core profitability of the practice, rather than just top-line revenue or collections.
There are numerous other factors to consider when assigning a value to a dental practice, but EBITDA is a cornerstone metric to bear in mind. Your potential buyers will be reviewing a plethora of other practices; your EBITDA helps them compare your practice against all others and make informed decisions.
The Benefits of a Free Consultation
Understand the average value of a dental practice is a good number to know, but without a custom consultation, you don’t know where your practice sits in regard to that average. That’s why you should call Triumphant today for your courtesy consultation! Our dental finance professionals are always available to assist you. Call now for your free consultation!