ION Dental Group members will receive an annual Practice Summary Appraisal. See the Best Questions to Ask the Selling Doctor! In most dental practice valuations, the rule of thumb considers a percentage of the revenue from the practice. It’s important to remember that fair market value to collections, while the most common valuation method, is, Because the seller will typically pay long-term capital gains rates on Goodwill, which run about 20% lower than ordinary income tax rates, Another key fact in the buyers corner is that bank lending is readily available today. Capitalized excess earnings 2. Until recently, not much. Financial Tips & Advice for Dental Professionals. Equipment has 1) a basis or acquisition price, 2) a book value (basis value adjusted for depreciation), 3) a replacement value (the cost of buying comparable new equipment), 4) an in-place value (in a working office generating income), and 5) a street value (if the equipment were put in a warehouse and sold). Given the complexity in valuing tangible assets such as equipment, consider how difficult it is to accurately assess the value of intangible assets such as goodwill, which constitute the greatest majority of dental practice value. Buyers considering purchasing a practice: know that you’re going to pay a little bit more for your practice than you would have a few years ago. Negotiate the Asset Allocation When Buying a Dental Practice. It’s important to remember that fair market value to collections, while the most common valuation method, is not the only method to value a practice. Dental Practice Appraisals: Price Is What the Market Will Bear. Dental buying groups explained: How strength in numbers helps independent practices, How 3 dentists added revenue despite a turbulent economy, Managerial vs. financial accounting: Why it matters for dental practice owners, Generate recurring revenue to increase your practice’s valuation, Take the plunge into digital transformation and boost your bottom line. Pediatric dental practices are the next most valuable, currently selling for an average of 71.22% of annual collections, followed by general dentistry at 69.87% Next is oral surgery at 68.57%. The projected cash flows are based on a reasonable growth rate of collections and associated practice costs each year, and then discounted by the assumed cost of capital plus a risk premium. Fewer retiring dentists means a lower supply of established practices for sale which increases practice purchase prices. … The Good News About Dental Practice Values. Dental practice valuation involves determining the worth of a dentist’s business so it can be packaged and offered for sale at a price that reflects a fair market value and attracts buyers. The higher the allocation to goodwill, generally the better for the seller. In some cases, we may identify ways to improve your practice value during the appraisal … But there are other reasons for needing an up-to-date appraisal for your practice as well. Many lenders will lend, Buyers considering purchasing a practice: know that you’re going to pay a little bit more for your practice than you would have a few years ago. Your independent, objective dental practice appraisal will ensure your practice is priced fairly and competitively as you move towards a practice transition. A professional and accurate appraisal is the result of much study, judgment, experience, and deliberation, which not only provides a final price, but proves why that price is the only logical result. 74.41% of the sales price would be allocated to goodwill with the remaining 25.59% allocated to the tangible assets of the practice – equipment, supplies, etc. It’s important to note that prosthodontics practices are on the lower end of the spectrum at 67.13%, but the volume is low enough not to cross the line of a statistically significant sample size. The value of your practice is more than just financial. Dental Practice Valuation Methods ... year and then discounted by the assumed cost of capital plus a risk premium. Because the seller will typically pay long-term capital gains rates on Goodwill, which run about 20% lower than ordinary income tax rates that are typically applied to tangible assets. Have a question about the value of a dental practice? He has been admitted as an expert witness, and has testified for dental practice valuations in Arkansas, Alabama, Georgia, Tennessee, and North Carolina. If I’m buying or selling a prosthodontics practice, I would note that average practice values are on the lower end, but more likely reflect the average overall dental transitions market. In the case of appraisals, there is usually one method that gets to the heart of value much better than others, and its importance and precision should not be degraded for the sake of using all of the values that the appraiser derived. Periodontics practices have average goodwill at 77.63% and general practices allocate on average 76.10% to goodwill. Why is this important? Practice transition experts believe the valuation of dental practices may be negatively affected if dentists are looking to sell in the next few years. The Market Approach is a major determinant of the fair market value of a practice. More and more banks understand dental transitions and are getting in the game. The most valuable type of dental practice continues to be orthodontics at 79.81% of collections. For full conference information, registration, and early-bird pricing, visit principlesofpracticemgmt.com today! Too many times appraisers apply the overall average percentage of all practice sales, not realizing that only 3% of all practices were sold at the average percentage. Their original article is definitely worth a look. While the sale of an orthodontic or dental building is relatively rare, as most dental professionals lease office space, the sale of a dental practice… They want an outstanding bottom line. California Practice Sales, Inc., provides nine-page written appraisals of dental practices for such purposes as insurance, fire, theft, divorce, sale, and partnership for the reasonable base fee of $2,000.00. 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