Dental practice appraisals help the buyer and seller agree to a fair price for the sale of a practice, making them similar to home or property appraisals. Of course, there are only two instances in which you will ever need to acquire a dental practice appraisal, those being when you purchase a dental practice or when you sell one.
Nevertheless, the following are the various factors that must be considered with these appraisals, in particular:
Practice Specialization
One of the main factors that go into determining the value of dental practice appraisals is the type of dentistry that is performed at a particular practice. A general practice, for instance, will be worth a different amount than a practice that specializes in surgery or one that only treats children.
Location
Assuming the buyer doesn’t intend to move the practice, its location will have a significant influence on its value. A general practice that is located within walking distance of several residential areas, for example, is going to have better potential for growth than one that is about a 15-minute drive from most potential patients.
Additionally, the practice will very likely receive a much higher appraisal if it owns the building where it is located instead of renting out the office space. The new owner will be obtaining property as well as a business, and that means they can potentially sell the property for a large profit, even if they don’t sell the company when they retire.
Patient List
When selling a dental practice, you aren’t just selling your brand, equipment, and building. You are selling your patient list to the new owner, as well (assuming your patients continue to receive their dental services at your former office after you leave).
Both the size of your patient list and the likelihood that patients will stick around after the transfer of ownership are factors that affect the value of dental practice appraisals. With that in mind, you can take steps to help keep patients around after you pass along the practice, such as staying on for a time after you sell the business as a way of making the transfer of ownership less jarring for your patients.
Income
Of course, the income that a practice is currently making will also have a significant impact on the value of any appraisal. If a practice makes $1 million a year, for instance, it will have a higher value than one that only makes $500,000 a year.
Keep in mind, though, that a practice’s income evaluation is based on its net income, not gross. A surgical practice may have a much higher gross value than a nearby general practitioner, but once hospital fees and equipment fees are accounted for, that income might be lower.
Staff
The quality of the staff at a dental practice can also have a significant impact on its value, especially if there are dentists on staff who are not partners. If the new owner is not the only person who will be providing care for patients, then the quality of nurses and dentists who work for the practice undoubtedly matters.
Trademarks
Finally, you must remember that the new owner is buying the existing business for a reason: It has a brand that locals are familiar with. That includes name recognition, maybe even a logo, which is used in advertising to identify the business. The new owner expects to use those trademarks, which is part of why they have value in the first place. That value may not be high, but it will affect the valuation.
Contact a Dental Practice Consulting Attorney Today
If you are considering buying or selling a dental practice anywhere in the country, contact Mahan Law immediately to schedule a consultation with a dental practice consulting attorney to discuss dental practice appraisals.
