Our dental practice research confirms the majority of dentists – 54% to be exact – don’t know what their practice is genuinely worth, and SMEs have an even greater lack of knowledge!
Many dental practice owners think of their business as their ‘superannuation’. That is, they expect the proceeds of the sale of their clinic to fund their retirement. However, our research shows that most dentists either believe their practice is worth more than it actually is, or they have absolutely no clue where to start when valuing their business.
Consequently, many dentists and SMEs are not only disheartened when their business fails to meet their price expectations, but they also struggle with a shortcoming of funds to support their dream retirement lifestyle.
The benefits of business valuation
With increased competition, corporatisation and other factors putting pressure on dental practices, conducting an annual practice revaluation is a great way to demonstrate the value of your advisory services and reinforce the reasons as to why you are their essential adviser.
How to value a dental practice
If you’re valuing a dental practice, your valuation process should include the following elements:
- An assessment of dental industry qualitative risk and value drivers;
- The correct allocation of direct (e.g. laboratory fees) and indirect costs;
- Adjustments for notional salaries, owner benefits and abnormal items;
- Analysis of key operating costs;
- A market-based business cap rate supported by comparable practice valuation benchmarks.