Location, Metrics, and Opportunities. Give me those three things, and I’ll give you a range of what your practice could sell for at that particular moment.
How? Because at DMC, we have been preparing, marketing, and selling dental practices for a number of years on our listing website, DentalPlace.ca. So, let’s get into it, shall we?
Location
- Where is your dental practice located?
- Ground floor?
- Strip plaza?
- Professional medical building?
- Free parking?
- Good signage?
- Near residential developments?
The idea is that practice in prime real estate locations (nowadays, that’s strip plazas with good signage and free parking near residential neighbourhoods with up-and-coming developments) will be most attractive.
Metrics
In terms of the physical space:
- How many square feet?
- Operatories?
- Total Rent?
- Years left on the lease?
- Lease Renewal Terms?
- Does the selling dentist own the land and building?
- it’s better for a buyer to purchase than lease out space
- Does the lease have an early termination right in favour of the landlord or the dentist?
- e.g. in case of death or disability or sale, or perhaps in the case of demolition
- Is there a relocation clause in the lease?
In terms of the financials:
- What’s the practice billing vs. collecting?
- What are the Accounts Receivables?
- What is the CASH FLOW or EBITDA (earnings before interest, taxes, depreciation, and amortization)?
In terms of the resources:
- How many days is the practice open per week?
- How many team members do you have?
- Are they on contracts?
- Do those contracts limit a buyer’s ability to terminate employees?
In terms of the patients:
- What is the patient base makeup?
- ethnicities, languages spoken, backgrounds, income levels
- How many patients came last year? In the previous 2 years?
- How many patients are active and tend to come each year?
In terms of treatments:
- What percentage of production is hygiene?
- a healthy figure is at least 30-40%
- What percentage of production is preventative vs. restorative vs. surgical vs. specialties?
- What treatments are being referred out, how many, and how often?
- Does the practice place or only restore implants?
- What kind of endos are being done?
- What kind of ortho is being offered?
Opportunities
- Is there an opportunity to expand?
- Perhaps equip the 4th operatory and use it.
- Or is there an option to take over an adjacent space or on another floor?
- Is there an opportunity to be open longer or more often?
- Are there a good number and type of cases being referred out that can be kept in-house?
- Is there an opportunity to target new residential developments?
- Can you target existing prospects with new treatments?
- If the practice hasn’t historically accepted assignment, perhaps it can do so now?
- Can the practice increase referrals?
Example
So, let’s look at an example of how I value a dental practice.
- GTA Practice
- Ground Floor
- Strip Plaza
- 1500 square feet
- 4 Operatories
- Free Parking
- Good signage
- 1,500 Active Patients (of diverse ages and socio-economic backgrounds)
- Accepts Assignment
- 40% Hygiene Production
- Grosses $1 million
- Open 4 days a week
- EBITDA before professional compensation: $400k
- EBITDA after professional compensation: $250
- Employees are on contract
- Good long-term lease with no nasty clauses
- Treatment style: conservative, bread-and-butter restorative dentistry
- Opportunities: run marketing campaigns, stay open more days, do extractions, place implants, offer Invisalign, have a CEREC machine for specific lab work
Average value of this dental practice post-Covid-19: $1.5 million.
How much could this practice have sold for BEFORE COVID-19? At least $1.5-million-$1.75-million.
This is what a typical “good” practice looks like. And this is a typical and acceptable sale price according to bankers, accountants and lawyers.
For the purposes of selling, if you want to have a “great” practice and get an even higher price, then you should have:
- more available space to grow
- more patients and more non-assignment patients
- more hygiene production (50% would be ideal)
- less days open (so a buyer can open more days)
- do NO marketing
- have better cash flow
- by producing more and controlling expenses – particularly rent, supplies and staffing
Bottom Line
Valuing your dental practice is crucial in ensuring your long-term success and financial well-being. By understanding the multiple facets of practice valuation—from financial performance to patient loyalty and market trends—you can make informed decisions that reflect the true worth of your hard work and dedication. At DMC, we specialize in helping dentists navigate these complexities with confidence and clarity. Our expert team is here to provide personalized guidance, ensuring you achieve the best possible outcomes for your practice. Ready to discover the true value of your dental practice? Contact us today for a complimentary valuation consultation and start your journey towards a secure and prosperous future.
