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Why Every Dental Practice Needs a Current Valuation

Issue: Spring 2016

brochure picture 800-220x220.jpg Why Every Dental Practice Needs a Current Valuation

When you purchased or became an associate at your practice, chances are that a practice appraisal was done. You needed to know how much the practice was worth at the time you were making the purchase or investing your future. If you are part of the group that is thinking, “I’m not expanding my practice, bringing on an associate, or selling a practice,” you’re also thinking — “this doesn’t apply to me.” But it does apply to you.

There are other important reasons to have a current practice valuation. Many people depend on the success and continuity of your practice. Your associates, staff, patients, and most importantly—your family—depend on it. Your practice represents one of, if not the most important assets you own. It is your legacy that has taken years to build. You need to protect it and your loved ones.

All practice owners need to have a Letter of Instruction that spells out in detail what needs to be done in case of an emergency and who your key contacts are (e.g., accountant, attorney). That way the practice can continue to run, your employees can work, and your patients can be cared for, even in dire circumstances.

If you are a sole practitioner, it is especially important that you have a current practice valuation.

If you are a sole practitioner, it is especially important that you have a current practice valuation. In the case of disability or the untimely death of the practice owner, approximately 30% of practices will sell within 90 days. After that timeframe, the chances of a practice selling at any price decrease dramatically. If a practice value hasn’t already been established, the likelihood of a practice selling quickly is significantly reduced. By having a current practice valuation, the doctor’s family will be able to sell the practice and benefit from the fruit of the doctor’s labor.

In addition, that same practice valuation is also useful for all of the more standard reasons. If you purchase equipment or expand your practice, you will need a practice valuation for financing. If you take in an Associate, you need one to determine any future buy-in arrangement for that associate. While the practice valuation may not stay current, you may be able to have it updated rather than getting a completely new valuation.

There are many reasons to get a practice valuation—buying and selling a practice are just two of them. Protecting your family and legacy may be the best reason.

Henry Schein Professional Practice Transitions can be reached at 800-988-5674 or ppt@henryschein.com. This is neither legal nor accounting advice.