They say you can’t take it with you. And it’s certainly true of dental practices.
Whether you plan on passing it on to family members, selling to a corporation or even another practitioner, there are three simple rules to keep in mind.
Rule 1: Value does not equal price. Value is an estimate of the financial worth of a practice determined by formulas. Price, however, is determined by the careful dance between how desperate a seller is to sell and how determined a buyer is to buy.
At present time, most of the dentists I know above the age of 60 cannot wait to sell their practice. Typically, the dental practice is one of their largest assets and is generally considered the best way to ensure a happy and secure retirement.
Rule 2: Gross production is not what you want to purchase. A much better determinant of the value of a practice is really net income. So whether you’re considering selling your dental practice or making a purchase, it’s critical that you look at net income from the seller’s tax returns related to the practice. What a buyer should look for before making the purchase is the dental practice’s ability to make a profit. So as a seller the number one goal is to make the practice as profitable as possible before putting it on the market. The more profitable it is, the more valuable it will be to a would-be purchasers.
Rule 3: Never buy a practice’s potential, only the present or historic value. Future profits can be uncertain. Many times I’ve had someone say to me, “Dr. Coughlin, I’m thinking about buying a practice. It has great potential.” You really want to make your purchase price based on today’s value, not what tomorrow’s value might or might not be.
I cannot emphasize enough that even if you feel you’re not interested in selling your practice or you’re not considering buying a practice you should be prepared to sell at any point in time.
If you are considering buying a practice or selling your own practice, I may be able to help. My coaching services leverage over 30 years of real experience growing my business from one practice to 14.
Contact me today and let’s make sure you make the best and most profitable decisions based on your current situation.