Quantive is highly experienced in conducting business valuations for dental practices. Our team of professionals understands the business model, can work with you to see where value lies, and price that into a valuation report. The needs of a dental practice valuation are clearly unique – it’s imperative that we work with you to understand the issues that both add value to your practice – as well as risk – and work those into our valuation analysis.
Dental Practice Valuation Process
Some of the items that our certified valuation experts will take into account:
- Financial Statements and Tax Returns, to include a breakdown of expenses for insurance, retirement benefits, employee benefits, payroll taxes, medical reimbursement, telephone expenses, and continuing education.
- % of collections used to cover overhead
- Value of Equipment – this should be performed by a local dealer and presented to the valuation analyst to make proper balance sheet adjustments
- Analysis to review leasehold improvements
- A production and collections report and a breakdown by each dentist and hygienist
- An accounts receivable and aging report. In addition, what percentage of the accounts receivable is actually collected?
- A description of any contractual relationships – especially including HMOs, PPOs, DMOs, and capitation plans and when the contracts expire.
- Total number of active patients. If this is the valuation of a specialty practice, a list of referring dentists would be extremely helpful. Also, number of new patients per month.
- A detailed physical description of the office, including, by way of example, the number of operations
- A copy of current lease
- To the extent the owner/seller has other dentists employed, are there strong and enforceable non-competition and non-solicitation agreements in place?
Using the above, and in concert with discussions with the owner, we’ll work to craft an analysis that takes into account the various risk factors and growth opportunities for the business.
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Dental Practice Models and Analysis
Typically we will rely on one (or more) of the following methods for our calculations
- Asset Based Approach – What is the net worth of the physical assets of the business?
- Market Approach – How does your practice compare to peers that have sold?
- Income Approach – What is the value of the ongoing “benefit stream” of your practice?
About the Dental Practice Industry
The dental industry has undergone significant change in the last 20 years. On one hand the population has continued to increase – and age. With the “coming of age” of the Baby Boomer generation, the market for dental care has continued to increase.
In 2000, estimates indicate that there were approximately 115,000 dental practices and 130,000 full-time equivalent practicing doctors — a level that has remained fairly steady. The number of practitioners has certainly been changing – with a decrease in practitioners likely offset to some extent by productivity increases.
These fundamental changes in the industry are sure to effect dental practice valuations as both the patient population and firm populations continue to evolve.