MORR Perspectives

The good news: Every dental practice—good, bad, or ugly— has inherent value. The bad news: The value of your practice might be impacted by key factors which you might be neglecting. Although there is no simple equation to determine how much a dental practice is worth, there are a few essential areas that can make or break your practice’s value.

No matter how you look at it, a dental practice is a business— which means profitability is key. If your practice can demonstrate consistent revenue and growth over time, it is more likely to be valued at a higher price point. This is particularly important when you are considering retirement or selling your practice, since buyers are especially interested in practices that show strong immediate cash flow.

Infrastructure is a catchall term for the bones of your practice, but it can be boiled down to three parts: daily operations, systems, and staff.

1. Daily Operations: The day-to-day activities of securing appointments, determining hours, and providing services are essential to your practice’s success. When daily operations are consistently in harmony, you are likely to see a positive impact on your overall value.
2. Systems: Everything from financials to in-office technology fall into this category. The quality of your systems directly influences your practice’s efficiency. The more fine-tuning applied to this piece, the greater your value in the market.
3. Staff: Your employees are your greatest supports, and therefore are critical components of value. Their loyalty, efficiency, and training dictate how well your practice performs on a daily basis.

 Patients

Successful dental practices run on patients—but not just any patients. Total patient count is important, as is the number of active patients. Unfortunately, the former is unreliable and the latter is hard to classify, which means little value is derived from either. When it comes to value, the only patient category that matters is loyalty. Loyal patients are tied to your practice, and are most likely to follow you through a transition. The more loyal your patients, the higher your price point.

For every dental practice, large or small, all three contributors are closely tied. Your dental practice may be pulling strong earnings from loyal patients, but you could be putting your value at risk if you have neglected the managerial side of dentistry. Similarly, a strong infrastructure is nothing without earned patients to provide income.

With no standard calculation for dental practice value, it is worth investing in working with a Certified Valuation Analyst (CVA). A valuation expert can determine the true market value of your dental practice and identify problem areas that are holding you back.

If you’re interested in finding your true value, contact us for a free valuation and assessment.