Practice valuation
Understanding Dental Practice Valuation: A Guide for Dentists
A useful valuation translates a practice's financial performance, risk, assets, and future earning capacity into a supportable range. It should help inform a decision - not manufacture a desired price.
Written byDr. Jared A. Franson
Normalize the financial picture
Owner-specific, one-time, and discretionary expenses may need adjustment to understand sustainable cash flow. The assumptions behind those adjustments should be documented and tested rather than accepted at face value.
Assess quality and transferability
Patient retention, provider concentration, procedure mix, hygiene, staffing, systems, payer mix, facility terms, equipment, and local market conditions all affect risk. Two practices with similar collections can have very different values.
Test the buyer's post-purchase cash flow
A price should be considered alongside debt service, working capital, expected compensation, taxes, and necessary investments. The question is not only what the seller earned, but what a buyer can reasonably earn after acquiring the practice.
Use valuation as one decision tool
Price must still be considered alongside financing terms, working-capital needs, required improvements, and the buyer's ability to operate the practice successfully. A fair valuation supports negotiation, but it does not replace due diligence.
This article is for general educational purposes and is not legal, tax, accounting, or financial advice. Consult appropriately qualified professionals regarding your specific situation.