Dental Business Transitioning: Understanding the Valuation Process

Are you considering selling your dental practice? Maybe it’s time to retire and enjoy all the rewards of your long years working as a dentist. Or you want to move on and try out new business opportunities. Whatever the reason, transitioning in or out of a dental practice is a significant milestone that requires careful handling. Every transitioning process involves making important professional and financial decisions; thus, it can sometimes be quite stressful. However, with professional help in planning and navigating the entire process, selling or buying a dental practice can be a rewarding and successful process.

Once you decide to sell your dental practice, the first thing to do is get a valuation for your dental business. The value placed on your practice plays a crucial role in the entire transitioning process. It’s essential to find an excellent dentist CPA San Diego with experience in valuations. 

Your CPA will take into consideration every aspect of the business before providing an expert dental practice valuation.

Understanding the Valuation Process

A detailed valuation review shows the dental business’s strengths and weaknesses. With that information, your broker will give you advice on the best transitioning method for your practice. Valuation tells you whether an outright sale is best for both you and the buyer, or you should consider other options. If your valuation isn’t good enough, you can get advice on what to do from your dentist CPA in San Diego.

With practice valuation, you don’t always get what you expect, which comes as a surprise to many dentists. Understandably, it’s normal to have an emotional attachment to the practice and expect a high valuation. However, emotional attachment doesn’t equal realistic valuation, and as a potential seller, you have to accept that fact.

A dental business’s value is estimated from its hard assets and its ability to generate revenue for its potential owners. Referred to as the practice’s “goodwill,” this income-generating estimate is what convinces the buyer that your practice has value. Your practice’s good will is estimated from a few factors, including the current patient list, recurring income, and other immediate revenue-producing sources. The value of your staff is also a part of the business’s goodwill. Getting a good idea of your practice’s goodwill offers both you and potential buyers the opportunity to give proper value to the company. With the right valuation, you get a reasonable price for your practice while the buyer gets good value for their money.

If you’re buying a dental practice, a proper valuation process not only tells you the fair price to pay, it also gives insight into the practice’s state. Can the dental office survive the change of dentist? What is the cash flow of this practice? Do you need to buy new machines and dental equipment after purchasing the business? Valuation answers all these questions and more. Ultimately, you have to turn to an excellent dentist CPA in San Diego to use the best valuation method for the dental practice you want to buy. Always remember that valuation is not a cut-and-dry process, and the most experienced CPAs make better valuation judgments.