Selling A Dental Practice, How To Get Ready

By Author: Nicholas Davis
Total Articles: 2
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Many dental practice owners rely on their dental practice consultant to sell their practice. While this is an effective means for the sale of a dental practice, often the maximum potential of a practice is not realized.

In this article, the DDSLogic team will review some of the key features associated with buying and selling dental practices and what you can do as dental practice seller to maximize the calculated value of a dental practice.

The first area in which a seller can increase value is by creating competition. Choosing a great dental practice consultant like the preferred consultants on DDSLogic.com can greatly increase your exposure in the dental practice sales market. The more buyer dentists are looking at your practice, the greater the chances you will not only end up with a great price, but also a great person to take over your legacy.

Using the Free dental practice value calculator on DDSLogic.com can help you evaluate and see how some small changes in your practice might increase the value of your dental practice.

Some of the key factors in the price of a dental practice are ...
... active patient numbers, gross production, and overhead expenses.

Your dental practice value is a direct reflection of your active patients. Ultimately, the gross production is simply the number of patients you have times the average amount billed to each patient. Therefore increasing patient numbers is key to the sustainability of practice income over time.

When trying to increase patient numbers, the majority of new patients should come from internal referrals. Experts in dental practice consulting recommend 60-70% of patients come from internal referrals. As your dental practice value increases, you will have the extra income to incentivize/thank your patients for their referrals.

Consider this, if you give a $5 gift card each time a patient refers a friend or likes you on a public bookmarking page and you receive a new patient for 1/10th of these referrals, your cost for obtaining that patient is $50. Depending on your practice, each new patient is worth at least $100-$500 per year, or up to a 1000% return on your investment. Be careful with incentivizing though, as some insurance companies (especially Medicaid) will not allow their patients to be given monetary gifts of any kind.

There are many ways to increase patient numbers when buying a dental practice or selling a dental practice, every extra patient is extra dental practice value.

Another major contributor to the value of your dental practice is your gross production.

While calculating the value of a dental practice, many fast methods rely solely on your gross production. While these fast methods of dental practice valuation are utterly inaccurate, many people still use them instead of using easy-to-use and highly sophisticated methods like the free dental practice value calculator on DDSLogic.com.

Your production is simply the number of procedures you perform times the cost of those procedures. So the only two ways to increase production are to increase the numbers of procedures you perform or increase the cost of your procedures. How you attempt to increase either of these two factors is dependent on the amount of insurance you take.

In cash practices, increasing cost of all procedures is the easiest and most effective way to increase the value of your dental practice. Consider if you have a practice value of $500k. If you were to increase procedure costs by 5%, this would be a $25,000/year increase in production.

For dental practices that have greater than 50% insurance, your price increases may not be as effective at increasing practice value. Consider taking a look at providing some of the services you normally refer out. If your practice isn’t filling every appointment time throughout the day, chances are good you have time for the extra procedures.

Whichever method you choose for increasing production, keep in mind that rule number one is increase patient numbers. If you are increasing prices or number of procedures at the expense of gaining new patients, it is anti-productive.

The final factor we will discuss for increasing the value of your dental practice is reducing your overhead.

Many dental practice sellers have used their practice over the years to hide some expenses that may not have been entirely “business” oriented. Keep in mind that these show in your dental practice value as overhead expenses that will reduce the value of your practice. If you are placing things like your car or family vacations on the business card, be willing to accept the lower value for your dental practice.

Also, consider taking a look at average cost of employment for staff members in your area. If you have been paying large salaries to your staff, they may be loyal, but they are taking away from the profitability of your practice and thus your dental practice value. If you are running at an overhead of greater than 80%, this should be your first order of business.

About Author:

DDSLogic is an online marketplace for Buyers, Sellers, Consultants and Brokers to deal directly with each other for buying and selling dental practices. To get more information, visit us: http://ddslogic.com