Going to the dentist is not something a lot of people enjoy, but is essential to the health of your mouth and overall health. Most dentists work in private practices, however some branch out into dental hospitals and government clinics. A dental practice, is generally owned by one or two dentists and actively keep their training and technology in the dental industry, helps offer a larger array of procedures to patients, which in turn have given them success in growing their practices.
You and your staff are highly educated, and trained, to be courteous, efficient and safe while doing their job, while offering clients the best service and rates in the area, but lately maybe you may find yourself wanting to try your hand at something else or maybe you are just ready to retire and you have wondered about selling your business, and ask yourself, “What is my dental practice worth?”. A broker can help you find the answer to that question, but understanding the process is always beneficial to you as an owner. After all, your objective is to receive the maximum value for it, and in order to do that, you must first look at the many variables that come into consideration when looking at the possibility of selling your dental practice.
We have taken data from the last decade of dental practices sold in the United States, that met our criteria and compiled it In order to show you the different variables. But in order to make sure you have all the necessary information to make an informed decision, we have broken it down further for your review.
What is your dental practice worth?
The value of your dental practice is correlative to your individual business, the market and what potential buyers are willing to pay. So when trying to figure out how much your dental practice is worth, take a look at the following questions and jot down the answers to help further the valuation process of your business.
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the center on the owner?
- What systems and processes are in place to run the center?
What makes a dental practice worth more?
When a buyer looks at purchasing your practice, they are basically looking at their rate of return on their investment. So when will they recover what they have spent on the business? In order to show the prospective buyer that their ROI will be high and their relative risk will be low, you should have the a few key characteristics associated with your dental practice
And while it is true that the profit and sales are considered very important aspects when considering to purchase a dental practice, they are not the only factors that can add or decrease value the value of your practice. The following characteristics will give your dental practice better value.
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
- Growth potential
What does the average dental practice sell for?
Looking at the graph, the broken down the data that we analyzed, which consisted of centers that range in the $50 thousand to the $10 million valuation range. And these centers can sell for as much as billions of dollars or as little as a few thousand. You can clearly see the average of dental practice sold in the last year in the United States is at 2.08 times earnings, with the average sale price coming in at $663,394.12. However, to have a clear understanding you also have to look at the median sale at $322,500.00 and the most frequent sale was at $65,000.00, which play as a factor in your valuation. All this information is a bit overwhelming without being broken down, so later in this article, we will break down these numbers and give you the information needed to be able to start the selling process.
What is the most frequent deal size?
Since we live in an economy that has a market that fluctuates on a daily basis, pinpointing the exact answer to this question, is not as easy as it seems. However, looking at the data collected, the most frequently sized deal is tied evenly between the $0-250k, $250-$500k and $500-$1 million ranges. Throughout the last decade there has been consistent sales in all three of the price ranges. But no need to worry if your dental practice does not fall into either of these valuation ranges, there is a buyer for every business, finding that buyer is the key. And in order to find that buyer, we suggest finding the right broker to help.
Is the dental practice market getting bigger?
There will always be fluctuations in the market and trends. Dental practices are essential for the health of people’s mouth and bodies. A great dental practice can keep itself afloat during any dips in the market and being able to keep your dental practice stable during those times will give future buyers the assurance that your dental practice is a good investment and buy.
Are bigger dental practices worth more?
Generally speaking, yes, the bigger your dental practice is, the more that it is worth. Take a look at the image below, as there is an increase in revenue, your multiple becomes higher, which helps generate a better return on your personal investment.
To help you understand the graph a little better, look at the multiple from 2015 for the valuation price range of $0-250k range, here the average multiple lands right at 1.81, with a total of 4 dental practices sold, however when you look at the $1-2 Million range in 2015 your multiple jumps to 2.1 with 1 dental practice sold. Looking at this data, there is a clear answer in this case, that yes larger dental practices are worth more.
What states have the most dental practice deals?
Are you wondering where the most deals were made throughout the country, or if your state has a hot market to sell fast? California holds the most amount of dental practices sold. But having a company in a smaller state with less sales does not mean that someone isn’t looking to start a business venture in your neck of the woods. Having a broker to help you find a buyer for your dental practice no matter what state you are in, can help you successfully sell your center.
Why would you sell in the first place?
When deciding to sell your dental practice, it can become an overwhelming and difficult decision. Your reasons will always be different from the dental practice owner down the road. Maybe you are ready to retire, or you are ready to move on to a few venture. Whatever your reason is, be sure that you have the necessary knowledge and tools to get the value out of your company that you are looking for.
How long will it take to sell your dental practice?
There is not one set timeline for the sale of any center. The variables of the individual center and terms of the sale will define how long it will take to sell. Do keep in mind that generally speaking, the larger the deal (over $1 million) take longer to sell, over the smaller deal (under $200k) because of the complexity of the center, in addition to the risk of purchasing a company that large for the buyer. And try to remember, that your individual business will always sell at a different pace than other businesses, and being patient is an essential part in selling.
What is the process of selling your business?
Our step by step process will help you become more confident, when you decide to sell your dental practice. Many business owners forget or overlook essential steps in the selling process and sometimes become confused and lost throughout the process. Doing each and everyone one of these steps will help guide you to the maximum profit of the sale of your center. If you have questions or concerns about your businesses’ value or the process in itself please contact us and we will be happy to help.
Who will buy your business?
Finding a buyer can be frustrating and feel like a never ending search, but finding one is essential for the sale of your dental practice. There are many options and possibilities when it comes to buyers for your company, buyers can range from first time buyers, experienced entrepreneurs, or private equity companies. No matter what the size or maturity of your business there is a buyer for your dental practice, and we can help you find them.
After reading this article and understanding the necessary steps and processes that come along with the sale of your dental practice, and you’ve decided that selling your dental practice is the right decision, we encourage you to have your business valuated by a professional broker, this will ensure that you are receiving maximum value. We understand that your dental practice is your baby, and we always keep that in mind, when valuing your business. So when trying to answer that question of what is your business worth, comparing it to the dental practice in your town, will not get you the exact answers you seek. When you are ready to take the first step, we will be more than happy to help you find the true value of your business, and can help accelerate the sale, by helping you find the right buyer as well. Feel free to fill out our valuation form and get started right away.