There is one common question that sellers want to know: “what is my dental practice worth?”. More than likely, the sale of your practice probably makes up a large part of your net worth. Due to this, planning your exit strategy and knowing what your business is worth becomes an important consideration when planning your retirement.

By reading this article, you are going to get an inside look at data from 122 sales of general dental practices that occurred in 2022. Before we dive into the details, it is important to note that these are averages and averages are here to provide you with just a general expectation. Understand that different states and geographical areas throughout the country vary in supply and demand which is a key consideration when valuing a business. While this article will provide a general expectation, I can not stress enough that you should consult with your local NAPB (National Association of Practice Brokers) representative to get a formal practice evaluation for your specific practice. The data cited was submitted by each of our broker members to where our organization covers ~90% of the United States.

Not all data is created equal! It is important to have a brief background on who the data was submitted by and how reputable the data is. The National Association of Practice Brokers (NAPB) is an exclusive organization of seventeen (17) dental-specific business brokers that provide dental practice transitions and valuation services to dental professionals around the country. Our members teach, train, network, and educate each other on tactics, practices, and processes surrounding dental practice transitions. This allows our members to provide the most current, up-to-date understanding and trends with each dental practice sale and appraisal while maintaining the highest standards of business relationships. Our group & organization (NAPB) sells more dental practices than any other broker, group, or organization in the country. Our organization has done over 10,000 practice transitions and has over 389 years of combined experience.

 

Average Sale Price:

National Avg. $735,065.47

Florida Avg. $957,337.50

Average Percentage of Gross Revenue:

National Avg. 75.6%

Florida Avg. 78.9%

Average Multiple of Earnings:

National Avg. : 1.98x

Florida Avg. 2.31x

*” Multiple of Earnings” is referencing ‘Adjusted Net Earnings’ which is what a dentist/owner would make from the business before interest, taxes, depreciation, and amortization.

 

Important Takeaways from the Data:

1. The most effective approach for yourself is to plan. Whether you are purchasing or selling a practice, this is a major life decision. You would be shocked by how many sellers do not know the value of their business or plan the sale of their practice in advance. We have found this either goes two ways:

a) You undervalued your business to where you could have sold sooner than expected.

b) You overvalued your practice by hearing ‘rule of thumbs’ and we must be the bearer of bad news that you need to continue to work as you are never going to get what you need to retire now.

It is of extreme importance to bring in a consultant & professional like a broker to not only value your business a few years before you think are you able to retire but also so they can give you feedback as to how you could make your practice more profitable and appealing to prospective buyers. Oftentimes there are a handful of tips that are cost effective and can go a long way if you plan appropriately.

2. Each broker from our organization submitted 7 to 10 of their last practice sales from 2022. While it is a fair sample size of data to evaluate, it should be noted that the data could still be skewed. As an example, the average sale price may be lower if you looked at a larger sample size and the percentage of revenue could be higher than what is shown above.
3. Practice values are increasing, and we do not expect this trend to change. We attribute this to a few factors:

a) DSOs are paying more for dental practices.

b) There is a larger doctor buyer pool because the existing dental schools are expanding, and more dental schools are opening.

In short, the demand for practices is increasing which in turn drives up the prices being paid and in turn practice evaluations.

What is considered when valuing a business?

You see the data points provided but may be wondering: “Why does one practice sell for 60% of revenue whereas another sells for 85% of revenue”? We wanted to outline a few of the key considerations that a professional analyzes when determining the value of a practice.

Four Primary Factors to Valuing a Business:

1. Cash Flow (Multiple of Earnings or EBITDA)
2. Technology & Equipment Value
3. Location – General & Specific
4. Overall Risk

Other Variables Taken into Consideration:

• General Location
• Specific Location
• Lease Arrangement/Terms
• Active Patient Count
• New Starts per Month & Year
• Insurance Participation
• Patient Demographics and Saturation
• Operating Efficiency
• Staff Continuity
• Ownership History
• Schedule & Bookings
• Marketing Strategy
• Accounts Receivable
• Fee Schedule
• Hygiene Revenue
• Procedure Mix
• Provider Mix

Are you ready to start planning your exit strategy and need a practice evaluation? Are you ready to start the process of selling your practice now? Contact us to learn more about our company and how we can help you. Transitions are personal and so are we. We let our reputation and results speak for itself.