There are several important criteria for evaluating a dental office for sale by owner. Of course, these criteria differs from those necessary to buy an apartment complex for sale, for example. To assess purchase opportunities logically, many buyers consider the facts involved with potential practices. Additionally, these considerations help determine the office’s potential value. As a dentist, you can purchase an existing practice to acquire an existing patient base, which saves significant time and money. Read on to discover the top criteria for evaluating a dental office for sale by owner.
The valuation methods used to determine sale price is important to evaluate a dental office for sale in the US. Dentists commonly use several methods to value their practices. Market or income based valuation methods are typically used by dental offices. Market based methods rely on the market data of other local practices. Income based methods are an accurate way to establish the fair market value of most dental offices. This method typically accounts for capitalized earnings or discounted cash flows. Surely, understand the valuation methods used to price the dental office to determine the price’s feasibility.
A practice’s existing staff is another crucial criteria for evaluating dental offices on sale. You’re often acquiring staff such as hygienists, billing coders and office administrators when purchasing an existing practice. Observe their work processes and ask them questions to evaluate their quality as well as their fit for your office. Keep these professionals around to help current patients make the transition and increase your understanding of existing processes. In fact, knowledge the existing staff possesses and shares often impacts the long-term success of practice ownership transitions. Absolutely, the existing staff of a practice is another criteria that drastically impacts the ownership transition.
Lab Fees & Supplies
Lab fees and supplies are an additional criteria for evaluating dental practices for sale. Look for a practice with combined total lab fees and supply expenses of 10-14% to maximize your ROI. Depending on the type of your practice, this number will fluctuate. For example, orthodontists will spend more on supplies, while pediatric dentists will spend more on lab fees. This number is important due to its variability. Most large expenses, such as rent and payroll are usually fixed. The fees and supply expense numbers are not. Therefore, lab and supply expenses around this level demonstrates the practice’s efficient management of their funds. If necessary, you can search for office partitions for sale, as well. Certainly, evaluate lab fees and supply numbers to determine how well the previous owners financially managed the practice.
Facility Real Estate
Evaluating the facility’s real estate agreement is another important dental office sale criteria. Determine if the space is owned or leased. If the property is leased, there might be an opportunity to purchase it in the future. Reassign the seller’s current lease to yourself or negotiate lease terms with the landlord. Your financial strength, lease term, and renewal options, besides other costs you’re expected to pay as a tenant, are key factors often used in these negotiations. Definitely, evaluating the property’s real estate agreements provides future purchase opportunities and options for negotiation.
Lastly, consider the office’s existing patient base as a criteria to evaluate the practice. Patient bases are one of the best assets to any dental practice, and tend to fluctuate. Look at your existing patient base and target adding 10% of that number. Since this is a percentage, the size of your existing base impacts the numbers you need to target. Demonstrate your ability to attract new patients in the future with an influx of new patients. Additionally, increase production with an influx of new patients, since they typically need more dental work. Of course, existing patient bases determine your new patient numbers to target.
There is a myriad of criteria for evaluating dental offices for sale by owner. For example, determine that price’s accuracy and feasibility by evaluating the valuation methods used to price the practice. Help with ownership transition processes by Evaluating the existing staff. Provide insights into how well the previous owner financially managed the practice by looking at lab fees and supply expense numbers. Open negotiation options as well as future purchases to evaluate the real estate agreements. Finally, determine new patient target numbers by considering the existing patient base. Of course, contacting several small business appraisers can provide guidance, as well. When wondering which criteria to evaluate dental office for sale by owner, consider the criteria described above.