5 Strategies to Maximize the Value of Your Dental Practice

How to Maximize the Value of your Dental Practice

There are many ways to increase the value of your dental practice and various methods to measure its worth.

Potential buyers of your practice have more information available to them today, and they are doing their homework before they make an offer for a practice. Therefore, it is important to make sure that your practice leaves no stone unturned. As part of the process for preparing to sell a practice, there are some adjustments which you should consider years in advance, well before you decide to sell.

1. Pricing Model

One area to consider in advance is ensuring that your practice’s pricing model has kept up with cost increases. Inflation has hit many parts of our society and as a practice owner you should make sure that you are keeping up with price increases of supplies. It is always better to increase prices in small increments over time rather than one larger sum all at once. This will ensure that the profitability of the practice continues to grow while helping to avoid patients getting sticker shock.

2. Fee-for-Service Model

Another way to keep up with inflation is to consider moving from an insurance-based reimbursement model to a fee-for-service model. Insurance companies set fees that may not change with inflation. However, fee-for-service or in-house memberships may be more dynamic in adjusting for inflation. A hybrid version of both methods may be the solution.

3. Vendor Expenses

Expenses can be a part of the equation that can be controlled. Go through the exercise of looking at vendor expenses to make sure each expense is necessary, or whether any can be substituted for less expensive alternatives. Also, having state-of-the-art equipment that is digital is more attractive to a buyer than having older equipment.

4. Revenue Models

When considering what the value of your practice is, a simple way practices are evaluated is 70% to 75% of gross revenues or 1 times net income. However, other factors include:

Type of insurance providers (Larger companies are better)

• # of active patients
• # of new patients per month
• Market area (urban or suburban)
• Growth potential
• Specialties & procedures done in house

5. Dental Service Organizations

DSO’s (Dental service organizations) can usually deliver a higher price but may have higher expectations of sellers. However, whether you are selling to a DSO or an individual, it is prudent to regularly inspect your service operation, update your equipment, evaluate if you are making the most of your revenues and control your expenses.

In short, it is important to start planning for an eventual sale of your practice well in advance. Do not wait until you are ready to sell your practice to make important adjustments; rather, examine and adjust your practice on a regular basis to ensure that you are getting top dollar for when you decide to sell your practice.

^{By Richard Conte / 2nd Vice President | Healthcare Relationship Officer}

About Rich:

With industry-specific expertise in the healthcare vertical and dental lending, Rich understands business challenges and how to solve for them. A Maywood resident, he has prior professional experience with several financial institutions. Conte holds an MBA from Fairleigh Dickinson University and is a member of his local Knights of Columbus council.

To learn more, contact Rich today.