Dental practice valuations: now a growing niche

BVWireIssue #50-3
November 15, 2006

2005 was supposed to be the year when the number of newly-graduating dentists was going to be less than the number of retiring dentists. “So theoretically, there would have been a practice to buy for every single graduating dentist,” according to Larry Domer, MBA, DBA, ABV, who spoke at last week’s NACVA Colorado/Wyoming Chapter Meeting in Denver. But what happened: The downturn in the stock market prolonged retirement for many dentists—until now, when the models are once again predicting that, for the next ten years, there will be a dental practice available for every prospective buyer.

The problem: Most valuations of dental practices are done by brokers, whose fee is often a percentage of the sale, plus expenses. “Talk about an absolute vested interest,” Domer said. “If they receive a percentage fee, and they are doing the valuation—and they want an exclusive on the deal (as in real estate), then guess what they’ll tell the doc?” Plus, some of the valuation methods they use are “mind-boggling,” he says, including “wild guesses” and “rules of thumb” such as 100% of the latest year’s gross revenues. Sounds like dentists should read the just-released 5th edition of Valuing a Practice, A Guide for Dentists, coauthored by Dr. Domer. And then they should call a credentialed business appraiser, or trying to buy/sell a dental practice could be like…pulling teeth.

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