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Articles

The Professional Advisory

  1. Is it Time to Move?
  2. Staging A Dental Practice
  3. The High Cost of Dying
  4. Deal-Busters
  5. Patients - Attract and Retain
  6. Should I Stay or Should I Go?
  7. Is There a Buyer for Every Practice?
  8. Good, Better, Best - The Market has Spoken
  9. Smooth-Sale-ing
  10. Buying Time
  11. Patients, Patience, Patients
  12. A Real Patient
  13. Why Do a Practice Valuation? I'm not Selling
  14. Irrational Exuberance or The New Normal?
  15. Do dental equipment and dental technology affect a practice value?
  16. Finding and Being a Mentor
  17. Bigger is Better
  18. Daves Top Ten List for Buyers (Vendors should read this too!)
  19. How Well Do You Know Your Practice?
  20. Dave
  21. What will happen to dental practice Values in the next 10 years?
  22. Your Premises Lease is an Important Asset
  23. What are Associates Thinking?
  24. There is Life Outside the GTA
  25. When Is the Right Time to Sell My Dental Practice?
  26. Mergers are a Viable Option
  27. Is Your Associate an Asset or a Liability?
  28. Has your Practice Facility Kept Up With Your Billings?
  29. The 100 per cent of Gross Myth
  30. The Past, The Present and The Future
  31. Caveat Emptor
  32. Overpaid Long Term Staff
  33. Selling your Practice in Stages
  34. A Potential Pitfall of Selling Shares
  35. Value in Your Practice Through Balance
  36. Only Trusted Staff Can Defraud You
  37. To Own or Not to Own Practice Real Estate? That is the Question.
  38. Coping With A Large Patient Base
  39. Successful Dental Practice Transitions
  40. Taking Care of Business
  41. The Investing Dentist Phenomenon
  42. Two areas to focus upon that could negatively impact the value of your practice
  43. Organize your Debt in Order to Sell your Practice
  44. Having a Better Team
  45. How Do I Prepare My Practice For Sale
  46. How Do I Prepare My Practice For Sale? Part 3
  47. How Do I Prepare My Practice For Sale? Part 2
  48. How Do I Prepare My Practice For Sale? Part 1
  49. Advice to My Son or Daughter Graduating from Dental School
  50. Transition - What to Expect
  51. Discussion on Digital X-Rays
  52. Partnerships and Shotguns
  53. Strategic Planning - How to Get Started
  54. Calling All Vendors - Practices have Gone Up in Value
  55. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
  56. Matrimonial Practice Valuations
  57. Purchaser's Guide to Affording a Practice
  58. Location Improvements Throughout Your Career
  59. Small Practice Valuations
  60. Partnerships – The Best and The Worst
  61. Changing Location When the Opportunity Comes Along
  62. Visual Presentation of Your Practice
  63. Presentation of Charts
  64. Your Premises Lease Can Be Your Worst Enemy
  65. How to Select an Appraiser for Your Practice
  66. How Are Your Billing Ratios?
  67. It Pays to Invest in Your Tangible Assets
  68. The Importance of Separate Financial Statements
  69. Five Time Frame Levels to Sell a Practice
  70. 12 Suggestions to Safeguard Computer Data
  71. How to Buy a Visible Practice
  72. Why is there a shortage of good practices today?
  73. The Importance of Equipment in the Purchase of a Practice
  74. The Balanced Practice
  75. Will My Practice Be Saleable in The Future?
  76. Buyer Be Aware
  77. Excess Profit - The Second Key
  78. Patients and Profits are the Keys
  79. Plan Ahead

Volume 6: The Balanced Practice

Download the PDF version now!

Although profit and patients are the main driving forces for determining a practice’s value, they aren’t the whole story. It is very difficult to take a good older practice with old equipment and old leaseholds – even one with low, low overheads – and come up with a value that truly reflects the high income generated by the practice. The bottom line is that it’s important for a $500,000 practice to look like a $500,000 practice.

A balanced practice is one in which the value of the assets (equipment and leaseholds) is a material portion of the total value, somewhere in the 30% to 60% range. If your practice is not balanced, you can’t expect to achieve top dollar when you go to sell it.

Investing in your practice as you proceed through your career is the easy way to keep your practice up to date. For example, pre-Harvey Chemoclave 5000 sterilizers are undoubtedly a deterrent when selling of your practice. State-of-theart today requires a Statim or Tuttnauer high speed sterilizer. Without current equipment, the value of your practice will be affected.

After 20 to 25 years, a total remodeling of the practice is generally required. For example, the old “hole in the wall” for the receptionist is not where it’s at today. Today the reception area projects into the patient seating area. Of course, colour, texture and flow are also part of the visual impact of the practice. Many practices are making the new Triangle Sterilization Centre the centre of attention in the office. The centre is certainly expensive and smaller practices cannot easily afford one. However, these smaller practices are not trying to have a value of $500,000 or $750,000. A $300,000 practice would not be expected to have such a centre.

New practices have the opposite problem: they are all assets with limited patients and profit. Again, this is an unbalanced practice. A purchaser would look at the potential growth of both patients and billings when assessing the future viability of such a location. It is hard to sell “potential”: it’s not concrete and depends on the purchaser’s ability to draw new patients through advertising and word of mouth.

Purchasers look first at the facility, then at the profitability. First impressions are extremely important. Recent graduates, however, are looking at patients and profit: if they are there, one can easily change the facility, though there is a cost to do so.

In northern Ontario practices, this is even more important as it is easier to open a practice without purchasing assets if the area is under-serviced. I can recall a northern cottage-country practice that did not sell until the vendor put in a used contemporary operatory.

To realize the full value of your practice when the time comes to sell, ensure it is balanced. While profits and patients are important, many purchasers want to see assets before they’ll agree to buy.

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