Valuing a dental practice in nine easy steps

Andy Acton breaks down the process of valuing a dental practice accurately into nine simple steps.

Valuing a dental practice requires the gathering of information on a practice and analysing it against data from comparable practices in order to benchmark the figures and arrive at a goodwill value.

Establishing an accurate dental practice valuation is critical. With only 10,000-12,000 dental practices in the UK, ensuring that your practice is being compared to others that bear similar characteristics is key. Often inaccurate comparisons are made because some data is misunderstood, misinterpreted or missing.

The age of the data being used is critical. Using financial information from 18 months ago is no basis for a current valuation. By the same token, the data to which you compare should ideally not be more than six months old. In short, the more current your information, the better.

1. Information

Make sure you own the information that is used to value the dental practice or have the permission of the owner to use it. If you do not have permission to use this information then, quite reasonably, the rightful owner will be unhappy.

2. Prepare

Set time aside to prepare the necessary information, and keep in mind you will most likely want to do this away from interruptions and outside of office hours. You may want to extract data from your practice management applications. Setting time aside at a weekend or over an evening or two might be the best approach for this task.

3. Financial data collection

This will include your accounts for the past three years, fee income…