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No Stupid Questions: What Do I Need for a Practice Valuation?

Posted by Betsy Krekling, ADA Advisor on 12/8/21 7:45 AM
Betsy Krekling, ADA Advisor


Once again, Chris Mayer of The Heimat Group is answering your questions on practice valuations. Check out his previous No Stupid Questions answers: 

Why (and when) should I get a practice valuation?
What are the three approaches to dental practice valuation?
How does someone determine what my practice is worth?

This time, we asked Chris which documents a professional valuator needs to conduct a valuation.  

Chris responds:

To help your practice valuator determine an accurate estimate, you will need to show detailed practice information.

Typically, a valuation professional will want to see:

  • Three to five years of financial statements, plus current year-to-date, including income statement, balance sheet, and cash flows
  • Five years of new patient flow, collections, and production
  • Insurance and billing information
  • Accountant prepared statements (if available)
  • The number of active and inactive patients 
  • A list of all your equipment and fixtures that will be included in the sale with the date of purchase, the price paid, maintenance or repair records, and depreciation schedule
  • Depreciation schedule for equipment
  • Five years of tax returns
  • Mortgage and appraisal OR or current lease 
  • Organization chart by role and employee
  • Location and demographic information
  • Any marketing materials (website, brochures)

Building this documentation can take time, but it’s essential not just for your valuation but for your sale. A buyer will want to see this information to assess how the practice runs, whether they can service any debt on the practice, and, ultimately, whether it’s the right practice for their goals. 

Ideally, you would already have much of this documentation filed away and just need to compile and update it as requested. If not, don’t be daunted! Start today and enlist the help of your CPA or office manager to ensure everything is readily available and accurate. Then, make a note in your calendar to update everything annually so it’s always ready when you need it. 

Bonus question: what should I look for when finding someone to value my practice?

There are a variety of industry players that offer valuation services for dental practices. That can make choosing the right professional to appraise your practice difficult. 

You can ask colleagues for recommendations, but make sure to do your own due diligence. Ask potential valuators questions like, “What are your professional designations” or “How many dentists have you worked with?” You want to find a valuator who understands the intricacies of what makes a dental practice successful, such as treatment and insurance mix, collections vs production, and so on.

Learn more about getting your paperwork in order ahead of a practice valuation.

Do you need to pull these documents together for your own practice? Download our handy Practice Valuation checklist!

Download the Valuation Checklist

Topics: Real Talk, No Stupid Questions, practice valuation


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