Selling your dental practice, or even just entertaining the thought, often brings a wave of reflection. Years of effort, long hours, patient care, and tough decisions have built something meaningful. But how do you put a number on all of it?
Understanding the value of your practice isn’t only for those ready to sell. It’s a smart move for any dentist who wants to make informed business decisions, plan for retirement, or benchmark their progress. And in today’s market, that number is shaped by more than just collections and production.
The Market Has Shifted, and So Has Valuation
For years, rule-of-thumb valuations were common. A multiple of collections. A percentage of net income. While those formulas still float around, they paint an incomplete picture. The dental landscape has grown more complex.
Private equity firms have expanded into dentistry. Dental Service Organizations (DSOs) are acquiring practices at a faster rate. Buyers are savvier, and lenders more cautious. These dynamics have changed how practices are evaluated. In this environment, cookie-cutter methods miss the mark.
Modern valuations look deeper. Buyers and advisors are asking more nuanced questions. Is the income reliable? Are the systems scalable? Is the patient base loyal and well-balanced? Your practice isn’t just a business. It’s a living, operational asset. That’s what valuation needs to reflect.
What Buyers and Advisors Are Looking For
To understand what your practice is worth, you need to examine the parts that create long-term value.
1. Clean Financials
This element is non-negotiable. If your profit-and-loss statements are cluttered with personal expenses or inconsistent reporting, it becomes harder to isolate real profitability. Clear, well-organized financials allow for accurate EBITDA adjustments and give buyers confidence in what they’re reviewing.
2. Location and Local Trends
The location for your practice matters. A growing population, limited competition, and high demand for dental services can drive your valuation higher. The opposite is true in saturated or declining areas. Even zip code differences within a metro area can influence value.
3. Operational Systems and Team Stability
A practice with documented procedures and a well-trained, long-standing team is a significant asset. If the business runs smoothly without constant hands-on oversight, it becomes more attractive to buyers. Stability reduces perceived risk and often boosts sale price.
4. Revenue Mix and Service Scope
Are you heavily dependent on one provider? Is most of your production coming from restorative work, hygiene, or a mix of services? Is your referral network reliable? Practices that are diversified in services and not overly dependent on one doctor or referral partner tend to command better valuations.
5. Facility and Equipment Quality
Modern, digital, and well-maintained equipment makes your practice easier to transition. A buyer won’t have to factor in costly upgrades right away. Even if everything isn’t brand new, a clean, efficient space with updated systems holds more value than one needing significant capital investment.
Understanding Today’s Economic Context
The broader economy plays a role in what practices are worth. Interest rates remain relatively high. Banks are being more selective in their lending. For individual buyers, that often means higher monthly payments on acquisition loans, which can affect what they’re willing to pay.
On the other hand, DSOs often have different access to capital and can move more quickly. If your practice fits their criteria, they may offer a higher multiple than an individual buyer. That said, they’re still discerning. Your financials, patient base, and growth potential must be dialed in.
Timing also matters. The number of practices going to market is increasing as more dentists near retirement age. That means competition. The best time to explore your valuation is before you need to sell. Being proactive lets you prepare your practice and negotiate from a position of strength.
Getting a True Valuation
A proper dental practice valuation isn’t a generic business appraisal. It requires experience in the dental field, an understanding of current market conditions, and insight into what buyers are really looking for.
At Dental CPAs, we don’t just run the numbers. We evaluate your practice like a strategic partner. We look at the story behind your numbers, the trends in your market, and your long-term goals. That’s what makes the difference between a theoretical value and a real one.
Why Knowing Your Value Matters Even if You’re Not Selling
A valuation isn’t just about exiting. It helps with planning your retirement, buying out a partner, exploring a merger, or simply understanding the health of your business. It gives you perspective. And in business, perspective is power.
Your practice is more than collections and profit margins. It’s a reflection of your leadership, your systems, and the trust you’ve built with patients. Knowing its worth is the first step in protecting everything you’ve created.
Want to find out what your practice is worth?
Let’s start the conversation. We’ll take a close look, answer your questions, and help you plan the right next step, whether that’s preparing for a transition or optimizing for long-term success.