Why your Practice Value May Be Higher Now Than in the Future
1. Practice Value Is Driven by Current and Recent Performance
Practice valuations are grounded in reality, not projections.
Buyers and lenders focus heavily on recent collections, profitability, and cash flow. If collections are flat or declining, valuation risk increases quickly. Waiting around is often more expensive than owners expect.
Once performance trends soften, it is difficult to reverse the valuation impact.
2. A Shrinking Scope of Services Reduces Practice Value
As general dentists approach retirement, it’s common to scale back on specialty procedures. In‑house production declines, even if patient volume appears stable. The practice looks less profitable to buyers.
This often results in lower valuation multiples and reduced buyer enthusiasm.
3. Buyers See Upside, But They Buy Based on Today’s Numbers
Many buyers have the clinical skill set to reintroduce specialty procedures and increase production.
However, lenders do not finance acquisitions based on potential. Purchase prices are determined by documented, historical performance. There are upside benefits for the buyer after a sale, but not for the seller.
The longer a practice owner waits, the more upside shifts away from them.
4. Owner Age and Declining New Patient Flow Can Signal Risk
Practice demographics matter to buyers, and owner age can subtly, but materially, impact buyer demand.
Older owners often see declining new patient numbers as young families may hesitate to commit if they believe the owner won’t be around long‑term. Shrinking new patient flow raises red flags for buyers and lenders.
Declining new patients suggest future revenue softness, which can materially reduce practice valuation, even if current collections appear stable.
5. Waiting Can Transfer Value From Seller to Buyer
Delaying a sale while production or patient growth declines, often shifts economic value.
Procedure attrition and slowing growth benefit the future buyer who reverses those trends. Selling sooner allows the owner to capture the full value of what they built. Waiting can unintentionally discount decades of work.
6. Increasing Competitive Pressure From Corporate Dentistry
Corporate and group practices continue to expand and benefit from scale advantages, including lower supply and laboratory costs, stronger negotiating leverage with insurers, and greater ability to withstand margin pressure over time.
These dynamics can compress profitability for solo practices and impact future valuations.
Conclusion
Practice values are strongest when performance is stable, services are comprehensive, and patient growth remains healthy.
Whether it’s from reduced procedures, declining new patients, or competitive pressure, selling before further contraction can preserve your leverage with buyers and maximize sale price. For many practice owners, earlier action captures value that waiting quietly gives away.
Take control of your future
PVA℠ helps practice owners prepare for the inevitable transition of their practices to new ownership.
J. Robert “Bob” Brooks, CEPA, CBI
J. Robert “Bob” Brooks, CEPA, CBI, leads Practice Endeavors, an Ohio-based practice brokerage and dental realty company. His company provides practice owners with the tools they need to prepare well for life after practice ownership and to find the best price/best fit buyers for their seller clients. Bob was integral in starting the first of its kind dental practice broker credentialing for the International Business Brokers Association.