Practice valuation – Embracing hidden opportunities within your business
A practice valuation is a document that provides information to the numerous stakeholders involved in a practice sale.
But why is a practice valuation so important, and how can this be used to help you get the most from your practice sale?
Practice valuation offers principals an aerial snapshot of their business as a whole and can be used to plan for financial goals. For example, say you aim to retire in a few years and want to ensure that the sale of your practice provides a certain amount of revenue. The initial valuation will make you aware of how much your practice is currently worth, identifying any areas that can be streamlined and improved in order to generate a higher sum at point of sale.
Areas to build on
There are a number of different areas you can build on in your practice to gain value. It’s worth remembering, however, that factors such as the time before you go to market, how willing you are to explore certain avenues post-sale and what your valuation goals are will come into play. All of these will impact the plan that is suggested to you by any valuation expert.
When performing a valuation, three key cost categories come under initial consideration. These are: your laboratory and material costs, your establishment costs (electricity, water etc.) and your staff costs. These three aspects are reviewed separately as a percentage of total revenue and can be used to measure how well you are currently operating, as well as if any tweaks or improvements can be made.
Following this, analysing your chair occupancy can also identify significant opportunities for growth. If you are currently only operating at 50% capacity, for instance, this should be explored and solutions suggested to boost operations and business value.
Introducing new services
One sure-fire way to improve your practice valuation is to offer new services. There are two areas of dentistry that are particularly profitable – orthodontics and dental implant treatments.
Clear aligner treatments can provide a wonderful opportunity for dental professionals, as it can be easily learnt and implemented. It can start generating a huge amount of revenue in a relatively short space of time.
Say, for example, you usually refer out three orthodontic cases a month. This would typically mean that you are missing out on £90,000 of lost revenue and £31,500 of net profit per year. Providing aligners will allow you to keep that profit within the practice – and that’s without the extra revenue that these treatments can bring through marketing activity to attract new patients and upselling to existing ones.
Dental implantology is, of course, not as easy to implement into your skillset quickly. Still, if you aren’t planning to retire or sell your practice for some time, this might be another way to significantly boost your revenue. You may also look to employ a dental implantologists during this period to fulfil this patient need.
Embrace opportunities that correlate with the needs of patients in your local area – if, for instance, your practice is in an affluent location but only offers NHS services, you could be severely curtailing its valuation potential. Similarly, if you are in an area with patient age groups that are particularly interested in cosmetic treatments, not offering these is also limiting your scope and the appeal of your business. It’s these changes that make a significant difference.
MediEstates works closely with the rest of the Henry Schein group to ensure that principal dentists can make the most of their practice valuations and reach their financial aspirations at the point of sale.
To find out more, please contact the team today.
For more information, contact MediEstates on 01332 609318 or
visit www.mediestates.co.uk
