dental practice value

Maintaining Practice Value

Maintaining Dental Practice Value:


It’s never too soon to start thinking about how to maintain your dental practice value for future sale, even if you’re just starting your first practice.  Despite all of your advanced planning, you may find yourself expanding to a larger location, opening a second practice, or ready to retire sooner than expected. The value that your practice holds at the time of sale could make the difference between a successful transition, and a challenging one.

Over the next month, we will share four key steps to building and maintaining practice value. First, start with location. Just as with your home purchase, a good portion of your practice value is based on “location, location, location.” If you are planning to build or purchase your practice, spend as much of your investment as you can afford to secure a premium practice location. Nothing speaks more to the quality of services your patients can expect than the location of your practice.

Look for a professional neighborhood with a good reputation for safety and services, and plenty of foot traffic. Seek out a location that has excellent visibility from the street or from traffic thoroughfares if you are in a mall. Ensure the site has adequate parking for staff and patients, and good lighting day and night. If your location is less than ideal, use attractive signage, a superb building design or an expert paint job to communicate the quality of services you provide.  All will contribute to the ultimate value of your practice.

Designing with Longevity

Step 2 to building and maintaining your dental practice value is designing your practice with longevity in mind. If you are building or remodeling your practice, create a floor plan and office design with intrinsic longevity so they will still be appropriate years from now when it’s time to sell. Use an open floor plan that ensures ease of traffic flow. Build in the capacity to expand services as needed with extra operatory, laboratory, equipment or storage space. Use furnishings that are classic in design and colors that are timeless. Consider incorporating environmentally friendly materials and systems that save energy and improve air quality, as these will positively impact the value of the practice. While poor practice design may not be a deal-breaker at the time of sale, a carefully thought-out floor plan and interior structure can add perceived value to the practice for the right buyer.

Technology Investment Plan

Step 3 to building and maintaining your dental practice value is creating a technology investment plan. Keeping your practice equipment and technology up-to-date is critical to the future value of your business – but more importantly, it’s imperative to the comfort and well-being of your patients. Advanced technology usually means more and better options for patients. When you can deliver better options, your patients have a strong incentive to keep coming back.

Consumers today are savvy shoppers and understand what current “best practices” are. With social websites that encourage the sharing of personal ratings of business services, they may have instant input on what’s available from your competition. If you are not staying current with the latest offerings such as laser injections and teeth alignment services, your practice may lose not only some of its equity value, but its stable patient base as well.

Regularly investing in new advancements in dental equipment is an important means of remaining competitive while meeting your patients’ needs for best quality care. A technology investment plan is fundamental to maintaining practice relevancy and value over time.

Maintaining Cash Flow

Finally, and perhaps most importantly, the last step to building and maintaining practice value is maintaining positive cash flow. Nothing will sink your practice value faster than poor cash flow. Cash flow can be defined as total monthly income minus the total cost of operating expenses. A practice with cash flow equaling 40% or more of total income has flexibility to hire new associates, purchase new equipment, and ride out market fluctuations. But practices with cash flow of about 25% of total income may be struggling to meet monthly payments and lack the flexibility to take advantage of new opportunities. Costly salaries, rent, and debt are the biggest contributors to poor cash flow. If your debt is over three years old, consider taking advantage of today’s lower interest rates and refinancing or consolidating debt to improve your cash flow.

Click to read  Maintaining Practice Value Series.