The Valuation Handbook: Valuation Techniques from Today's Top Practitioners

CHAPTER 17

Valuing Dental Practices

 

Stanley L. Pollock

Professional Practice Planners, Inc.

 

 

Over the past decades, the appraisal of dental practices has become popular and the number of appraisers involved in dental practice appraisal has increased greatly. During the decades, dental practice appraisal has developed from a rather crude, formula-driven art form into a mature, multi-method process. By way of example, in the 1970s and 1980s dental practices were valued and sold at 100 percent of the latest 12 months equals gross revenues. In the 1990s, values of dental practices continued upward and sold at inflated numbers. Shortly thereafter, the dental practice bubble began to leak. Cox (1995) reported on the subject; as a rule, dental practices sold at around 65 percent of collected revenues, which was the price/gross ratio. After extensive research, I reported in the 2006 and 2007 supplements of Valuing Professional Practices & Licenses (Pollock 2006, 2007) that general dental practices sold in arm’s-length deals at 57 percent of the latest gross revenues. Gross revenues, of course, were higher than in previous decades, and operating expenses were creeping up; certain pockets across the United States were not affected to any great extent, while other pockets were greatly affected.

What became apparent during the decades was that certain appraisers were still seeking simple guideline formulas while other more studious ones gained a great deal of relevant and applicable ...