Why do a practice valuation? I'm not selling yet

Whether you just bought your practice or it’s been running for a while now, practice valuations can help you understand where your practice stands, and in what areas there is room for improvement. Without these numbers, you can’t set the benchmarks you need to grow your practice. Knowing your practice numbers can also help to give you insight into the potential market value of your practice. You need a plan, and it all starts with a close look at your numbers.

At JPA, we can teach you how to get your practice to where it needs to be in order to be poised for future success. Whether you are planning to sell your dental practice soon, or just want to know "how much is my dental practice worth," practice valuations can give you great insight.

We like to think about your practice valuation like a regular checkup on your business. It helps you understand what’s doing well and what could be doing better in accordance with your financial goals.

Why a practice valuation is important at any given time - not just the time of the sale.

1. It protects your largest asset over time

When a practice is first purchased, a practice appraisal was (most likely) done. As the new owner, you may think this won’t affect you now, but by keeping a close eye on the numbers of your practice throughout its life, you are helping protect your largest asset for your family, staff, and patients.

2. It helps you spot red flags

When you go through a practice valuation, your dental-specific broker or advisor might identify key areas of concern. For example, if your cash flow is too low or your overhead expenses are too high, which can help you and your advisors catch costly expenses early, saving you money.

3. It helps with financial planning

Whatever your short term and long term goals may be, knowing the market value of the practice paints the bigger picture of where you are and where you want to be. With knowing your practice’s worth, you can identify your KPIs (key performance indicators) and get a measurement for your growth and success over time. This helps you to be better-equipped to strategize a real plan to support any future initiatives such as; buying new equipment or expanding your practice. Or, if it is time, you can come up with a strategic plan to get out with the help of your team of trusted advisors.

Related Blog: 4 Reasons Why Dentists Need a Retirement Plan

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4. It helps you keep an eye your numbers

It’s plain and simple -- when you’re staying up-to-date on your numbers, you’re doing good business. If this is you, you probably have a strong desire to keep your financial records clean, and keep your finger on the pulse of your practice. For example, this might mean that you’re separating out any non-practice expenses in your statements so that you have a true reflection of your practice numbers. This is highly beneficial because it will show potential buyers that your practice is running exactly as it should be, and there will be no future surprises for them.

Additionally, by doing regular practice valuations, you will see how your practice has grown over time, helping you understand how much your practice is worth. Why does all this matter? It supports you when you go to sell your practice in the future. Buyers want to do business with people that have their act together. It helps them validate their trust in you and your practice. Not only this, but it makes your transition process smooth and efficient.

In a nutshell, a practice valuation keeps you on track so that you can get the highest return on your practice.

At JPA, we offer a practice appraisals and valuations as well as a Transitions Plus plan to our clients that need help with their numbers. We also offer a Market Area Analysis to help you uncover how your practice's location impacts the market price. Let us know if you need any help.

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