Three most common problems surrounding dental payroll

Handling payroll is one of the most arduous tasks a dentist/owner has to deal with on a regular basis. Doing it yourself eats up valuable time that would be better spent treating patients. I recently spoke to Jamie Scherban, Senior Business Consultant at Paychex to discusses the most common problems dentists face regarding payroll.

When I started out back in 1983, there was no punching in or punching out. My office worked on the honor system. This worked well until I got into trouble with a disgruntled employee.

I then moved to sign in sheet to a punch clock – both of which also got me into trouble. Obviously administration was not part of what I was taught in dental school. And it showed as I made mistake after mistake until I finally outsourced this part of my practice to someone who knew what they were doing.

A dentist with 6-10 employees can spend anywhere between two to four hours a week focusing on payroll. “Our job is to give that doctor the ability to earn as much as they can based on the hours they work,” according to Scherban. “They should be focusing on their practice rather than focus on this stuff.”

When Scherban comes into a practice, any practice, he generally finds them making the same three mistakes that cost them time and money.

1-Incorrect setup

Did you set up the business correctly with the state and IRS? Even with existing businesses a lot of the time taxes are filed incorrectly because they were set up incorrectly. This results in late filings, penalties and notices from the tax man.

2-Filing taxes on time

Dentists are generally very good at being dentists. However when it comes to general administration duties like payroll tax filing – things can get overlooked. So taxes are not filed on time.

3-Managing employees

How do you manage benefits and time off? How do you track who punched in? Did they punch out?
This takes time away from the core business of being a dentist. So finding a solution that takes these issues off the table reduces the stress and makes the workplace run more smoothly and with less conflict.

In the end it is your responsibility to ensure that everything is properly tracked. If you choose to do it yourself, you are going to spend less time with billable patients which will cost you money. So it just makes sense to outsource this type of admin to a company such as Paychex, so that you can strike one of the least interesting tasks off your to-do list.

Why Every Dentist Needs to Be on Google My Business

Google My Business is among the most important tools you have to convince prospects to choose your dental practice rather than a competitor’s. Yet many dentists know little or nothing about what Google My Business is, why it matters, or how to set it up. Here is what you should know.

What is Google My Business?

Google My Business can be viewed as the core of your local SEO (search engine optimization) campaign. Until 2014, Google had quite a few options for business owners including Google Plus pages and Google Places pages. Today, Google My Business unifies all of these diverse pages into a single, streamlined, free tool that puts your business information, photos, and most importantly, reviews all in the same place.

Your Google My Business listing will show up in Google’s Local Maps. If your Google My Business page is fully optimized, you may even show up in the Local Maps 3 Pack search results. As the name suggests, this is a premium listing of the top 3 local dentists as determined by Google’s algorithms.

Setting Up Google My Business

Google My Business should always be used in conjunction with Google Analytics and Google Search Console. These three tools are designed to integrate to give you a complete picture of your overall online performance.

There are three different levels to setting up a Google My Business page. Start at the beginning and work your way through the steps as you have the time.

Beginner: The very first step is to claim and verify your Google My Business page. This lets Google check that you have a legitimate dental practice at the listed address. When verification is complete, you will gain access to the Google My Business dashboard and tools.

Next, you will need to optimize your business NAP (name, address, and phone number). Make sure that your practice name, phone number, and address are correct, and are identical to all other listings you have online.

Intermediate: Photos and videos help prospects learn what to expect. Try to provide a good mix of success stories, behind the scenes peeks, and “getting to know you” clips of yourself and your staff. Encourage satisfied patients to send in photos and videos as well, as prospects always like to hear from their peers.

Reviews are a huge part of any Google My Business page. Ask your existing patients directly to write a review, and consider offering a small incentive like a few dollars off their next cleaning. If you get any negative reviews, do not delete them, but do respond to them. Prospects like to know that if they have an issue, your practice will help them resolve it.

Expert: Use Google Posts to link up your blog. You should already be blogging regularly, as this will keep your website fresh, informative, and up to date. Use the free tools to link your blog to your Google My Business page. Include top-quality photos with each post, along with a call to action that leads readers to your full website.

Monitor your Questions and Answers section. There is no tool to alert you that a question was posted, so you will need to remain proactive. Anyone can answer questions, so it is important to make sure that user-posted answers are accurate. This is also an opportunity to engage directly with your patients and prospects, building credibility and loyalty.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and currently serves as a faculty member there. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at (800) 983-4126 to learn how Dr. Coughlin can help.

Using online testimonials to promote your dental practice

Many dentists do not realize the tremendous power of online testimonials in bringing in new patients. Yet according to poll data, a whopping 92% of prospective patients claim to read them, and 67% admit to being influenced by them. Here is what you should know about using online testimonials to promote your dental practice.

Benefits of Online Testimonials

Google Visibility: The Google algorithm is built to showcase the most authoritative and relevant websites in Google search. Online testimonials, particularly on multiple sites, assure Google that yours is a legitimate practice with high social proof.

Promotion: Research shows that patients tend to stay longer on websites they trust, especially if there are videos to watch. They are also more likely to actually visit the practice whose website caught their attention. Ask your satisfied patients to record a video testimonial, and you have the seeds of a tremendous promotional campaign.

Trust: Patient testimonials are a powerful way to build trust with both your current patients and your prospects. In fact, your current patients may be more likely to recommend you to their friends and family members when they see that their positive impressions of you are shared by others.

Reputation and Brand Awareness: Every time someone sees your practice reflected in a positive light, it makes an impression. The more testimonials you have, the more power you have to build your reputation and, ultimately your brand. This translates into more patients, more repeat visits, and more positive word of mouth throughout your community.

Insight: You can glean a great deal of information from what your patients say, and don’t say, in their testimonials. Use this opportunity to learn, and you will improve your overall patient experience.

Types of Online Testimonials

Savvy dentists will incorporate all three basic types of testimonials into their online marketing.

Written with a Single Photo: This is still the most common type of testimonial. An eye-catching photo of the patient is used, along with a few sentences about his or her experience.

Before and After Photos: Many patients are reluctant to share their “before” photos with the world, but if you have a few who are willing, these testimonials can be extremely powerful. A written account of the patient’s process accompanies two or more photos documenting the journey.

Videos: A video testimonial should be no longer than one minute, and it must be tightly edited. People enjoy watching their peers talk about their experiences, so don’t be shy in asking for volunteers. Choose patients who are articulate, present well on camera, and are not prone to rambling.

Building a Great Testimonial

Although a testimonial must be presented in the patient’s own words, many patients do not know how to go about describing their experiences. Asking open-ended questions helps the patient frame his journey and build an authentic, but well-presented, narrative. Here are a few possible questions:

  • What, if anything, nearly prevented you from choosing this practice?
  • What made you decide to choose us?
  • What was your favorite part of your experience at our office?
  • What are the top three benefits that our office provides?
  • Briefly describe your journey with our practice from your first appointment through your most recent visit.
  • Would you recommend us to your friends and family and, if so, why?
  • Is there anything you wish someone had told you about our practice before you started treatment here?

These questions will not only help your patients articulate their experiences, but they also provide insights into what your patients value most. In turn, you can focus your marketing efforts on the things that are most important to the highest number of patients, drawing in prospects who value those same features.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and currently serves as a faculty member there. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at (800) 983-4126 to learn how Dr. Coughlin can help.

Dental Practice Transition Checklist: Making a Smooth Transition

If you are buying an existing dental practice, odds are high that the business side of the transaction is uppermost in your mind. After all, you must work your way through a seemingly endless set of documentation, from the purchase agreement to equipment leases, to ensure that you get a fair deal. Still, though, it is vital to remember that you are a dentist, and that an existing practice comes with an existing patient load and office staff who must be carefully tended to throughout the transition period. Here is a checklist to help you balance both sides of the transition.

Chart Audit

Review 10 percent of the active patient charts, or at least 100 charts. Most definitions of “active patient” state that the person has been seen for care in the past 12 to 18 months, but some dentists define it differently. Determine if your definition of “active” matches that of the selling dentist, or whether you will need to sort through all the charts to reclassify them.

Business Policies

Review any documentation that the practice has regarding patient flow and office management, such as the Standard Operating Procedures (SOPs). Learn the existing policies for everything from missed appointments to staff vacation scheduling. It is fine to change the current policies over time, but for everyone’s sake, try to maintain continuity by not implementing too many changes at once.

Treatment Planning

Review a few charts to compare your own clinical judgment to that of the selling dentist. Note any cases where you seem to wildly disagree. Also consider criteria for case acceptance, clinical proficiency of yourself and the existing staff, areas of treatment interest, and where both you and the selling dentist fall on the spectrum of conservative to experimental treatment. Start making plans for addressing areas where your methodologies are significantly different from those of your predecessor.

Billing and Collections

Review the existing financial arrangements for all aspects of billing and collections. What payment options are accepted? What is the fee schedule, and how does it compare to reimbursement rates and local competitors’ rates? What does the accounts receivable monthly average aging look like? Which insurances are accepted, and what do you need to do to transfer accepted insurance contracts into your name?

Scheduling

Review the existing scheduling process. Are there gaps in the schedule? Is there enough free time to treat emergencies? How far out are basic hygiene appointments scheduled? What about exams? How many complex procedures are on the schedule, and in what time frame?

New Patient Flow

How many new patients are coming in each month? What are the referral sources? What types of marketing are currently implemented, and what is their return on investment? Look for areas that are working well, as well as ways to improve the flow of new patients.

Facility

Thoroughly examine both the inside and the outside of the property with an eye toward possible improvements. Anything from improved street visibility to better grounds maintenance could boost your bottom line. Also take a critical look at the practice through the eyes of a patient: is the waiting area clean and aesthetically pleasing? Are there private spaces to discuss treatment and payment options? Is the design modern, or intentionally a throwback, as opposed to dated and tired? Are there sufficient amenities? What type of charting system is used?

Treatment Rooms

Walk through the treatment rooms to assess the existing setup. Is the lighting sufficient? Are the chairs comfortable and in good condition? Do you have the equipment you want and need, and is it properly sized and placed for the way you like to work? Are there newer pieces of technology you would like to add? Are there adequate supplies, and a streamlined process for procuring new ones? Also, be sure to examine the sterilization equipment, and ask for an inspection certificate from the most recent inspection of the mechanical room.

Lease

Carefully review the existing lease with your attorney. Make sure you understand the remaining term and renewal options. Find out if the current lease is transferrable or if you will need to sign a new one, and check that the terms are competitive with similar leases in the local area.

Staff

Get all the details regarding staff contracts, including compensation rates and benefits. Evaluate the working relationship between the staff and the selling dentist, and get to know each staff member well enough to determine whether they are the right match for you. Work with the selling dentist to inform the staff of the transition, and find out which members of staff do not plan to stay on with you. Make a list of new staff members you will need to hire.

Transitioning an existing dental practice to new ownership can be complex. The more open both you and the selling dentist are with each other, the patients, and the staff, the smoother the transition will be. Take your time and be sure to explore all the details, and you will be in the best possible position to take the business through a smooth transition.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and currently serves as a faculty member there. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at (800) 983-4126 to learn how Dr. Coughlin can help.

Can you really love the business of dentistry?

As a working dentist who has opened up 14 practices during my career, I am someone who enjoys the challenges of being an entrepreneur.

It hasn’t always been easy. I’ve made costly mistakes (and I still do!). Over the years I’ve learned to roll with the punches while creating systems and best practices that I can successfully replicate over and over again.

But being an entrepreneur takes work. For many dentists, it’s the business of dentistry that really takes a toll. They aren’t prepared to run a practice and they stumble from one crisis to another.

If you can’t find joy in the business aspect of your practice you may eventually burn out.

Unfortunately it’s not getting any easier.

When I started you could make mistakes and learn from them. Today the marketplace has changed. If you don’t get things right the first time, you competition isn’t just the dentist down the street, it’s also the Managed Service Organizations (MSOs) and Dental Service Organizations (DSOs) that are often standing behind them.

I’m proof positive that you can compete and win in this kind of marketplace. I’m also the first to admit that it isn’t for everyone.

Some dentists are happy to have the day to day business and practice management decisions made by someone else. It certainly gives them more time for golf.

If that sounds like something you are interested in then it’s in your best interest to maximize the value of your practice before you talk to an MSO or DSO. If you are going to essentially be working for someone else then you really want to make sure that the blood, sweat and tears you’ve put into your business is reflected in your buy-out.

Before you make any decisions you should speak to someone like myself, who can give you solid guidance on what your best options are going forward. You might discover that with a little coaching you can learn to love the business of dentistry as much as I do.

Or you may decide a better tee time is what you really want from your career.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and his Masters in Health Care Admin. at Western New England University. He currently serves as a faculty member at Tufts. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in talking to Dr. Coughlin the best way is to just give him a call on his cell phone at 413-519-9421

Dental associations need more business education programs

As a dentist it’s very unlikely clinical skills are your biggest challenge. Dental schools are very good at teaching the mechanics of our profession.

What they are not so good at is preparing us for running a business.

For most of us it’s a trial by fire. The average dental graduate comes out of school with a mountain of debt.

According to the American Dental Education Association (ADEA), the average debt per graduating senior is $287,331 (according to a 2017 survey).

That’s a big hole to dig yourself out of.

And starting a practice of your own isn’t cheap either. According to Bank of America, the average cost to set up a dental practice is just over $400,000.

That’s just the start up costs. Let’s say you’ve managed to secure financing and open your doors. Being a dentist today is not the same as it once was. Where we once were able to grow our business over decades, today there is increased competition from Managed Service Organizations and Dental Service Organizations that can leverage their size and buying power to negotiate better deals than a single dentist can hope to get in their wildest dreams.

At this point you might be thinking that there is really no hope. But that’s not the case. These organizations got where they are in the marketplace because they identified the lack of business experience most dentists bring to the table.

As a working “wet-finger” dentist myself, I believe it is the responsibility of  local, state and national dental associations to help their members learn more about what they are facing and give them the tools to compete against these MSOs and DSOs so they can continue to thrive and grow.

In addition to one-on-one coaching and consulting for dentists, I regularly offer free webinars to dental associations to bring attention to this issue. If you are in a leadership position at your association send me a note and let’s talk about a free session for your members.

If you are a member, make an introduction. Connect me with your programming or education person and I’ll do my best to set something up so you and others in your dental community can learn more about MSO’s, DSOs and corporate dentistry.

Selling a Dental Practice to a Corporate Buyer

If you are selling your dental practice, it is important to be aware that not all buyers are individual dentists. Corporate buyers are becoming more and more common. The two categories of corporate buyers are dental management organizations (DMOs), and small group networks (SGNs). The main differences are that DMOs are large, owning from 30 to several hundred dental practices, and that DMOs have virtually unlimited resources. SGNs are small, typically owning less than 20 dental practices, and are limited in their available investment capital.

Assessing the Offer

Regardless of which type of corporate buyer has put an offer on the table, it is important to carefully assess the offer. Fortunately, there are 5 simple steps to help you decide whether the offer is right for you.

Know your value: You cannot accurately assess the offer that is made unless you understand the valuation of your practice. There are numerous ways to perform this valuation, and there are many complex factors that can affect the value. Therefore, a professional valuation is always advised.

The buyer may make an offer that is significantly higher or lower than your valuation. If this happens, it is important to learn why. Get professional advice if you are considering an offer outside your valuation range to be sure you are getting a fair deal.

Understand the buyer: You probably already know that you need to investigate the financial strength of any prospective buyer. For a corporate buyer, this should include asking your accountant to review the company’s earnings expectations, financial statements, and tax returns. Also check references and reviews, with an eye toward developing an informed picture of the company’s track record of purchases and sales.

In addition, it is important to understand the buyer’s goals. Corporate buyers want to acquire the existing patient base and grow the practice’s profitability. They generally want to retain the current owner as a manager, which may or may not interest you. They also have an existing transition process focused on cutting costs and maximizing revenue. Your economic goals become tied to the corporation’s.

Know the payment structure: Regardless of who buys your practice, financing will likely be involved. With a corporate buyer, though, the structure may be highly complex. For example, a portion of the purchase price may be contingent on your ability to hit certain goals and objectives over a predetermined number of years. In addition, you may receive a portion of the purchase price as equity in the company rather than cash. You may even be required to purchase additional equity.

Know the risks: Signing a contract with a corporate buyer involves a great deal of risk. You do not know the corporate buyer that well, and there is no recourse for equity stakeholders if the company goes belly up. However, if you are willing and able to assume the risk, are willing to work hard to hit goals and objectives, and feel confident in the purchasing entity, you could make a strong return on your investment.

Because corporate purchase agreements are highly complicated and involve high levels of risk, it is vital to seek professional advice. Only you, your financial advisors, and your dental business advisor can determine whether a corporate buyer makes sense for you.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and currently serves as a faculty member there. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at (800) 983-4126 to learn how Dr. Coughlin can help.

Dental Practice Valuation: How Much is Your Practice Worth?

Like anything else in life, there is an easy answer to the question, “How much is my dental practice worth?” “However much someone is willing to pay.” The reality is that you can have valuations done all day long, and they will conflict with each other because they are based on different methodologies, and at the end of the day, none of them really matter if no one is willing to pay the valuation price. Still, valuation is a vital component for both buyers and sellers, so it is important to have a professional valuation completed.

Academic vs. Real World Valuation

It can be argued that there are two basic ways to value a dental practice: academic and real world.

The academic approach is used to generate a written appraisal. There are many different formulas, generally based on capitalization of earnings, discounted cash flows, or even net tangible and intangible assets. Take a few years of data, apply a generally accepted multiplier, do some hand waving, and arrive at a number. If performed by a financial expert with subject matter knowledge in dental practices, this will arrive at a reasonable valuation.

The real-world approach acknowledges both the usefulness of appraisal formulas and the importance of understanding the market. Practice brokers specialize in dental practice sales transactions, and are experts in the current marketplace. While there is no central database of dental practices that are currently on the market or have recently sold, practice brokers have enough experience to know what similar practices are generally selling for.

The Limitations of Valuations

Of course, the problem is that no two dental practices are ever truly that similar. One might be owned by a dentist who has fine-tuned overhead expenses to an extremely low level that a buyer may not be able to match. One might have a base of long-time patients who have had all major procedures done and only come in twice a year for cleanings. Perhaps the selling dentist does rare procedures that the buyer cannot or does not want to perform, or maybe the seller is unusually speedy at performing complex work. The patients might be extremely loyal to the selling dentist, and many may decide to leave rather than stay with the new dentist.

On the other hand, the buyer might be a hot new dentist who performs virtually all services in-house, while the seller referred most complex cases out to specialists. The buyer might be more marketing savvy, or more committed to digital dentistry, or have more of a flair for the business side of the practice.

Likewise, the value of the office lease must be considered. Is it stable, and are the payments reasonable? What about the location of the practice? Is it in an up and coming neighborhood, a long-established one, or an area that is in decline? Parking, visibility, staff, reputation, and many other details must also be taken into account.

All these factors and more make dental practice valuations both an art and a science. Because dental practices have few hard assets, and are not interchangeable commodity goods, it is crucial that any valuation be performed by an expert who understands what happens after a practice is sold. The best valuations are done by those who are excellent at quantifying the likely future productivity and profitability of the practice for the buyer.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and currently serves as a faculty member there. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at (800) 983-4126 to learn how Dr. Coughlin can help.

Keys to Selling a Dental Practice for the Maximum Price

Dental practice valuation is a highly complex blend of art and science. Ultimately, though, any practice is worth whatever a buyer is willing to pay for it. If you want to maximize the selling price, there are a few things you can do to make your practice more attractive to potential buyers.

Accounts Receivable

The majority of dentists are happy with an accounts receivable cycle as long as 45 days. Still, if yours is significantly lower, it can prove that your practice has a healthy cash flow. Upgrading your revenue management technology and procedures can help.

Location

While the real estate idea of “location, location, location” does not fully apply when selling a dental practice, there is no denying that location matters to prospective buyers. In particular, buyers are interested in the demographics and population trends of the area, as those affect the patient base. For example, a buyer interested in complex restorations would likely prefer an affluent area with an older demographic, while someone who specializes in pediatric dentistry will want to be in a neighborhood with lots of young families.

You don’t need to move your practice in order to sell it, but you will get the best price by focusing on buyers whose primary interests match the demographics of the area. Of course, if your practice attracts patients who are willing to travel a long way for your services, that can be a selling point on its own.

Practice Philosophy

Everyone has a different philosophy and approach to treatment, and you certainly don’t need to change yours. However, if you are looking for the maximum selling price, you should be sure to discuss these topics early on with each potential buyer. Every buyer is hoping for a strong, existing patient base, as well as to focus on the areas of dentistry that most interest him or her. It might be that a buyer can see a new direction for your practice in the form of additional services or new technology, but if your approaches are wildly different, some of your existing patients might leave after the sale. Buyers are aware of this risk, and will likely not offer top dollar for practices that do not naturally mesh with their ideas.

Intangible Assets

Dental practices generally have a wide variety of tangible assets, such as equipment and furniture, but intangible assets can add tremendous value to the practice. Brand equity and intellectual property are typically the most important. Brand equity includes, but is not limited to, such factors as reputation, perception of service, and loyalty from both patients and employees. Protecting the brand can be a very important element in the sales process, and a top brand can bring a significantly higher price.

Intellectual property includes anything that you developed that is unique to your practice, such as codified policies and procedures, treatment methodologies, and ways of managing the business side of your practice. The more successful your practice is, the more your unique intellectual property is likely to be worth at the time of sale.

Technology Considerations

It would seem obvious that sophisticated dental technology automatically raises the selling price of a dental practice, but this is rarely the case. At the time of sale, technology is really only worth the demonstrated financial impact that it has on the practice. In other words, you may get a premium for a piece of technology that demonstrably improved processes and, in turn, revenue. But simply running out right before the sale to buy new software will not get you much return on your investment.

There are a couple of reasons for this. First, there is a plethora of dental technology on the market, and most dentists like to equip their offices with the technologies they like best. Second, used equipment has a very low cash value. Finally, the buyer may be entirely unfamiliar with that shiny new program you installed, and unimpressed with your claims of what the salesperson told you it could do. Being able to point to results is key.

Ultimately, the best way to obtain the maximum price for your dental practice is to start long before you are ready to sell. Build the best practice you can, constantly refine and improve your processes, and create a strong brand. When you are ready to sell, focus on buyers who are looking for what you have to sell, and whose philosophies mesh well with your own.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and currently serves as a faculty member there. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at (800) 983-4126 to learn how Dr. Coughlin can help.

A Simple Dental Practice Appraisal Formula

Whether you are buying or selling a dental practice, the method used to appraise the practice can make an enormous difference in the success of the transaction. An accurate appraisal is vital for many reasons, including but not limited to:

Decreasing selling time

Boosting both buyer and seller confidence

Reducing the risks of practice failure during the transition

Better financing options

Simple Dental Practice Appraisal Formulas

There is no single best way to appraise a dental practice. It is both an art and a science, and is best performed by an expert. Still, it is important to understand the common appraisal formulas that are used.

Income-Based Valuation

Income-based valuation is the best way to appraise most dental practices. It is simple and easy to follow, and works particularly well for practices that have strong, growing patient bases and a history of revenue growth. There are two income-based valuation methods.

Capitalized earnings: This valuation looks at the practice’s net income for the prior year or the average of the past few years. The net income is divided by a cap rate of 25 to 31 percent to determine the fair market value.

Discounted cash flows: For this method, the next 10 years of net income are projected, and then converted to a net present value. The projections are based on a reasonable growth in costs, and then discounted by the assumed cost of capital plus a premium of 23 to 31 percent.

Market-Based Valuation

This valuation method assesses the market data of similar dental practice sales in your region. It is based on historical collections data multiplied by 60 to 80 percent. Although market-based valuation is appropriate in some scenarios, it is often considered less reliable than income-based valuation.

Net Asset Valuation

Net asset valuation considers both tangible and intangible assets. Tangible assets are physical property such as real estate and equipment, while intangible assets include practice goodwill. Since an estimated 80 to 85 percent of the value of a dental practice is intangible, it can be difficult to accurately appraise practices in this way. However, this method is useful for practices with either significant tangible assets or financial difficulties.

Appraising a dental practice is not easy. You can use a simple appraisal formula to get a rough idea of what your practice is worth, but only a professional can fully determine the best valuation method and take into account all the little details that can dramatically affect the final appraisal.

Ascent Dental Solutions is a full-service agency dedicated to helping dentists build their practices and map out their careers. It is the brainchild of Dr. Kevin Coughlin, who earned his doctorate at Tufts University School of Dental Medicine and currently serves as a faculty member there. While Dr. Coughlin continues to practice dentistry as the principal owner of the 14-location Baystate Dental PC, he has a strong passion for helping fellow dentists maximize their success. If you are interested in learning how to take your dental practice to the next level, please contact Ascent Dental Solutions today at (800) 983-4126 to learn how Dr. Coughlin can help.