The Importance of Accurately Pricing Your Dental Practice 

In the current seller’s market, some dentists may be tempted to list their practices at exorbitant sales prices. Other dentists may want to set a low sales price to quickly exit their practice. From our experience, neither strategy is in the doctors’ best interests, and you would be much better off accurately pricing your dental practice from the start.

If you price your practice too low, you may deter potential buyers from inquiring because they may assume something is wrong with your asset. If you price your practice too high, you risk having a stale listing and may be forced to lower the price, which can be frustrating and demoralizing. Since most buyers can’t pay in cash, they rely on lenders to complete the sale. If your practice is overpriced, lenders may require a seller-carry note or significant down payment, and these financing difficulties can delay or kill the deal.

Contrasting Case Studies 

The following case studies illustrate the importance of accurately pricing your dental practice.

Scenario 1

Dr. Brown* came to Menlo wanting to sell his practice. He was nearing retirement age and starting to feel the physical wear and tear after 30 years in the chair. After performing a thorough review of his practice, our team sat down with Dr. Brown to determine a sales price. We presented the strengths of the practice, pointed out a few potential hurdles that would need to be overcome, and provided our opinion of value—all the while stressing that the selected sales price is ultimately the decision of the seller. After giving it some thought, Dr. Brown determined he was willing to be patient and decided to list his practice $100,000 above the originally recommended price. Respecting Dr. Brown’s decision, we immediately listed the practice at that price and went to work.

As with most practices in an attractive area, Dr. Brown’s office initially gained substantial interest from buyers. However, upon review, most buyers were deterred by the price, expressing many of the same concerns we outlined to Dr. Brown in our initial conversations. Worried about offending the seller with a ‘low-ball’ offer, most buyers lost interest and moved on to other opportunities. Despite the market feedback, Dr. Brown continued to hold out hope that the right buyer would come around.

Several weeks and then months went by without any active buyer interest. Eventually, some unexpected health complications accelerated Dr. Brown’s need to sell the practice. At this point, most of the initial interest and urgency from buyers had been lost, and, fearing that his health complications would cause practice performance to suffer, Dr. Brown was forced to accept an offer $50,000 below our original recommended price.

Scenario 2

Shortly after our initial interactions with Dr. Brown, Dr. Jones* also approached Menlo desiring to sell her practice. Following the same approach as outlined in Scenario 1, we analyzed the practice and provided a recommended sales price, to which Dr. Jones agreed. Dr. Jones’s practice received significant preliminary interest; however, this time, buyers recognized the practice was competitively priced. Within one week of going to market, the seller received four competitive offers, one of which was sight-unseen. With these offers, Dr. Jones was in a position of leverage and had the ability to select the buyer that would best carry on her legacy without having to compromise on price. After accepting one of the offers (while also securing two back-up offers), Dr. Jones was able to close in less than 45 days.

How to Accurately Price Your Practice

To determine a fair sales price, analyze market data and your practice’s financials. Additional factors to consider when determining your sale price include:

• Procedures offered
• Location
• Condition of the office
• Age and type of equipment
• Staff tenure
• Hygiene program strength

From our experience, sellers are unlikely to accurately determine the optimal price for their own practice, due to biases of emotional connection and lack of market experience. Whenever possible, you should use experts to determine the best price for your practice, as an accurate market price is the best strategy and will likely result in the highest return.

Menlo Dental Transitions understands that there are various reasons that a seller may need to list their practice above or below market rate, and we respect our sellers’ decisions. Our greatest desire is to achieve the goals and wishes of our clients.

Contact our team for a Certified Practice Valuation. We are confident in our ability to read the market and will help you determine a fair sales price that will enable you to extract maximum value from your practice.

*Names have been changed.

Check out this video featuring David Haynes for additional information.