Some years ago now our youngest son Chris was working towards an undergraduate degree in business at UMKC. As an exercise for one of his marketing classes, they were to create a business plan and website for a hypothetical venture. He chose askchris.com. The premise was that if you were agonizing over some decision and just needed a little common sense advice, you could submit your situation to him online and for a small fee, he would give you an opinion. For example; “in a neighborhood of taupe houses, would it be OK to paint my house purple?” Or what about; “our second child is on the way. What do you think about us buying a new Mazda Miata or would a minivan be a better call?” Frankly, given some of the choices that most of us have made, I thought it was a pretty good idea and was convinced that there would be no shortage of material. While the questions sounded absurd, I have seen purple houses and child car seats in Miatas. Someone should have used askchris.com!
What’s It Really Worth?
* This article was first printed in the April 2012 issue of the Midwestern Dentist, the publication of the Greater Kansas City Dental Society. I have edited it a bit for this column but the results are the same.
One of the most frequent calls we get at EMA is for the magic number of practice valuation that when added, subtracted, multiplied or divided to some critical practice statistic will allow the caller to proceed with their sale, divorce, partnership, etc. Whether they are dentists, accountants, attorneys, soon to be ex-spouses or bankers, they are usually somewhat disappointed to learn that regardless of what it says on page 29 of the ADA’s Valuing a Practice, a Guide for Dentists Handbook, there isn’t one answer that will apply to all situations. However, if you will indulge me a few contingencies and a little explanation, I think I can give you a few tips that may be useful in getting at least some idea about what your practice may be worth. If you are really patient and read through to the end, I’ll even give you the magic formula.
Have We Turned the Tide?
A couple of recent articles coming across my desk might suggest that the long awaited loosening of the dental practice sales market may be starting. There is no doubt that doctors have hung on longer than their original plans and that consequently the number of practice opportunities has not been equal to the number of young doctors seeking those opportunities. Maybe the recovery of the stock market to near historical highs along with an overall increase in consumer confidence is having an effect. Now if we can just avoid the “Fiscal Cliff”.
I Just Sold My Mother’s House
Being a 61 year old guy in a world full of other 61 year old guys, this is probably not the first time this situation has come up. As our parents age and they are no longer able to care for themselves, children are frequently placed in the position of having to deal with their property and business affairs. For many of us, this is something of a learning experience as it is not part of our usual order of business, and frankly, one you will not enjoy. Let me relate a little of my personal experience and then we will discuss my bigger fear.
I Love It When You Say That!
Probably nothing in this business gets my heart racing more than to have a prospective buyer say to me during the showing of a client practice that – You will NEVER get that price for this practice. It is amusing to me on one level because the speaker has never appraised or even owned a practice up ‘till this point and secondly because it overlooks one of the fundamental properties of buying and selling; just because it may not be worth it to you doesn’t mean it won’t be worth that to someone else. Grandma told me never to say never or always and when someone tells me that, I am more motivated than ever to find that “right” buyer.