Dental practice owners who have not had their practice formally valued in the past few years may be working with numbers that no longer reflect current market conditions. The post-pandemic dental market has seen significant shifts in staffing costs, patient volume, technology investment, and buyer demand, all of which affect what a practice is actually worth today.
The dental law team at Mandelbaum Barrett PC works with practice owners throughout New Jersey and New York on practice transitions, acquisitions, and ownership matters. If you are planning to sell, bring on a partner, or simply want a current baseline for your business, understanding how practices are valued in this environment is essential.
Why Pre-Pandemic Valuations No Longer Apply
Practice valuations from before the pandemic reflected a different set of market conditions. Overhead structures, patient demand, staffing availability, and DSO acquisition activity have all changed substantially since then. A practice that was valued at a certain multiple in 2019 may be worth more or less today, depending on how it has adapted.
Labor costs in dental practices have increased significantly. Hygienist wages, front desk salaries, and associate pay have all moved upward as practices compete for staff in a tighter employment market. These costs directly affect the profitability metrics that buyers and valuators use to assess practice worth.
How Dental Practices Are Valued
Most dental practice valuations use a combination of revenue-based and cash flow-based approaches. The most common methods include a multiple of collections (typically based on a percentage of annual gross production or collections) and a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization).
According to the American Dental Association, several qualitative factors also influence what a buyer will pay, including patient demographics, the age and condition of equipment, the lease terms on the facility, and the quality and stability of the staff. Practices with long-standing patient relationships and modern equipment tend to command stronger multiples.
The Impact of DSO Activity on Practice Valuations
Dental service organizations have become significant buyers of private dental practices. Their participation in the acquisition market has had a notable effect on valuations, particularly for practices that meet the scale and productivity metrics that DSOs prioritize.
Private practice owners considering a sale need to understand both the DSO buyer landscape and the strategic fit questions that affect offer terms. DSO transactions often involve more complex deal structures than traditional dentist-to-dentist transitions, including earnouts, equity stakes, and continued employment agreements.
Factors That Can Increase Your Practice Value
Practice owners who are not yet ready to sell can take steps that strengthen the valuation when they are ready. Key factors that tend to support stronger valuations include:
- Consistent year-over-year production growth
- A well-maintained patient base with strong recall compliance
- Updated technology, including digital imaging and practice management software
- A stable and experienced clinical team
- Favorable lease terms with renewal options
Addressing gaps in any of these areas in advance of a sale or transition can make a meaningful difference in the final number.
Contact Mandelbaum Barrett PC About Your Dental Practice
Whether you are planning a transition, evaluating a buy-in offer, or simply want to understand what your practice is worth in today’s market, the dental law attorneys at Mandelbaum Barrett PC are here to help. Our team has handled hundreds of dental transactions across New Jersey and New York, working with both sellers and buyers to navigate the legal and financial aspects of these deals.
Reach out through our contact page to connect with our dental law team. We are ready to walk you through your options and help you make informed decisions about the future of your practice.