Endodontist

Endodontist

Transitioning an Endodontic practice requires the consideration of many factors and an understanding that each Endodontic office is unique. NDP has the tools to ensure your transition success.

There are a very small number of graduating Endodontists graduating each year. There are approximately 56 Endodontic programs in the country and a small number of residents graduate each year. The vast majority of these graduating residents will work for a corporate setting upon graduation, a group practice, or work as an independent contractor at multiple general dentists offices. Very few will start a practice from scratch straight out of residency. This specialty is unique when compared to the others because of the increasing number of general dentists performing root canals based on their training, technology, competition, and simply because of the profitability in the root canal procedure. The endodontic candidate is high in demand based on the limited number of graduating residents that finish their program annually.

Other factors that make a Endodontic resident high in demand is the low cost to set up a practice if they elect to do so. While a General Practice will cost between $450,000-$500,000 to set up, an Endodontic practice can run closer to $250,000 if set up efficiently. Alternatively, the Endo resident can easily pick up associate work for 40-45% of production to make their start up successful.

The ideal candidate pool that is most attractive to our clients are the candidates that have a few years of experience, have a drive, know that they don’t want to work in a corporate setting and have the passion to become a business owner sooner than later.

Through our network of relationships within the dental schools and residency programs across the country NDP has contacts most of the Endodontic programs. We also have relationships with countless vendors and practice management consultants enabling a faster match of potential buyers to a potential seller and thereby taking the first step towards a successful transition.

Whether looking to add an associate or looking for a potential buyer, here are some keys to consider:

Endodontic Practice Valuations

Endodontic practices are valued similar to the other practices in dentistry. Number one is the cash flow of the practice. Cash is king! Location, type of equipment and finish out, type of transition if the senior doctor is staying there to transition the referring doctors, staff, and are the major components. Most Endo practices are in major metropolitan areas with population bases of typically 75,000 or greater. An Endo practice has the ability to have a low overhead if ran efficiency and actually the lowest in dentistry. If staff and operating costs are controlled, profit margins and cash flow increase resulting in an increased valuation.

What is Overhead?

While it’s rare to see a Endodontic practice with overhead rates outside of the 30-55% range, we have seen Endo practices maintain an overhead as low as 25% and obviously these practices will value higher than one with an overhead rate above 55%. The main difference in the overhead for an Endodontic practice is the speed of the doctor and number of employees working in the office. While some Endodontist might work on 5-6 canals a day, others can complete 15 per day. The increased production will lower the direct (employee) and all fixed costs thus generating a lower overhead.

What about the Assets?

Similar to other specialties, the valuation of a Endodontic practice will often times vary due to the level and value of assets. Because assets are key to an Endodontic buyer, the detail and accuracy of the appraisals of equipment and any potential upgrades in the immediate years prior to transition will be crucial to the selling doctor. A practice that has just invested in the newest technology Microscope can increase the value of the practice almost dollar for dollar.

If cash is king then location is queen – generally location of a practice will set the demand. A practice on the west coast, west of Interstate 5 may value at a premium compared to a rural southeast or mid-west practice. This is for the obvious reasons, but also because, while not a universal rule, most residents are married and it takes two decision makers versus one to make the commitment or move to a certain climate or city.

With regards to the value of a Endodontic practice there are some high level expectations, but in general, Endodontic practices have valued in the 70-75%% of collections range for decades. Obviously, valuations are complex and there are several factors that can cause the resulting value to vary. NDP’s valuation of your practice will use the industry standards present in the valuation world while taking into account the factors that make your business unique. Read more about our valuation services here.

Interested in potentially transitioning your Endodontic practice or just want an idea of what your practice may transition look like as you begin thinking of the next phase?

For a complimentary review of your practice please contact our offices, or fill out a short contact form and we will contact you!

Once we hear from you, we will request some basic financial and operational information and set up a one-hour review of your practice to give you real expectations of what you as a Endodontist seller can expect, but most importantly, what Endodontist buyers are expecting from you!

Overhead is the operating expenses of the practice. Typically, this will be the total expense of the practice minus any of the following expenses:

  • Owner Doctor’s & Associates Salary (including applicable payroll taxes)
  • Financing Costs (Interest Expense, if applicable)
  • Non- Cash Charges (Amortization, Depreciation)
  • Owner Discretionary Expenses – Travel, Continuing Education, Automobile Expense, Cell Phones, etc.)
  • Excess or additional rent if owner also owns building and are paying themselves a rent above or below the market rate
  • Retirement or Pension Expense

Whatever is left divided by the collections of the practice will equal the overhead rate of the practice. This typically falls between 30-60% in dentistry, the lower the percentage, the better.

Assets are the items in your practice that help you generate your cash flow such as supplies, equipment and the furniture and fixtures of your office.

  • Supplies: To understand the value of your supplies, we aren’t asking you to count gauze pads or gloves, we will typically take two months of your normal supply expense to estimate the value of the supplies you have on hand. This will vary by specialty – but typically Oral Surgeons or Periodontists who work with implants will have higher supply expenses due to implant or bone grafting costs.
  • Furniture and Fixtures: You will want the estimated value of the assets that are not dental related (waiting rooms chairs, break room, decorative pieces that will stay in the practice, etc.) to be accounted for in the final estimate of asset value. This can be as detailed as a piece-by-piece inventory or estimated by room.
  • Oral Surgery Equipment: Generally in a valuation of your practice, a third party will be required to come in and provide you an independent third party appraisal of your equipment value. Alternatively, if you have the original invoices of the equipment of your practice, we can use these as a basis for an estimate of value. X-ray units, dental chairs, cabinetry, sterilization equipment, Lasers, Intra-Oral Cameras and computer systems and other similar equipment will be included here.
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