Transitioning a solo Pediatric dental practice into a partnership is the most common type of partnership transition of all of the specialties. In today’s market, Pediatric dentists are in a similar situation to Oral Surgeons in the fact that they are also in a tough situation to recruit a new pediatric dentists because of the small number of residents completing pediatric programs annually and the demand for these residents is great.

Pediatric dentistry is unique as an established or new practice can easily grow a practice by simply “turning on” the Medicaid patient base, which can literally flood the office with new patients in most areas of the country. Whether or not this is a good decision will depend on the state, the reimbursement level, and the dentist’s desire to serve this sector of the population.

Of all of the dental specialties Pediatric dentists are one of the hardest specialties to recruit for as there are numerous practices looking and limited barriers to entry should a new dentist want to start up a new practice. It’s not uncommon for a start up Pediatric practice in the right geographic area to collect over $900,000 by the end of their third year of practice. The pediatric specialty is a buyers market and requires additional efforts and diligence for those established dentists looking for a partner, associate or buyer. Corporate dentistry has also realized the opportunity and demand for pediatric dentistry and they are doing their best to expand as quickly as possible.

One of the reasons that you will want to work with NDP during your transition as a Pediatric Dentist is our direct connections to the 77 residency programs in the U.S. and our knowledge of the dental industry. We truly understand the field of Pediatric dentistry and the difference between a fee for service and a Medicaid office.

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

Another major factor that must be considered in a periodontal practice is location! Pediatric practices are transitioning well in major metropolitan areas of the US, but those in rural areas or less desirable geographic areas (those further than 100 miles to a major metropolitan area) often struggle to find the right associate or buyer. Finding the right buyer and for Pediatric practicing in markets with less than 200,000 populations may require some special assistance and can take time. Again, because Pediatric dentists can start up a practice and have a guaranteed patient base (through the acceptance of Medicaid), residents are not as likely to settle on a geographic area they aren’t completely sold on. The key is searching all avenues and finding both a doctor (and their spouse) who have the desire or who are willing to move to your community and put down roots.

Pediatric Practice Valuations

Pediatric practices are valued similarly to other dental specialties but there are several areas that may vary. First is the acceptance of Medicaid. Although Medicaid may create a patient base, the quantity of patients does not equal the quality from a payment perspective. A practice that has 30% collections or greater in Medicaid is going to value less than a straight fee for service practice.

What is Overhead?

The second item is Cash Flow. The level of overhead and how closely those costs are controlled will directly impact profit margins and cash flow increase resulting in a change in the valuation. While it‘s rare to see a pediatric practice outside the parameters of 48%-62% overhead, they do exist and a practice that has an overhead below the 50% will obviously value higher than a practice that is higher at 62%.

What about the Assets?

Similar to other specialties, the valuation of a Pediatric practice will often times vary due to the level and value of assets. Because assets are key to a potential Pediatric 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 a 2014 Carestream x-ray valued at $125,000 will obviously increase the value of the practice almost dollar for dollar.

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 seller can expect, but most importantly, what new buyers are expecting from you! NDP only works in the field of dentistry and understands what is necessary to ensure the success of a your Pediatric practice transition!

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.
Let NDP help find the right practice for you!

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