What Makes Transitioning a Pediatric Practice Unique?

Evolving a solo pediatric dental practice into a partnership is the most common type of practice transition of all of the specialties.

Though pediatric practice transitions are common, pediatric dentists can be difficult to recruit due to ample competition from other practices in addition to the fact that starting one’s own practice as a pediatric dentist can be simpler than other specialties.

A pediatric practice transition is unique due to the following:

  • An established or new practice can easily grow by simply “turning on” the Medicaid patient base
  • Because the pediatric market is a buyer’s market, it might require more effort to find the right associate or an interested and qualified buyer
  • The ease of transition is often affected by location; metropolitan areas experience an easier time transitioning than their rural counterparts

Pediatric Practice Valuations

Many owners assume the valuation is simply a percentage of their annual collections or a multiple of their profit; this simply isn’t true! Your valuation includes several more elements of which you should be aware:

  • Overhead- The cost it requires for your practice to operate is the number one driver of your valuation. The average pediatric practice has an overhead of 45-53% with a profit margin of 47-55%
  • Assets – The level of technology and the age of your equipment will impact your valuation
  • Medicaid -The average pediatric practice has a Medicaid customer base of 24%; the mix of PPO, HMO, FFS and Medicaid will impact your valuation. An established or new practice can easily grow by simply “turning on” the Medicaid patient base, but this can increase the risk of the transition given the unknowns of the Medicaid regulatory environment

  • Hospital affiliation – Hospital affiliations can increase profitability, but they can also pose a risk if they carry too great a percentage of your practice collections
  • In-house orthodontics – Adding the convenience of ortho services in one location can add profitability and diversity of services—which will impact the valuation
  • Reputation and relationships – Whether with parents or referral base, the reputation and branding of the practice and practitioner can impact value
  • Hygiene services – Pediatric practices have the highest percentage of hygiene production. The recall system is critical!

Interested in understanding how to plan for a pediatric transition? Want to know what your practice may be worth in today’s market?

For a complimentary review of your practice, please contact our office, or fill out a short contact form. To get started, we request basic financial and operational information and set up a one-hour review of your practice to give you real expectations of what you can expect as a seller, and what buyers are expecting from you!

*Source: CWA Pediatric Comparison Report

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