Transitioning a Prosthodontic practice requires the consideration of many factors and an understanding that each Prosthodontic office is unique. NDP has the tools to ensure your transition success.
There are fewer number of Prosthodontic residents graduating than any other specialty. There are approximately 49 of Prosthodontic programs in the country and less than 200 Prosth residents that graduate each year. The vast majority of these graduating residents will work for a corporate setting upon graduation and only a small percentage will join a true Prosthodontic fee for service practice where they will be a partner. This specialty is unique to the others because of the wide range of practices. We see some high-end true Prosth practices that are doing very complicated $50,000 cases to the other side of the spectrum with Prosth practices that might run 8 hygiene days a week in a $1,000,000 practice. Some Prosth practices work strictly on the referral of other general dentists and specialists and others that market directly to the public similar to a general dentist. Each of these styles are perfectly acceptable, but each are unique and will need to be considered when valuing the business.
The candidate pool that is most attractive to our clients and considered “ideal” are the candidates that have a few years of experience, have a drive for success, know that they don’t want to work in a corporate setting and have the passion to become a business owner sooner rather than later.
Through our network of relationships within the dental schools and residency programs across the country, NDP has contacts with the majority of the Prosthodontic programs across the country. 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:
- There are 65 dental schools graduating approximately 4,500 dental students each year. The Prosthodontic programs are producing an additional 200 graduating residents each year as well.
- The level of equipment in your practice will be one key in a transition. The majority of buyers have trained with the latest and greatest technology and if your practice has been upgraded in the last 5-7 years then this is a plus.
- What to expect from a candidate in your practice? A graduating Prosth resident will be equipped to produce immediately within your practice. A general dentist will most often need time to work up to producing $50,000 of monthly production in an office, whereas the Prosth resident is capable of generating this type of monthly production within their first 6-12 months. The key for the new Prosth resident is simply the buy-in from the referring doctors, the current office team, and the overall support of the transitioning Prosthodontist.
- Students and residents are facing between $275,000-$500,000 of student debt with interest rates of 6.8%-11.0% thus causing hesitation on borrowing more money with a start up or acquisition – NDP can show the Prosthdontic buyer how buying makes financial sense.
- “Will banks lend money to these students/residents?” is a common question we get at NDP and the answer is “Yes”. We work with most of the major banks that specialize in dentistry and most importantly NDP knows how to work with these banks to get the funding needed for these transitions.
Prosthodontic Practice Valuations
Prosthodontic 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 patients, type of transition if the senior doctor is staying there to transition the patients and staff to the new doctor are the major components. Most Prosthodontic practices are in major metropolitan areas with population bases of typically 100,000 or greater. A Prosthodontic practice has the ability to have a low overhead if ran efficiency, so if staff and operating costs are controlled, profit margins and cash flow increase resulting in an increased valuation.
While it’s rare to see a Prosthodontic practice with overhead rates outside of the 55-70% range, we have seen Prosth practices maintain an overhead as low as 50% and obviously these practices will value higher than one with an overhead rate above 70%. The main difference in the overhead for a Prosthodontic practice is the lab and supplies. Depending on the cases the Prosthodontist is completing you can easily have a Prosth practice that runs a 15% lab and 10% supply bill. The range on the direct cost for a Prosth practice will vary widely.
What about the Assets?
What about the Assets? Similar to other specialties, the valuation of a Prosthodontic practice will often times vary due to the level and value of assets. Because assets are key to a Prosth 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 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 Prosthodontic practice there are some high level expectations, but in general, Prosth practices have valued in the 65-70% 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 general practice or just want an idea of what your practice may transition look like as you begin thinking of the next phase?
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 Prosthodontist seller can expect, but most importantly, what Prosthondontist buyers are expecting from you!