Valuing a dental practice: what information matters?

By Evident Valuations

A dental practice’s revenue does not tell the whole valuation story. Two practices with similar billings can differ in clinician costs, owner dependence, premises security, equipment needs and the ability to sustain earnings.

A useful information pack connects the financial result to how the practice operates. The checklist below is a practical starting point; the required scope depends on the interest being valued and the purpose of the work.

First define what is being valued

Is the subject the operating practice, shares in the company, or a particular partner’s interest? Are the premises owned separately? Is equipment owned, financed or leased? Clarify which assets and obligations are included before comparing values or offers.

If a proposed transaction involves several entities or a departing practitioner, identify those arrangements early. A property interest may require separate specialist valuation advice.

Financial records and clinician remuneration

Provide annual financial statements, current management accounts and an explanation of material changes. Reconcile practice-management reports to the accounting records where possible, distinguishing billings, receipts, refunds and outstanding amounts.

Break down revenue and clinician costs in a way that explains the operating model. For an owner who treats patients and manages the business, distinguish the work performed in each role and the resources needed to replace it. Our guide to owner salaries and earnings adjustments explains why removing all owner remuneration can overstate sustainable earnings.

Patient activity and the mix of services

Aggregate operating measures can help explain the quality and repeatability of revenue. Depending on availability and relevance, these may include:

• Active-patient counts, with a clear definition and measurement period.
• New-patient activity, return visits and recall attendance.
• Revenue by clinician and broad treatment category.
• Appointment capacity, cancellations and utilisation.
• Dependence on particular referral sources or funding arrangements.

Interpret the figures together. A large historical patient database does not establish how many people currently attend. Nor does unused chair capacity automatically support a growth forecast: staffing, demand, opening hours and investment need to be considered.

People and dependence on the owner

Summarise the roles, working arrangements and remuneration of dentists, hygienists, oral health therapists, assistants and administrative staff as relevant. Identify vacancies, planned departures and any recruitment assumptions in a forecast.

Consider how patient relationships and referrals are distributed. If a departing owner generates a substantial share of revenue, a forecast should explain the proposed transition and the evidence supporting continued activity. Retention should not be assumed simply because the practice has changed hands.

Premises, equipment and future investment

Gather the premises lease and information about tenure, renewal options, rent and relevant transfer provisions. Have legal advisers address the legal effect of those terms rather than assuming that occupancy continues unchanged.

Provide an equipment register, ownership and finance details, and known replacement or refurbishment plans. A practice with ageing equipment may need cash investment even when its current profit looks healthy. Consider fit-out, software and other operating requirements when explaining the forecast.

A practical comparison

Imagine two practices each reporting $1.5 million in annual revenue. In one, several clinicians contribute to that revenue and the owner mainly manages the business. In the other, the owner performs most clinical work and plans to leave immediately.

The same revenue figure would not answer the questions about replacement costs and continuity. This hypothetical comparison illustrates the need for operating evidence; it does not establish a premium, discount or industry multiple for either practice.

Protect patient information during preparation

Start with aggregated information and avoid including patient names or identifiable clinical records in an initial valuation enquiry. The OAIC’s health privacy guidance explains limits on using and disclosing health information. Obtain appropriate advice and agree a lawful, secure process before any patient-level disclosure; confidentiality arrangements alone do not establish permission.

For a broader preparation list, read the business valuation document checklist. Explore business and share valuations or request a consultation to discuss the practice, ownership interest and intended use.

Related reading

• What documents do you need for a business valuation?
• How owner salaries and one-off expenses affect business value

General information only. The appropriate valuation approach and requirements depend on the circumstances, agreed scope and intended use. This article is not a valuation of a particular business or individual legal, tax or financial advice.

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