Orthotown November 2024 - 37

profitability. Part of the hidden cost of a small
space is that the owner needs to work more days,
seeing less patients, than if they were in a larger
facility with a larger waiting room. Who wants
to spend a career working four days a week when
they could have done it on three days if they
just invested another $500,000-plus into a new
facility after buying the practice? It's always a
joy to find a practice for sale where the facility
is only 10 to 15 years old and will last the new
owner their entire career unless practice growth
is significant.
3
Too few new-patient exams
and observations
One of the most critical aspects of any
business is attracting new customers. Without
new patients (NPs), a practice dies, so it's vital to
evaluate the NP numbers for the past few years
to see if that number is declining, and to look
into the future to determine if that number will
be adequate to carry forward the current starts.
It's likely that a retiring doctor's NPs are dwindling
as his best referral sources retire, and he no
longer puts his energy into personally marketing
the practice to the area dentists. The practice
that has 250 new patients yet starts 80% of them
is often considered to be of greater value than
the practice that has 400 NPs and starts 50%.
Each starts 200 patients a year, but actually the
one with 400 NPs has far more potential, and less
risk, than the one with many less NPs.
The same is true for patients on observation
recall. Imagine two similar practices in every
way except one practice does almost no early
treatment and has 300 patients in the observation
" refrigerator " for future starts and the other
has 100. It's estimated that approximately 70%
of all patients placed on observation recall will
start with the practice over time, which means
the larger recall base is anticipated to deliver 210
future starts, or approximately $1 million dollars
NOVEMBER 2024 | 37 | ORTHOTOWN.COM
of income, while the smaller observation base
will yield potentially only 70 starts, or $350,000.
Also be wary of the pitfall where the practice
had 300 observation patients two years ago
but now is down to only 70 because as the NPs
started drying up the observation patients were
started in treatment at younger and younger
ages to try to keep the production up.
4
Outdated equipment: Pan/ceph, chairs,
units, sterilization and instruments
With most practice sales, the equipment
is older, and there should be some positive value
consideration for the practice that has newer
equipment. A pan/ceph machine is not inexpensive
and if it's older than 14 years, we usually
reduce the practice value by at least $25,000 to
offset part of the cost for replacing the machine.
Be aware that appraisers rarely assign an adequate
positive or negative value for equipment
and rarely understand the numbers and condition
of the sterilization and instruments.
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Orthotown November 2024

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