Valuation of a dental practice

The valuations discussed in this article deal with the actual sale of a practice and presume that the selling dentist will not compete. Valuations for litigation purposes may vary considerably as many states have different definitions of value in litigation environments that may vary from fair market values. The earnings-based models should be looked at when the practice is earning in excess of what a dentist can make without being an owner. To insure that the practice is not being under-valued the value based upon a continuing practice should also be considered. Finally, terms are very important. The tax deductibility of the purchase and the capital gain considerations of the seller are items to consider when constructing an offer. The new Section 197 of the Internal Revenue Code has a significant impact on practice negotiations since it now provides for the deductible write-off of goodwill. Frequently terms can be constructed that benefit both parties from a cash and tax standpoint.