The Practice Buyer's Corner - Random Musings from the Buy-Side
The Practice Buyer's Corner - Random Musings from the Buy-Side
The purpose of this blog is to share current, real world, experiences on the topics of practice valuation, practice transition, retirement planning, and building equity value - over time - in your dental practice.
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seanepp
seanepp

Real Estate Choices - The Most Common Transition Challenge

4/10/2013 5:43:59 PM   |   Comments: 5   |   Views: 715
Having analyzed countless dental practices, the most common theme among the more "challenging" valuation discussions we encounter is the relative impact of real estate decisions on practice valuation. 

Location and visibility, while very important, aren't often nearly as important as making the right commitment in terms of basic size and finish.  The number one killer of a decent valuation is a poor real estate decision as it can rarely be modified regardless of whether or not it is leased or owned.  Committing to a space too large, too nice, or both - is the best way to impair the valuation of your practice.

Moreover, what do your patients expect?  Easy access, good parking, and a clean, contemporary facility - that's all.  The proverbial "Taj Mahal" facility is almost guaranteed to be a millstone when you're looking to transition your practice.

An admittedly rough rule of thumb, but if the stone and wood work in your practice are nicer than that found in your friends' homes - you could have a real estate problem.

Appreciate the input from the CPAs and valuation experts but would suggest that the ideal facility costs to maximize practice valuation, all else being equal, tend to settle in around +/- 5% of annual collections (this is just rent and CAM; as applicable).
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