Goodwill in Dental Practice Value – For Sellers
By Megan Urban, OMNI Practice Group
As many of you know, in the sale of dental practices, typically the biggest contributor in determining the purchase price is “Goodwill”. Are you aware of the aspects that make up goodwill? Of course, it includes your patients and business reputation, but it’s also based on patient retention, which is your hygiene program or Recare.
Savvy buyers understand that the repeat or retained patients are critical to on-going success. It is also important to lenders working with buyers. If you have a bulk of your patients coming in for large cases and your collections are high, that is commendable, however, a new buyer will be concerned that your patients have completed all treatment leaving them nothing to do and eliminates the chance for the buyer to meet and keep your patients.
All dentists focus on getting enough New Patients, as they should, but what happened to all the New Patients you treated over the years? Consider this example:
Let’s say you averaged 15 NPs per month for 10 years and you saw each on an average of twice per year in hygiene or Recare, you would need approximately 514 days of hygiene if you see an average of 7 per day. Some of you may see more patients in hygiene, but some may be SRP and perio patients may be coming every 3-4 months. You may work around 180-195 days per year so you would need approximately 2.75 hygienists. So that means if you retain at least 85% of those patients, you will need more and more hygiene days each year. Is this happening in your practice?
How many years have you been practicing and how many hygienists do you have? You may feel it’s impossible to fill more hygiene schedules. That tells me you may need revised scripting and a strategy for talking with your patients and educating them about their dental maintenance.
I have analyzed hundreds of practices and found that the average potential for increased collections from goodwill or patient retention is $30,000 to $150,000, depending on the size of the practice. I know it’s usually a high priority in any practice but needs a little tweaking that can bring big increases. And this doesn’t include potential increased collections from diagnosed treatment from all those periodic exams!
I encourage you to look at your own practice statistics. How many patients did you see in Recare in 2019? Run a procedure frequency report for codes 1110, 0120 and see if your numbers make sense based on your number of patients.
Do yourself a favor and increase your collections now and increase the value of your practice for the day you sell. This is my area of expertise and something I enjoy helping my clients achieve. Please contact me if you would like to further discuss and make a plan for your practice.