Dental industry in general experience strong growth since the innovation of dental cosmetics and the aging of many people that needs treatment. Dental health receives more preference in a household budget rather than medical health and education. The rise of cosmetic procedures and techniques opens demand for new dental devices. The business of a dental industry become more competitive and extravagant and there are common methods of business valuation when valuing dental practice.
- Asset-based valuation – this method also refers to a cost based approach wherein the cost of acquisition of its physical assets should be equal to its business value. However, this practice is rarely trusted upon in the dental industry because the dental practice valuation is closely grounded on the size of its clients than of its physical assets.
- Discounted cash flow – it is an income approach to the value. The value of goods under this process are identical to the current assessment of free cash flow to the resource owner. These procedures work well for both new dental practices where the growth rate is higher and for reputable and established dental practice with low-progress rates.
- Capitalization of earnings – it is an income approach to value. This method is very common and most appropriate to dental proceedings that encounter constant growth and predictable in earnings. Under this process, the cash flow forecast is equal to one year divided by the rate of capitalization.
- Market approach to value – this process operates market indication of value that includes acquisition of privately held practices of dental, etc.
Defining and determining the dental practice valuation needs balance physical factors and intangibles. You want to come up with a figure that represents what the client would willing pay for the practice or the fair market value. It is important that the evaluator you want to use knows everything and have experience in handling with dental practices.