Question: My accountant advised me to have a practice appraisal even though I am not interested in selling and/or retiring for at least another 10 years. He has quoted me a fee of $5,000 and I am not convinced about 1) spending that much money just to find out what my practice is worth today, and 2) if the appraisal will still be valid in 10 years when I am interested in selling. Do I really need an appraisal now?
By Tom Snyder, DMD, MBA
If you are a solo practitioner and have an established practice, it certainly is a worthwhile investment to have your practice appraised. The importance of knowing the value of your practice is a key ingredient of good financial planning as well as a sound risk management strategy. In the event of an adverse event, most family members have no idea what your practice is worth, so this is a good first step.
Since most doctors have life and disability insurance and their policies are annual financial expenditures, the fee you pay for a practice appraisal is a worthwhile investment. Many transition firms can prepare a comprehensive valuation in the $2,000 to $4,000 range with annual updates at $500 per year. Measure this fee against those annual life and disability insurance premiums you are paying and you’ll be getting quite a bargain. In the event that something unexpectedly happens to you, there will be peace of mind versus the chaos that can occur if no one knows what your practice is worth.
Obviously, when it is time to implement your transition plan, you will need to have the valuation updated to arrive at a current fair market value.
Tom Snyder, DMD, MBA, is the director of transition services for The Snyder Group, a division of Henry Schein. He can be reached at (800) 988-5674 or [email protected].
By Lynne Nelson
I’m not sure why an appraisal has been suggested by your accountant at this time, but it could be for retirement planning strategies. You are correct in that it would not be a useful tool if you are using it to sell your practice 10 years from now. You will need to have a current appraisal based on the last three years of revenue and expenses for a potential purchaser or lending institution to recognize it as a relevant indicator of value for your dental practice.
With that being said however, it could be a very necessary piece in planning for your retirement, along with safeguarding you and your family in case of accidental death or disability.
Appraisals can cost anywhere from $2,500 to $5,000 depending on who you hire and for what purpose you are having the appraisal produced. I would recommend having an appraisal completed in case of accidental death or disability, and I would use someone you trust to list, advertise, and sell the practice quickly as time is of the essence in the above scenario.
Many transition specialists will charge an initial fee and then have you submit your updated numbers annually, which allows you to have a current appraisal of the practice on file should you need to expedite a swift sale. This type of an appraisal can also be used for retirement planning because your practice sale will be a very important component in figuring what is needed to facilitate your lifestyle after retirement. I don’t think you can ever be over prepared, and it’s money well spent to protect and plan for the future!
Lynne Nelson is senior broker at Consani Seims, Ltd. and ADS Northwest, and cofounder of Practice Management Associates, LLC. For more information, contact her at (206) 920-6217, by email at [email protected], or via www.mydentalconsultants.com.
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