When looking to purchase a dental practice, obtaining a prospectus is part of the valuation process that will help you determine if the practice is growing, in status, or declining. The 20 or so pages broken down into different categories of interest to the buyer will identify the areas that potentially need attention, such as marketing and additional operating costs. As for the seller, the information gathered for a prospectus is typically the same that is required by the bank. The key metrics used to appraise a practice are generally agreed upon in the practice’s specialty and include the following.
Practice description
This includes a biography of the selling doctor, location of the practice, office hours, and types of equipment with supporting photos, as well as employee roster with hire dates, hourly wages, and benefits.
Production
A three-year weighted average of production is broken down by production type and provider, in addition to an evaluation of the types of procedures.
Patient analysis
Included in this is the total active patients and new patients per month for the past 12 months to analyze growth trends.
Finances
The financials that are involved in a sale include top and bottom line numbers, most recent tax returns, past three years of profit-and-loss statements, investments, list of insurance plans, current balance sheet, accounts receivable aging report, and a copy of the current lease in relation to take-home pay and capital spending.
What’s next?
Read more about the process of buying a dental practice in our e-book “Transitions,” then reach out to the experts at Professional Transition Strategies to help start the process of assembling a prospectus.