The Devil is in the Detail
We’re all familiar with sweeping statements in the press such as “House Prices to rise by x %” or “Energy bills set for y % increase”, not surprisingly these can engender either excitement or fear in equal measure. Such headlines are usually very broad averages, and the reality of our own experiences may be different, causing frustration if our individual liabilities (e.g., bills) rise, or assets (e.g. property values) fall, by more than the headline rate. Of course, it’s also possible to be on the ‘right side’ of this law of averages and see assets rise and liabilities drop by more than the quoted figure. For individual cases the devil really is in the detail.
Frank Taylor & Associates’ monthly Practice Value Index focuses on exactly the level of detail required to arrive at an accurate value for individual practices. Published monthly in Dentistry magazine, there is commentary on a small selection of practices recently sold in the UK, to give unique and detailed insight into current market conditions.
There are so many factors to consider whilst valuing a practice, and their relative importance in both the overall valuation and, crucially, to a potential buyer will help drive the final sale price.
Of course, location is important, proximity to a large town, for example, means a large potential source of patients, though even this is being disrupted by changing residential patterns because of the pandemic and the increase in remote or hybrid working. The tenure rights can also influence valuations & and generally it’s good to have a lease with a decent term of years remaining as short leases can mean short term loans which reduces the price.
Patient type (NHS or private), nature of work done, and the overall financial health of the practice will also drive the valuation; a practice that is struggling won’t be performing well & generating profits will normally be reflected in the price, however not always A large part of any business’ cost base is wages and salaries, so it is crucial to understand how many staff are in the practice and what hours they work.
Naturally the layout of the practice will play a part in the valuation, particularly if it contains multiple surgeries and with the potential to add more. Externally, the availability of parking (adjacent, nearby, and free!) can also be an attractive feature for both staff and patients.
Ultimately the valuation of a practice, and the price it achieves, isn’t formulaic, but it will be driven to some degree by the factors mentioned above, in different measure. The details are important, but they needn’t be devilish.