How to read a dental practice listing
A dental practice listing usually gives a specialty, a metro area, annual collections, sometimes an asking price and adjusted net income, and the number of operatories. These are the listing broker's own figures, not verified facts. Ask how each term is defined, because collections, adjusted net and add-backs are not standardized from one seller or broker to the next.
Collections and production
Production is the value of services billed at the practice's fee schedule. Collections is the money actually received. Collections is the steadier measure of what the practice brings in, and it is the figure most listings quote.
Adjusted net, SDE and add-backs
Adjusted net (or seller's discretionary earnings) tries to show what the practice earns for an owner-dentist after expenses, with the owner's own pay and one-time or personal costs added back. The add-backs are the seller's judgment, so ask for the schedule and have your CPA test each line.
Operatories
The number of treatment rooms set up for patients, a rough measure of capacity. Check how many are in use and how many the staff can actually run.
"Price not published"
Many listings leave the price off and discuss it after a confidentiality agreement. A missing price tells you nothing about value.
Location and anonymity
Listings show a metro or region, not an address, to protect the seller. The name and address are released after you sign the confidentiality agreement.
Questions to ask before you sign
- How is collections defined, and over what period?
- What are the add-backs behind adjusted net, line by line?
- Is the owner the main producer? How much of production comes from associates and hygiene?
- What does the lease say about assignment and renewal?
Related
Common questions
Are listing figures verified?
No. They are the listing broker's own. A buyer verifies them in due diligence with tax returns and production and collections reports.
Is the asking price what the practice is worth?
It is the seller's ask. Value is set by buyer, lender and negotiation, and an independent valuation is worth getting.