Let’s get real for a second—valuing a dental practice isn’t just about counting chairs, equipment, and how many times you’ve upgraded your whitening machine. Nope, it’s about the bigger picture—the revenue, the patient loyalty, and how much future awesomeness your practice can deliver.
So, whether you’re looking to sell, buy, or just flex about your business’s worth at your next dental conference, let’s break down how to value a dental practice with style, sass, and spreadsheets.
Step 1: The Numbers That Matter Most
First, let’s hit the obvious: the money. A practice’s value comes down to how much revenue it generates and how steady that cash flow is. Here are the main metrics you’ll want to laser-focus on:
1. Gross Revenue
This is the total money your practice brings in before any expenses—basically, the “look how much we’re crushing it” number. It’s the starting point for any valuation.
2. Profitability
Let’s be honest—gross revenue doesn’t mean squat if you’re not profitable. Buyers want to know how much of that income is actually sticking around after you’ve paid for the basics (staff salaries, supplies, rent, and coffee).
3. Recurring Revenue
Enter the membership program. If you’ve got a patient membership plan generating predictable, monthly income, you’re golden. Membership revenue is like catnip for buyers because it’s steady, reliable, and shows you’ve got your act together.
Step 2: Patient Loyalty = Dollar Signs
Patients aren’t just patients—they’re assets. Here’s why:
Membership Patients: The MVPs
Membership patients are like the VIPs of dental care. They pay recurring fees, they’re loyal, and they spend WAY more than insurance patients.
Case in Point:
- Practice Name: Happy Smiles Dental
- Active Membership Patients: 1,356
- MRR (Monthly Recurring Revenue): $61,020
- ARR (Annual Recurring Revenue): $732,240
- Average Patient Spend: Membership patients averaged $2,150/year, compared to $500/year for insurance patients.
When a practice has a thriving membership program, it’s a major signal that their patient base is loyal, profitable, and scalable.
Step 3: The Hidden Metrics Buyers Love
Okay, we all know gross revenue and profitability are big deals, but what about the secret sauce metrics? These are the things that separate a good valuation from a GREAT one:
1. Average Revenue Per Patient (ARPP)
If your ARPP is high, it means you’re maximizing value from each patient. How do you do that? By offering services that go beyond cleanings—like implants, whitening memberships, and even Botox.
2. Patient Acquisition Cost (PAC)
This is how much you spend to get a new patient through your doors. If your PAC is low, you’re crushing it. Membership patients are your best bet here because they have faster payback periods compared to PPO patients.
3. Churn Rate
This one’s simple: how many patients are you losing each year? If your churn is low, you’re a patient retention rockstar.
Step 4: PPO Write-Offs Are Killing Your Value
Let’s talk PPOs—the thorn in every dentist’s side. PPO contracts come with invisible costs, like write-offs that eat into your revenue and administrative headaches that make your front desk want to scream.
Here’s the harsh truth:
- PPO patients will ALWAYS have higher costs to maintain due to those endless write-offs.
- Membership patients don’t have these strings attached.
Switching from PPO-heavy to membership-focused isn’t just good for cash flow—it’s great for your practice’s value.
Step 5: Build a Referral Engine and Killer Online Reputation
Want to boost your practice’s value instantly? Get those five-star reviews rolling in and build a referral network that makes new patient acquisition a breeze. Happy patients = happy buyers.
Step 6: How BoomCloud™ Helps You Crush It
If you’re serious about increasing your dental practice’s value, BoomCloud™ is your new best friend. With BoomCloud, you can:
- Launch and scale a membership program for recurring revenue.
- Track and automate billing, so no one falls through the cracks.
- Get metrics like MRR, ARR, and patient churn at your fingertips.
Case Study: Turning Loyalty Into Lucrative
Practice: Bright Smiles Dentistry
Location: Somewhere fabulous
Membership Patients: 1,856
MRR: $83,520
ARR: $1,002,240
Bright Smiles started with a small membership program but scaled it with BoomCloud™. They used the data to improve patient retention, increase ARPP, and attract buyers who loved the steady recurring revenue.
Final Thoughts: Your Practice Is Worth More Than You Think
Valuing a dental practice isn’t rocket science, but it does take some strategy. Focus on boosting recurring revenue, cutting PPO costs, and enhancing patient loyalty. And if you’re not already running a membership program, what are you waiting for?
With tools like BoomCloud™, you can turn your practice into a lean, mean, recurring-revenue machine—one that buyers will fight over when the time comes to sell.
So go out there, build that value, and let’s see some dollar signs, baby!
