How much to Buy out a OMFS practice?

[Arhat]

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I am not the most financial savy person.
But what variable are important in order to buy out a practice.
I know that number of dental chairs, how much new patients is seen per week, and overall space of the area,as well as if one owns a land.

Is it reasonable or just crazy to sell a business practice (not the land) for millions?
I think it is far fetch since in reality pretty much all the patients you HAVE seen will not come back for recall visits like dentistry.

Any inputs?

 

[Bitters]

What you are buying can be broken down into two different elements. Tangible vs. Intangible assests.

The tangible part of the practice is easy. What is the value of the equipment in the office? New ct scanner, new stryker drills. etc. This value is negotiable, and fairly easy to determine. Just look at the depreciation schedule of the tax returns. Just remember since it is fully depreciated doesnt mean it doesnt have value.

The intangible is somewhat different. With general practice sales this is commonly referred to as the good will of the practice. How do you place a value on this? There are several formulas that are used to calculate this that most cpa's can explain to you. The way I look at it is with a specialty practice, your correct, patients dont have a long term relationship with you. So what are you buying. Your buying the income that the practice can provide you with. In essence what would I pay today for a business that will produce x dollars per year.

Common numbers for oral surgery practices, or at least from five years ago. were from 37 to 45 percent of average collections over the previous three years

So say you have a sole practitioner with 400000 worth of equipment with 1.2 million in collections. You are looking at a purchase price of around 900000 give or take.

This does not include any consideration of real estate which is a whole different ball game.