Understanding Your Dental Practice’s True Value

For many dentists, one of the most important — and confusing — steps in selling or transitioning a practice is determining how much it’s worth. Whether you’re considering retirement, adding a partner, or preparing for a sale, knowing your true practice value helps you make confident, informed decisions. 

At JRA Healthcare – Real Estate & Practice Advisory, we help dentists navigate every aspect of practice valuation and transition. Here’s what you should know about the different types of valuations, what impacts your practice’s worth, and how to avoid common pitfalls along the way. 

Step One: Understanding Valuation vs. Opinion of Value 

While the terms valuation and opinion of value are often used interchangeably, they represent two very different approaches to determining a practice’s financial worth. 

Opinion of Value 

An opinion of value provides an estimate of what a dental practice could sell for under current market conditions. It’s flexible, market-driven, and often used for preliminary insights before formally listing a practice. 

This approach considers factors such as: 

• Buyer demand and local demographics 

• Leasehold improvements and equipment 

• Service mix and procedures 

• Staffing and post-closing employment terms 

• Market competition and replacement cost 

When to Use an Opinion of Value: 

• You’re only exploring the idea of selling and not yet ready to commit. 

• Your practice is in a high-demand area likely to attract multiple buyers. 

• You want a quick, informal estimate to gauge your position in the market. 

Formal Valuation 

A formal valuation is a certified, detailed analysis performed by a qualified appraiser or broker. It follows industry standards and provides a defensible, documentable number suitable for lenders, partners, or legal requirements. 

When to Use a Formal Valuation: 

• For legal, partnership, or buyout negotiations. 

• When seeking financing or satisfying lender documentation. 

• For estate planning, mergers, or multi-practice sales. 

Formal valuations provide the most accurate representation of your practice’s financial health and future potential — but they also require detailed documentation, including financial statements, production data, and tax records. 

 

The Value of Your Practice: What Buyers Look For 

Ultimately, the true value of your dental practice depends on what a buyer is willing to pay based on the income they can generate after expenses. This is known as net income — the money left after paying overhead, payroll, and operating costs. 

While national benchmarks often cite that dental practices sell for 50% to 90% of their most recent year’s collections, that figure can be misleading. Two offices collecting the same amount may have completely different values depending on rent, staffing costs, and efficiency. 

For example: 

• A practice paying twice as much in rent as another will likely be valued lower, even if collections are identical. 

• A practice with a stable, long-term staff and strong patient retention is more appealing than one with frequent turnover. 

Buyers invest in profitability, not potential. That’s why it’s crucial to have accurate data and realistic expectations before setting your asking price. 

 

When a Valuation Isn’t Really a Valuation 

Not all valuations are created equal. Some consultants offer “free” or “quick” valuations that rely on rules of thumb — for example, saying your practice is worth 80% of annual gross revenue. 

These shortcuts can be dangerous because they ignore key financial variables like: 

• Overhead percentage 

• Profit margins 

• Debt obligations 

• Local market trends 

For instance, two practices collecting $1 million annually may look similar on paper. But if one has 55% overhead and the other has 70%, their true values are dramatically different. 

That’s why a complete, formal valuation — not a quick estimate — is essential when serious financial decisions are on the line. 

 

Appraised Value vs. Market Value: What’s the Difference? 

Understanding the difference between appraised value and market value is key when interpreting your practice’s worth. 

• Appraised Value is the number determined through a professional valuation or appraisal process. It reflects your practice’s financial performance, assets, goodwill, and stability — based on standardized formulas and industry benchmarks. It’s objective, data-driven, and used for financing, legal, or partnership purposes. 

• Market Value, on the other hand, is what a qualified buyer is actually willing to pay in today’s market. It fluctuates based on demand, location, competition, and timing. Even if your appraised value is high, your market value may differ depending on how buyers perceive opportunity and risk. 

In other words, the appraised value defines your practice’s worth on paper, while the market value reveals what it’s worth in reality. Both are useful — but market value ultimately determines the price you’ll receive in a sale. 

 

Key Considerations in Practice Valuation 

When reviewing your valuation or appraisal, keep these important points in mind: 

• Lender Requirements: In most dental-specific sales, lenders care less about formal appraisals and more about whether cash flow can support the loan. 

• Timing: Practice values are time-sensitive and reflect only a specific period — typically the most recent 12–18 months. 

• Market Conditions: Local demographics, competition, and patient mix can shift value up or down. 

• Staffing: Retention, salaries, and benefit structures can affect profitability and perceived risk. 

• Documentation: The more transparent and organized your financials are, the higher the buyer confidence — and often, the better the offer. 

 

The Importance of Working with a Trusted Advisor 

Unfortunately, not every broker or consultant is transparent. Some may inflate numbers to win your business, giving you an unrealistic expectation of your practice’s market value. 

At JRA Healthcare, we believe in accuracy and honesty. We provide independent, data-driven evaluations backed by decades of experience in dental real estate and practice transitions. Whether you’re preparing for a partnership, sale, or expansion, our team ensures your valuation reflects the real marketplace — not just a rule of thumb. 

 

 

Partner with JRA Healthcare for a Clear, Confident Valuation 

Your dental practice is one of your most valuable assets — and understanding its worth is the foundation of every successful transition. 

Whether you’re exploring an opinion of value or ready for a certified appraisal, JRA Healthcare will guide you through the process with clarity, transparency, and care. 

Contact us today to learn more about your practice’s current market value and how to prepare for a successful transition. 

📍 JRA Healthcare – Real Estate & Practice Advisory
600 Enterprise Dr, Suite #214, Oak Brook, IL 60523
📞 630-353-1190 | ✉️ [email protected]