Why You Should Pay for a Practice Valuation When There Are Free Valuations

As a dentist, what do you think your single most valuable investment asset is?

In almost all cases, it’s your dental practice! Therefore, making smart financial decisions about your practice is crucial for your livelihood. It’s also crucial because the competition among dentists and oral care professionals has really ramped up in the past decade, and you need all the funds you can get to stay competitive!

Primus Dental Design - Dental practiceIf the time comes when you’re looking to “cash out” of your practice or sell it in order to expand into a larger one, you’re going to need a valuation of some sort. You’ve probably been exposed to plenty of opportunities for free valuations, which is why it could be unclear to you whether it’s actually worth paying a fee for a valuation of your practice.

Well, the answer is unequivocally yes! It is worth it, and here’s why.

The Free Valuation

In decades past, there were rule-of-thumb valuations created to quickly measure the values of intangible assets. Without requiring careful analysis, these free valuations were supposed to provide a ballpark figure of what a practice might be worth. The problem is, they were wildly inaccurate, simplistic, and generally a very poor figure to base any major financial decisions upon.

The Paid Valuation

With a paid valuation, on the other hand, you consult with an experienced financial professional. This person utilizes complex and sophisticated financial models to measure the investment value of a practice, incorporating approaches like:

– Capitalization of earnings
– Discounted cash flows
– Market analysis
– Asset valuation

If you don’t know what those mean, that’s kind of the point. It’s easy to get a simplistic valuation, but you could be undercutting your practice’s value by hundreds of thousands of dollars or more if you don’t have a solid valuation that’s based on something substantiated. You can’t defend a simple free valuation, but you can easily defend a valuation that’s based on careful, comprehensive analysis of at least ten hours!

Further Drawbacks to Free Valuations

Aside from the crippling sense of regret that comes from selling your practice for far less than it’s truly worth, there are other drawbacks to relying on free valuations.

Primus Dental Design - You get what you pay for!

Here’s one of the biggest: if a financial advisor offers you a quote as part of a free valuation, you can’t turn around and hold the person responsible when you’re dissatisfied by it in the future. Why? Because it wasn’t paid advice (i.e. you didn’t engage this person’s services in a professional capacity). No fiduciary accountability means no lawsuit to recover damages from bad advice!

In the end, it seems abundantly clear that paying a fee for a valuation is a small price to pay for getting accurate information about your most important investment asset!

Whether you’re ready to retire or are looking to take your money and invest in new construction for your practice, you’ll benefit considerably from paying for a professional valuation on your dental practice.

Do you have any questions? We’re always ready to help, so contact us today for more information!

~Jason

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