Dental Elite’s Paul Wilkinson: “Inflated and deflated valuations explained”
Getting an accurate valuation from a trusted agency is integral to achieving the best results with a dental practice sale, because should you choose to go to market with a overinflated valuation – or one that is deflated – there’s a possibility that your practice might not do as well as it would have done at the ‘right’ price.
With a deflated valuation the main risk is your practice selling for less than it’s worth, which might be better for the buyer but is an injustice to you and all your hard work. In some instances a lower start price can help drive up the prices in an open bidding process, but there’s no guarantee with this, so it’s always best to avoid prices below the true value of your practice.
However, if the practice is brokered professionally the risks of a lower valuation are often hedged by maximising competition. On occasion we deliberately send a practice to market at a lower price to maximise ‘the heat’ in a deal, helping create the best possible price.
For this reason there is arguably greater risk with an inflated valuation. Even if your practice is high in demand and in an area that has naturally higher values, try to steer clear of the agency that has provided you with an exaggerated valuation.
The main reason being that if your practice is on the market for too much money you could seriously damage the value and reputation of your practice, as a lot of buyers won’t even entertain looking at it. If that were to happen and you then tried to reduce the asking price, it’s quite likely that you still wouldn't gain the same sort of traction.
It is usually because of one of the two following reasons that a valuation is inflated: the vendor has a price fixed in their mind and isn’t prepared to take any less, or the broker has overvalued to secure the business. There are plenty of market research and goodwill reports out there that can help you to get to grips on where your practice lies within the wider picture, and a quick search on the internet of similar practices for sale will soon give you an indication of what your practice is worth.
The other thing you can do to make sure that you come away with an accurate valuation is to ask the valuer for the methodology behind the report. You’ll find that some agencies such as Dental Elite will provide a comprehensive report automatically. If they aren’t able to back up your valuation with hard evidence you have to ask yourself how they managed to reach that conclusion – and whether they’re the best brokers to be leading your sale.
Of course, if you do your homework on an agency well enough beforehand you can usually find out if they provide you with a comprehensive report. Some websites might even tell you what the report content will contain. Still, the best way to learn the truth about an agency’s service is to look at customer reviews and testimonials from previous vendors.
The outcome of a practice sale might ultimately be about getting the deal over the line and having an agent that will take an active role, but the more reasonably priced you are the more attention you’ll attract from the market. For an accurate valuation and expert help contact Dental Elite.
Photo by Mariana Montes de Oca