From Numbers to Narrative: Capturing Your Practice’s Worth

Understanding the value of a dental practice is a vital step in many situations, whether you’re planning to buy or sell your practice or bring on a partner.

A valuation assesses the practice’s financial performance, profitability and risk factors, and market position to determine a well-supported estimate or opinion of value. It provides the selling doctor with a foundation for strategic planning and allows the buyer to evaluate the practice’s financial health and overall stability.

At NDP, our team offers two types of valuation reports: a formal valuation report and a calculation report. While the reports differ in scope, detail and purpose, both reports estimate the value of a practice and meet the professional standards set forth by the National Association of Certified Valuators and Analysts (NACVA).

“To determine the appropriate report for you, we start by asking why you want your practice valued,” NDP Valuation Manager Bryan Gooden said. “You may be adding a new doctor to your existing partnership, or perhaps you’re looking for a baseline value for planning purposes. Every valuation has a purpose, and that purpose helps us determine the report that’s right for you.”

The Formal Valuation Report

The formal valuation report is the most common among NDP’s valuations. A good rule of thumb is, if the valuation may be used in a legal, tax or regulatory setting, the formal valuation report would be the most appropriate.

This report is specifically useful for practices that are forming partnerships or adding a new doctor to an existing partnership. It establishes a fair and transparent framework for negotiations among owners and serves as a valuable reference during partnership restructures, dissolutions, or disputes.

The final deliverable is a comprehensive assessment of what NACVA calls the Conclusion of Value. This is presented in a thorough report, averaging 50 pages in length.

The Calculation Report

The calculation report is a simplified and condensed version compared to the formal valuation report.

It provides an estimate of value — not a formal opinion — that’s sufficient for planning or internal decision-making. The calculation report is not used for legal, tax, or regulatory purposes.

For instance, the practice owner may be planning for retirement, evaluating growth or expansion opportunities, exploring a potential partner buy-in, or seeking support for financing and strategic planning discussions.

This report is often used for familial buy-out transitions, such as a parent selling their practice to a son or daughter. In a family relationship, there’s typically natural trust and transparency, and the transition is usually amicable and collaborative with a low risk of dispute. The valuation in this context is not usually subject to legal challenge but instead provides a credible benchmark to guide the transition.

For the calculation report, the final deliverable is a straightforward estimate of what NACVA calls the Calculated Value. Averaging 20 pages in length, this report is typically much shorter than the formal valuation report.