“What consideration, if any, should be given to the new dentist as it relates to the increased value of the practice resulting from the associate’s added production during the deferred period (before buying into the practice and becoming an owner)?”
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The most widely used method for determining practice value is fair market value. The commonly accepted definition of fair market value is the price which a professional practice would produce, allowing reasonable time to find a purchaser, with both buyer and seller having access to full disclosure of information about each other.
When you recognize the clinical and management compensation as an overhead expense, the overhead percentage should be 80% to 85% of annual gross collections for a well run general dental practice.
Sell now or build to sell? Sell for present value or sell for future value? Commit now, but defer the actual sale until later? Take cash or fund your pension plan with the value of your practice? These are just a few important considerations for a dentist who is thinking and planning for the future.
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