Market Update – Fall 2010

May 23, 2012 | Market Updates |

Market update

Fall 2010

by Timothy A. Brown

The year 2010 witnessed increasing demand
for established dental practices. of note is
the surging demand for larger practices
(annual gross income of $1 million plus)
—from *i-Dentists™.

numerous recent transactions have witnessed multiple offers, typically
exceeding appraised values by 10 to 20%.This is a direct result of the
silent auction/sealed bid process that roi Corporation has perfected.

* i-Dentist™ is a Trademark of roi Corporation
www.roicorp.com
After a practice is sold, the appraiser will review their previous appraisals
and determine if they should increase or decrease their opinion of fair
market value for future appraisals. however; it is inappropriate to retroactively
re-appraise a recently sold practice (knowing its exact sale
price) as this process now has the benefit of hindsight.Any post sale
re-appraisal is a practice that roi Corporation does not subscribe to.
This has been asked of us to permit a buyer to obtain financing when
the sale price exceeds appraised value – we decline to do so.

The roi Corporation appraisal model relies upon actual, historical and
verified financial data to calculate fair market value.We consider this to
be the most prudent approach for the appraisal of a dental practice.

however, a purchaser’s seemingly optimistic income projections
have frequently been realized post-purchase.This serves to prove that
consumer dental spending is on the rise and that the average dental
practice will experience income growth in its first year of stewardship
by a younger, more ambitious owner.Additionally, many years of
post-sale surveys (performed by roi Corporation) verify that
increased revenues are achieved in almost every instance.

in conclusion:

1
The open market sale price may exceed the appraised
value by 10 to 20%

2
The appraised value will typically lag behind sale price
in a vibrant market setting

3
This variance is a result of rising market prices, and
will continue until the market stabilizes.

Timothy A. Brown
President & C.E.O. of ROI Corporation
ROI Corporation, is a company specializing in
dental practice appraisals, sales and consulting
across Canada. Timothy can be reached at 905-
278-4145 or by email at timothy@roicorp.com