Beyond supporting strategy, valuation, and growth at PA, we also support buyers in our Buyer Advocacy Program. It is uncommon to find major discrepancies in a valuation conducted by a reputable valuator when we conduct our analysis. Most of the time, the data is relatively consistent but the approach to projections, the business plan, and realistic growth that aligns with the buyer’s unique skill set and goals is where we will make adjustments to create a 3-year post acquisition blueprint. Major discrepancies in the valuation often aren’t present because a valuator can use knowledge of visit frequency, annual revenue per patient, procedural analysis, daily productivity, number of patients, and financial statements to have more than one “check point” that validates or invalidates data provided from one source or another.
Our goal is never to interfere with a deal – it’s to support and expedite the process, provide advocacy for the buyer, and provide clarity through verification.
So here’s an interesting one from a recent buyer advocacy report we completed…
The valuation reported 3,500 patients were seen in the past year. Production under $1M. 60% of patients are on a 6 month recall. Hygiene is 30%. Hygiene sees 10 patients per day. The dentist sees 9 patients per day. One dentist. 6 days of hygiene per week. No production reports were provided.
It turns out most of the data provided was attained verbally from the owner.
If we accepted the numbers presented to be true, we’d expect the average patient spends $285 per year (way too low), there’d either be about 12,000 patient visits scheduled in the year (which would require 382 weeks of work per year…that’s hard to achieve) OR every patient comes in 1.3x per year – but that math doesn’t work with 60% of patients on a 6 month recall.
We got the real numbers from the onsite visit review. The two-year active patient count was 900. All of the a sudden, the math balances. But we are most certainly dealing with a different practice than what was presented.
As a valuator, my goal is ALWAYS:
– to ensure maximum value for the seller (justified)
– to make sure it is understood from cover to cover by a buyer (transparency).
– to give every assurance possible that the bank will say “yes” to financing (legitimacy).
– And above all else, it’s RIGHT (accurate & dependable)
I don’t believe either the valuator or the owner was trying to deceive anyone in this instance. I think it’s unfair to ask the owner to come up with practice statistics included in a valuation. In this case, I think the sourcing and cross referencing of data had room for improvement. And now that the buyer knows what they are buying, they can move forward with an accurate and dependable analysis.
