During the process of buying a dental practice, many different factors must be negotiated aside from the purchase price, such as asset allocation. Negotiating the asset allocation when purchasing a dental practice is essential for getting the most value out of your purchase. To learn the basics of negotiating asset allocation when buying a dental practice, continue reading.
What is a dental practice asset allocation?
Asset allocation refers to an investment strategy in which risks and rewards are balanced by adjusting the percentage of an investment portfolio’s assets in relation to the investor’s risk tolerance, goals, and investment time frame. Essentially, asset allocation as it relates to purchasing a dental practice involves determining how much value is assigned to the different aspects of the practice, such as equipment, goodwill, and other asset categories.
Asset categories for dental practices
A dental practice is composed of several different types of assets. Some of the main categories of assets in a dental practice include:
- Dental equipment
- Patient records
- Dental and office supplies
- Leasehold improvements
- Noncompete agreements
How to negotiate an advantageous allocation
When negotiating an asset allocation, it is common to start by determining the value of the practice. After the value has been determined, the value of each category of tangible assets will be negotiated and agreed upon. Lastly, the remaining value will be allocated for goodwill.
To ensure that you get the most advantageous deal when purchasing a dental practice, negotiating a beneficial asset allocation is essential. Because asset allocation plays such a large role in the overall value you get from your purchase, it is important to hire a team of professionals who have the knowledge and experience necessary to do the job right. In addition to a dental accountant and dental attorney, dental transition specialists can help you get the most value out of your acquisition.