Dear Dr. V

By Scott A. Cabral, Esq.

Hello.  I am following up on our previous discussions. I spoke to you about 2 months ago and I decided that the next best step was to have a valuation of the practice. After receiving the paperwork from Choice, you and I spoke on two occasions for clarification on some of the documents needed. You were very helpful. Of course, just before I was to send the packet to have the valuation done by you, Covid-19 hit. I am still interested in the valuation but have some concerns of it's value at this point in time. I would be interested in any feedback you may have.

Dr. V

 

Dear Dr. V,

Your concern is a legitimate one and one we have discussed internally for several weeks now.  As a dental practice brokerage and appraisal firm, we have to make a determination as to what impact, if any, this pandemic will cause going forward to the value of a dental practice.  The closure of practices throughout the country will not only impact appraisals for the 2020 tax year, but also for 2021 and 2022 since most valuation methods take into account the three most recent years.

The answer to which nobody knows, since this is a first of its kind event, is will practices upon re-opening be overwhelmed with patients wanting to reschedule their missed appointments, or will the return to a full schedule be slow and steady over the coming months?  Obviously the former will lead to revenues catching up to prior year(s) quickly, while the latter will most likely lead to a decline in revenues for the 2020 year.

In either case, the decision we have made, is to appraise the practice as if the event did not occur.  And here is why.  Even if the practice is slow to recover, it will recover.  The event which caused the decline was not a long-term demise to the geographical location, loss of industry, change in local economics, etc..  But instead a nationwide “hold” to which all or most patients should return from.  All practices are in the same boat, so to speak, therefore patients aren’t jumping ship to go to another office which is still open. 

We feel to penalize a dental practice for a change in revenues due to a once in a 100 year type event would not be fair or appropriate.

That being said, it is completely up to you as to when you would like to have your appraisal completed.  We feel the value will be the same whether appraised now or later for most practices coming out of the pandemic for the reasons described above, except for a very limited number of practices where the practice may have faced a significant value altering event like the loss of several key employees to the virus by way of retirement or passing.