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Highly Profitable Pediatric Dental Practice

CASH FLOW
$533,042

Specifications

  • Price
    $790,000

  • Revenue
    $824,161

  • Cash Flow
    $533,042

  • Location
    Southwest Nebraska

  • Service Area
    Patients from NE, KS and CO

  • Reason for Sale
    Moving out of state

  • Profit Margin
    65%

  • Equipment
    $323,161

  • Account Receivable
    $76,435

  • Valuation
    $818,191

  • Lease
    $2,000

  • Intangible Assets
    Established repeat client list

This Southwest Nebraska specialized clinic with 67% profit margin supports patients in Nebraska, Kansas and Colorado. The practice started less 9 years ago and has grown to revenues of $825,317 in 2014.  Current patient count is 4,411 with an average of 30-35 patients scheduled per day.  The business receives referrals from 15 doctors.

The current Owner has four employees in place – 1 office/front desk and 3 assistants.  Owner is the dentist on staff.  The 1248 sq. ft. office has 4 operatory rooms and one central play area. 

Owner cash flow in 2015 annualized was $475,733 representing 67% of the $707,612 annualized gross sales for the year.  The $399,596 in assets included with the business include $270,170 in machinery and equipment, $11,748 in computer equipment, $41,243 in furniture and fixtures, and $76,435 in accounts receivable.  Machinery and equipment include 2 BIOLASE turbo lasers and Dexis digital x-ray equipment.

Current Owner will assist with transition and training for a period of 90 days post-close.  Office is currently open from 2-5 pm on Mondays and 8am-5pm Tuesday through Thursday, so a new Owner could expand practice hours to increase gross sales.  

With a cash flow of $475,733, a new Owner could retain $347,893 in net operating income after debt service and would realize a 440% return on investment on a $79,000 down payment. 

Business Highlights

  • Been established since 2008
  • Servicing patients located in Nebraska, Kansas, and Colorado
  • Located in Southwest Nebraska
  • Active Patients is 4,411
  • Seeing an average of 30-35 patients daily
  • Currently has 15 referring doctors to the clinic
  • Staffed with 1 Office/Front Desk personal and 3 Assistants
  • Growth Potential would be by expanding office hours 

Financial Highlights

  • List Price:        $790,000
  • Gross Sales
    • 2016: $824,161
    • 2015: $743,655 – owner was severely injured for 1.5 months and was unable to practice
    • 2014: $825,317
    • 2013: $762,619
  • Owner Profit/Cash Flow
    • 2016: $533,42
    • 2015: $481,289
    • 2014: $540,484
    • 2013: $482,213
  • Profit Margin: 65%

Assets Included: $399,596

  • Machinery & Dental Equipment: $270,170 (includes 2 BIOLASE turbo lasers, Dexis digital x-ray equipment)
  • Computer Equipment: $11,748
  • Furniture & Fixtures: $41,243
  • Accounts Receivable: $76,435 (current to 90 days)
  • Intangible Assets: Established repeat client list
  • Build-out: $115,873

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L Statement
January - December
Tax ReturnTax ReturnTax ReturnTax ReturnNotes
20162015201420132012
GROSS SALES$824,161$743,655$825,317$762,619$760,069Seller severely injured for 1.5 months in 2015
Net Income Shown on Financial Statement$198,964$131,176$211,934$270,933$378,917
ADDBACKS
Compensation to Owner$285,642$292,237$269,229$150,752$0
Other unrelated Salaries$6,500$6,500$6,500$6,500$6,500Wife's Salary
11% Tax on total W2 Salaries$32,135$32,861$30,330$17,298$715
Depreciation$2,418$7,707$8,574$20,634$73,020Non-cash item
Interest$6,833$10,459$13,077$15,409$31,104Non-ongoing expense
Meals & Entertainment$550$349$840$687$1,033Expenses unrelated to business
TOTAL ADDBACKS$334,078$350,113$328,550$211,280$112,372
Seller's Cash Flow = Total Addbacks + Net Income$533,042$481,289$540,484$482,213$491,289
Profit Margin64.68 %64.72 %65.48 %63.23 %64.64 %
  • 65% profit margin in 2016
  • 9.7% increase in gross sales from 2015 to 2016
    • Owner had a severe injury that prevented working for 1.5 months during 2015

Sales Analysis

  • Total revenue in 2016 was $824,161 compared to $743,655
  • Revenue outpaced expenses for every month expect March 

Services

With referrals from 15 doctors and an average of 30-35 patients seen per day, this pediatric practice has over 4,400 patients across Nebraska, Kansas and Colorado.  Services provided include:                                                                 

  • Oral health for children from infancy through teenage years                                                     
  • Dental emergencies
    • Toothache
    • Cut or bitten tongue, lip or cheek
    • Knocked out permanent tooth or baby tooth
    • Chipped or fractured permanent tooth or baby tooth
    • Severe blow to the head
    • Possible broken or fractured jaw
  • Dental radiographs (x-rays)
  • Pulp therapy
  • Sealants and fluoride treatments
  • Mouth guards
  • Sedation
    • Nitrous oxide
    • Conscious sedations
    • Outpatient General anesthesia

Employees

  • This is an owner/operator dental practice, and as it has a pediatric focus, there is no need for dental hygienists.
  • There are a total of 4 employees:
    • 1 office/front desk manager
    • 3 assistants

Valuation Details

The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business.  The formula used is as follows:

Cash Flow       x          Multiplier          =          Price

“Cash flow” is the sum of net income plus any owner perks and non-onward going expenses.

“Multiplier” is a prescribed number between 1 and 5 determined by a 100-point, 20-question rating system used to determine the business valuation (average is 3).

The Cash Flow for 2015 annualized is $475,733. The prescribed multiplier is 1.7

With this information, the computation result follows:

$481,289         x          1.7       =          $818,191

The List Price for the business is set at $790,000. The business is discounted due to the Seller’s desire to move out of state.

Using the Cash Flow of $481,289, the Buyer’s Net Operating Income after debt service would be $353,449.  Assuming a 10% Buyer down payment on the Purchase Price $790,000, the Return on Investment in the first year would be four-fold.

Purchase Price:

$790,000

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$
Years
%

Bank Loan Needed: $

Years
%
$
$
$
$
$

Funding Details

Business:

Offer Price: $

% Buyer Cash Down at Closing: $

% Seller Carry Back via Promissory Note: $

year term at a rate of %

% of Purchase Price secured by Buyer and Seller

Total Bank Loan Need: $

% of Purchase Price

Desired Loan Type:

Desired Bank Terms: year term at a rate of %

Total Business Assets, Inventory, and A/R: $

Total Undercollateralized Loan: $

Loan Payments

Monthly Payment to Bank: $
Yearly Payment to Bank: $
Monthly Payment to Seller: $
Yearly Payment to Seller: $
Total Monthly Debt Service: $
Total Yearly Debt Service: $

Conclusions

Fixed Charge Coverage Ratio

The bank will require a minimum ratio of 1.5 to be lendable.

Cash Flow:
2015 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2015 Cash Flow
$
Annual Debt Service: -$
NOI:

Buyer's Return on Investment (ROI)

The rate of return on the Buyer's down payment.

Down Payment: $
NOI:
ROI: %

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