---
title: "What Is Cost approach? Dental Practice Glossary"
description: "The cost approach is a valuation method that adds up the value of a practice's assets, often by what it would cost to replace them."
url: https://joncopeland.multisites.ai/glossary/cost-approach
publisher: Copeland Consulting Services
email: drcopeland@joncopelanddds.com
contact: https://joncopeland.multisites.ai/contact
---

Finance and valuation

# Cost approach

The cost approach is a valuation method that adds up the value of a practice's assets, often by what it would cost to replace them.

An IRS guide on valuing medical practices explains that the cost approach to asset valuation measures value by determining the cost to replace or reproduce an asset, less an allowance for physical deterioration or obsolescence. When used for a whole business, it uses the fair market value of individual assets as a starting point. The guide says an appraisal should consider the cost, market and income approaches together. For a dental practice, the cost approach looks at equipment, supplies and other assets. Alone it may miss value that comes from patients and reputation, which is why [goodwill](https://joncopeland.multisites.ai/glossary/goodwill) is often valued with other methods. See [income approach](https://joncopeland.multisites.ai/glossary/income-approach) and [market approach](https://joncopeland.multisites.ai/glossary/market-approach).

[Next stepPractice consulting with Dr. Copeland](https://joncopeland.multisites.ai/contact?topic=consulting)

## Related terms

-   [Income approach](https://joncopeland.multisites.ai/glossary/income-approach)
-   [Market approach](https://joncopeland.multisites.ai/glossary/market-approach)
-   [Goodwill](https://joncopeland.multisites.ai/glossary/goodwill)
-   [Practice valuation](https://joncopeland.multisites.ai/glossary/practice-valuation)

## Sources

1.  [IRS, Valuation of Medical Practices](https://www.irs.gov/pub/irs-tege/eotopicq96.pdf)

## Talk with Dr. Copeland

[Contact Dr. Copeland](https://joncopeland.multisites.ai/contact)[Email](mailto:drcopeland@joncopelanddds.com)