10 Things to Consider when Buying a Dental Practice

Are you thinking about buying a dental practice, but aren’t sure what it entails? If yes, think about hiring a dental practice broker to take you through the process. We have 25 years of owning dental offices and plenty of experience to share in buying one. We visit practices for sale around the country and have seen transition strategies in the process. We observed what works and what doesn’t and we’re happy to share it with you with these ten things to consider.

1. Your Finances

Check your credit score before looking to buy dental practices for sale because banks are looking for a FICO score of a minimum of 680. Also, all banks mandate that you must have life insurance equal to the size of the loan and disability insurance monthly equaling your monthly payment for your loan.

  •         You must consider a complete review of all financial records and dental statistical reports
  •         We generally request the following data:
  •         Three years of tax returns business
  •         Three years profit and loss
  •         Copy of the lease
  •         Dental procedure code analysis
  •         Staff analysis and breakdown Including payroll
  •         Fee schedule and insurance company breakdown
  •         List of procedures routinely referred out of office
  •         Benefits and vacations and profit-sharing for staff
  •         Patient demographic report
  •         Number of new patients per month
  •         Number of active patients
  •         Dental production by Provider
  •         Both your bank and your accountant will be reviewing all data and financials

2. Size Of The Office

Consider the size of the office and the number of dental operators. A 600 ft.² office with only two operators doesn’t leave room for expansion if that’s what you’re looking for.

Practices for sale with a minimum space of 1000 ft.² and four functional operatories are more ideal. A smaller office limits your growth in the future and adds to stress on the doctor and the staff because of limited space and the necessity to constantly clean and prepare rooms for the next patient’s

3. Seller’s Finances

One priority to consider when purchasing dental practices for sale is the profitability or net profit cash flow you must figure, based on the seller’s profit, what your take-home will be after you input your costs such as a business loan.

When buying a dental practice consider the age of the equipment and renovations needed. If you have to replace equipment and remodel the office you must factor this into your future costs.

4. Current Patients

Think about the type of patient the doctor sees. The most desirable makeup mixes PPO insurance and fee-for-service patients. Few buyers consider purchasing a practice that has only Medicaid patients. Take into account the number of active patients in the practice and visits that are scheduled. After analyzing the existing schedule, decide if you want to increase operating hours.

If the dental practice you buy has a patient load full staff, your success rate exceeds 95%. Also, consider the demographics of the area and the density and saturation of other dentists.

5. Past Procedures

Review the procedure code analysis of dental procedures of the office you’re purchasing. If you want to have a successful transition, be familiar with procedures that were in place beforehand.

Identifying the procedures that the seller is referring out of the office. If you can take over these procedures you will have an immediate boost to the bottom line of profitability.

6. Dental Practice Marketing

Much of a dental practice’s clientele comes from word of mouth and many sellers put minimal funds towards getting the word out about their practice.

Just a slight increase in the marketing budget could yield significant positive results. If advertising isn’t your strong suit, a dental broker can help you.

7. Location

But if the dental practice is visible from the street, on the ground level in a nice neighborhood, you can reduce the marketing budget.

A self-standing professional building where you own the real estate adds to the success of your practice. You could purchase a large sign which returns on investment will continue at no cost for years to come.

8. Legal Advice

Securing the services of a qualified dental attorney will make the entire process significantly easier. You’ll be dealing with a professional that has the experience you lack. The attorney will know how to create a contract that will protect you and your new practice.

You may encounter hurdles along the way. An experienced attorney will know how to navigate them and have resources by their side to help the practice transition.

9. Revenue

Factor in the gross production of the office. Look for a practice that is grossing $500,000 or more so you can earn enough to support your lifestyle. You might consider a lower gross hoping to build rapidly through marketing and therefore have less overhead paying a banknote.

Private equity companies are targeting practices grossing over $1 million so they can maintain an adequate return on investment.

10. Labor Force

Study hygiene production and decide whether you want a strong hygiene department that sees a lot of long-established patients for cleanings or if you want chair time to go to higher-income procedures. Opinions of dentists on this issue vary, but everyone agrees that a well-trained hygienist department is a great asset.

This decision adequately predicts the future revenue of the practice which helps with the practice valuation.

A great broker will not only make suggestions about the best attorney for you, but they will also assist throughout the entire process from finding practices for sale to closing. We cannot stress enough the importance of bringing the dental practice purchase to a successful closing by utilizing experienced dental professionals. This will be one of the wisest financial decisions you make.