What You’re Probably Asking Yourself when Considering Buying a Dental Practice

Where to Begin?

There’s no easy way around it, dental practice transitions are a life-altering experience, both financially and emotionally. Whether you’re fresh out of dental school or a several-year veteran, the prospect of owning your own dental practice feels like the right step in maximizing your career, perhaps the only step. But, if you’re like many aspiring business owners, you’re likely anticipating the challenges involved and can’t help but wonder what you should do to bolster your chances of success. 

The first question to ask yourself is, where do you want to be? It’s difficult to identify potential opportunities if you haven’t decided where you would like to live and work. Additionally, consider what areas of dentistry you specialize in. This carries direct influence over where your services will be desired most. Researching and understanding the demographics you are walking into can (and will) impact your level of success when looking to buy. 

Listen to Transition Talk Episode 2: Finding the Opportunity! to learn more about how to find your opportunity when you are ready!

Once you’ve decided this, it’s time to determine the people you surround yourself with and how you will fund your new practice.

Funding Your New Practice

The idea of buying a practice sounds like an expensive proposition, so naturally, you have a few concerns about how you’re going to pay for everything. On average most practices sell for roughly 55-85% collections, but that’s a big range, and many factors influence where your opportunity falls within that range. Understand this If you’re offering less than the asking price and understand why you’re offering that amount. Are there specific reasons for the lower offer or are you merely “seeing what you can get?” Some practices fall outside of this range, yet remain worth the price. How you interact with the seller and what you offer them in response to their asking price carries more weight than almost any other facet of this process, and the emotion of the number can derail the transition. 

Assuming you plan on financing the transition, you’ll need to deal with a bank at some point. Simply put, banks are in the business of managing risk. When considering you for a business loan, they’re going to weigh a myriad of factors. 

  • What experience do you have in practice management/what is your production history?
  • Is the existing dentist remaining with the practice? If not, how long will the transition time be?
  • How much cash do you have saved and what is your personal lifestyle expense?
  • What is the cash flow of the practice with you involved?

Listen to Transition Talk Episode 5: Show Me The Money! to learn more about approaching a bank while preparing for your transition. 

Then there’s the worry of patient turnover. Many prospective buyers fear losing a significant portion of the seller’s loyal customer base. However, Dental Economics magazine estimates that on average, less than two percent of patients leave following an ownership transition. This of course, depends largely on you service and how you decide to handle the transition, but know that your initial cash flow really shouldn’t take the hit you’re fearing. Remember that the patients are what really make up the “collateral” that supports the business, not the equipment. 

The Fear of Failure

Understanding some of the realities regarding ownership are all well and good, but what does pursuing ownership actually look like? If there’s one takeaway from this, it’s that the buyer-seller relationship is crucial, it literally trumps every other aspect of a successful transition. Earlier we talked about how your production and work history could impact your lending. It can also impact the seller’s view on selling to you, as they could be looking to hand their lifelong work over to a local, recent graduate with a fresh take on the future of dentistry, or perhaps they are looking for an established owner looking to expand. Either way, remember that the current owner has likely poured decades of their life into the business you are proposing to enter and at the end of the day, you will go further by ensuring strong communication skills, remaining humble, and representing yourself as a prepared professional.

As an extension of your own efforts, make sure you have surrounded yourself with the right people. Often these deals can include a CPA or financial advisor, attorneys (on both sides), a broker (if the deal was listed), a lender, and ideally, a consultant with experience in dental-specific transitions. Regardless of who you choose to engage make sure you are in control of your team and that they all are dental-specific professionals. This will ensure a seamless transition, because one bad team member can sabotage a deal.

One of the greatest hurdles to overcome is the fear of failure. Whether securing funding, poor planning, or simply not knowing where to begin, any business owner must contend with this idea. However, the reality is that very few dental transitions flame out when the buyer acquires a financially stable practice with a well-planned transition. This comes down to the factors discussed above, as well as many others. Whether buying, selling, or valuing a practice, NDP will guide you through the process of preparing for and completing your practice transition. We assist buyers and sellers across the U.S. Each locality and business within it holds unique opportunities and challenges, so take advantage of our free educational resources or reach out to us so that we can support your transition goals!