Dental Practice Acquisition

An existing practice acquisition affords the opportunity to buy an established business with a customer base. Before you buy an existing practice, consider the following benefits and risks.

Benefits

• Established Staff and Patients: Acquiring an existing practice means inheriting a team of skilled professionals and a loyal patient base. This eliminates the need for immediate hiring or extensive marketing efforts, provided the current base remains stable and conducive to business growth.
• Access to Historical Earnings: One significant advantage of acquiring an established dental practice is gaining access to years of financial data. This wealth of information detailing costs, profits, and losses not only provides valuable insights but may also enhance your eligibility for dental acquisition loans, streamlining the purchasing process.
• Efficient Systems and Processes: Assuming the practice you acquire has well-established systems in place for patient management, payroll, billing, and other essential business functions, you can leverage these systems without the need for extensive overhauls or implementing new software from scratch.
• Flexible Schedule: Owning your practice affords you the freedom to set your work schedule according to your preferences. You have the autonomy to determine your patient hours and daily workload, offering a level of flexibility and control that may not be available in traditional employment settings.
• Control over Earning Potential: Unlike the fixed salary you receive while working as an employee, owning your practice opens doors to unlimited earning potential. You directly reap the rewards of your hard work and business success, allowing you to chart your financial destiny.

Risks

• Integration Challenges with Staff: As the new owner, integrating into an existing team poses challenges. It’s essential to foster positive dynamics and address any conflicts that may arise among staff members. Additionally, you’re responsible for managing staffing issues and making tough decisions when necessary.
• Dual Role of Dentist and CEO: Transitioning into practice ownership requires wearing multiple hats, including that of a dentist and a CEO. For those without a background in business management, this entails a steep learning curve. From marketing strategies to financial management and technological advancements, the role demands a diverse skill set and ongoing education.
• Potential for Hidden Costs: Acquiring a dental practice may entail unforeseen expenses that surface post-sale. From facility upgrades to overdue staff raises, these hidden costs can strain finances and disrupt business operations. To mitigate these risks, it’s crucial to conduct thorough due diligence and account for potential contingencies.

If you’ve assessed the pros and cons of purchasing a dental practice and decided it’s the next right move in your career, the following steps can help guide you.

Choose your market

Choosing the perfect market to acquire a dental practice demands planning and strategic foresight. Dive into market research to pinpoint areas with promising demographics, like bustling populations and healthcare demands. You’ll also want to perform a competitive analysis as more saturated markets can impact patient flow and financial success.

As you research, envision the growth potential within your chosen market, factoring in population shifts, economic landscapes, and healthcare setups. These market factors matter for your business but be sure to also consider your personal preferences and desire to live in a specific area.

Select or solidify your niche

Although you may have numerous practices in your area, you have the liberty to select a specific focus or specialize in an aspect of dentistry that piques your interest. Popular niches in the field include cosmetic dentistry, restorative procedures, or catering to specific demographics such as children or seniors. Opting for general dentistry is perfectly acceptable; however, it's important to acknowledge that this choice may entail heightened competition and necessitate a more substantial marketing budget to attract new patients.

Decide how much you’re willing to invest

Consider carefully how much you're willing to invest in acquiring a practice. Your current financial situation and your comfort level with taking on debt are essential factors to weigh. Remember that the total cost depends on whether you're acquiring just the practice itself, including its patients and staff, or also the real estate it occupies. If you're considering purchasing both the practice and the property, you may need separate loans, each managed independently.

As you determine your budget for the acquisition, take into account your existing debts, such as student loans, mortgages, or car loans. Additionally, consider your personal financial objectives as excessive debt and a high debt-to-income ratio could hinder your ability to achieve other financial goals, like purchasing a home.

This is also the right time to decide if you want to do it alone or buy a practice with a group of other dentists. Trends from research by the ADA Health Policy Institute show a shift away from solo practice ownership, with 65% of dentists choosing to practice alone in 1999 down to around 50% in 2019.** This move toward working in small groups can be financially beneficial and provide a more favorable work-life balance.

Find a practice

One effective method for finding a dental practice is to leverage your connections within the dental community. Throughout your journey to becoming a dentist, you've likely established relationships with numerous dental professionals who may offer valuable insights and opportunities. Simply reaching out to your network and expressing your interest in practice acquisition can yield promising leads. Additionally, there are consultants and brokers who specialize in assisting individuals like you who are seeking to acquire a practice and can provide dedicated support and guidance.

Conducting thorough research in online forums and industry publications can also be fruitful in finding leads on practices available for acquisition in your desired location and price range. Upon identifying a practice where the current dentist is looking to retire or transition, you may be required to sign a non-disclosure agreement (NDA) before initiating discussions about the potential acquisition.

Consult with legal and financial experts

Attorneys and accountants specializing in healthcare practice acquisitions can be a wealth of information as you decide which practice to acquire. It’s also imperative to bring your loan provider into conversations as early as possible, as they’ll help you understand what’s driving the lending decision and help you ask sellers the right questions.

Negotiate and finalize the terms

As you delve into understanding the ins and outs of the practice and proceed with the purchase, remember that virtually everything is open to negotiation. While the seller may have a set valuation in mind, you might identify aspects of the business that could warrant a lower price. To sidestep conflicts and keep personal emotions at bay, enlisting the help of a third-party broker to handle negotiations can prove wise. While initiating negotiations with the price is crucial, it’s essential to recognize that other aspects of the deal are also negotiable, including:

• Non-compete Clause: You may choose to include a non-compete clause to prevent the seller from opening another practice in the same area for a specified period following the sale.
• Transition Period: Negotiate the length of time the current owner will remain involved to aid in your transition and help you get familiar with staff, patients, and operations.
• Contingencies: Similar to home purchases, you can include contingencies that hinge on securing financing or conducting due diligence on the practice.
• Assets: Clearly delineate which assets are part of the sale, such as equipment and inventory, ensuring clarity on what will remain with the practice and what the prior owner plans to sell separately.

BHG Financial offers highly specialized business financing up to $500K,^1,2 which you could use to acquire a dental practice. With repayment terms of up to 12 years,¹ you can start your foray into independent dentistry strategically and affordably. Our dedicated concierge service means you can rely on our team to serve your needs every step of the way.

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