How to Buy a Dental Practice

2. Budget

How much does it cost to buy a dental practice? The frustrating answer is: it depends. That’s why you need to create a budget. That way, you can see where you stand and decide if you want to apply for a loan (or several). If you decide a loan is the way to go, be ready to articulate your plan to pay off the loan.

3. Reputation

Is the practice well-liked? If you are buying a dental practice with a good reputation, you will want to assure your current clients that their quality service will continue under your ownership. Inheriting a trustworthy reputation will mean you have to maintain their quality standards, but it also means you won’t have to launch a big marketing campaign to attract new clients under new ownership.

4. Profit

Is the practice profitable? Knowing this will inform you if you need to use resources to get out of debt or advertise to get more clients. Are the patients coming in for cleanings twice a year, or are many of the patients inactive? (Dental practices are generally worth between 60-70% of their yearly sales, plus inventory.)

5. Fixes and Updates

Fixes and updates are a crucial aspect to consider. Ask yourself questions like: Are there any renovations or major fixes needed to the building? Does the equipment perform all the treatments you need? Is any of the equipment or software outdated or in need of repair? Are the utilities and the parking lot in good shape? Does anything need a facelift? All this will affect the overall cost of the purchase.

6. Patients’ Expectations

By buying, are you adding to the services that the existing patients are used to? Or are you offering less? Make sure your patients will be satisfied with the procedures you can offer, and the style in which you work. For example, a conservative practice that does mostly fillings will run into problems when taking over a practice known for its aggressive cosmetic procedures. Create a plan to fill in the gaps. You may need to hire more staff or spend more time training them. Offering more can be a good plan to grow the practice.

8. Support

Do you have the permits, legal help, and a business mentor to facilitate a smooth transition into a business owner? Especially if you are a dentist turned first time business owner, it is important to have a support system to catch any hiccups before they happen and guide you through the entire process.

2. Invest in yourself

Up your leadership game and business savvy. Arm yourself with knowledge with books such as How to Buy a Dental Practice by Brian D. Hanks to help you through the whole process.

3. Pick the location

Choose the location wisely when buying into a dental practice. Does it have enough business? If you are bringing some staff with you into the new practice, is it convenient for them? Don’t get real estate in the middle of nowhere if it’s not convenient for you and your existing staff members.

4. Make sure you are on the same page as the owner you are purchasing from

Will you work alongside each other during a transition period? Whether you do or don’t, it is normal to lose a percentage of patients. Make sure your budget can sustain that. Make sure you are not walking into a toxic environment that the old boss is leaving.

6. Create a budget

Your budget may include marketing, renovations, consultants’ fees, software upgrades, and initiatives that will allow you to scale your business. You may need to hire an interior designer and a construction crew, too. Either way, make sure you have a clear budget to follow so you don’t risk biting off more than you can chew.

7. Apply for financing

It can be difficult to know how much to buy a dental practice for. Getting a clear view on your financing plan will help. First, decide how much of your savings versus loans you’ll use. When you apply for financing, make sure your credit score is good.

The Small Business Association offers loans between $5000 and 5 million. Microloans from the SBA are $50,000 or less. SBA loan applications and the time it takes for approval can take some time, so if you want a quicker option, try a bank or credit union loan.

Alternatively, online loans are quickest, though the borrowing amount does not go into the millions. They are also a good option if you are worried about your credit history or lack of experience putting you at a disadvantage or other loan applications. Still, a low credit score could mean a high interest rate, even for online loans.

Securing business lines of credit helps if you are not sure how much funding you will require. It is essentially a credit card for your practice, giving you a spending limit. You will only pay interest on the funds you use. Lines of credit can be reused once you pay them off. Interest rates vary from 7-25%. Lines go to $1 million with repayment terms between six months and five years. It takes just days to be approved. This is a good idea to do early on in the process, since you do not have to pay anything up front.

Loans for dental equipment are more accessible for those with bad credit. The equipment itself can be used as collateral to secure the loan. However, it may require a 10-20% down payment. Loan amounts vary with interest rates starting at 6%. The repayment period is typically between six months and five years. Thankfully, the process for approval takes days, and not weeks.

8. Make the purchase

The last part of the dental practice acquisitions process is actually purchasing the practice. Following the steps above will have you prepared and excited to sign on the dotted line.