Acquiring a dental practice can be a great way to build a successful career in the dental industry. Purchasing an existing practice offers several significant advantages, including an established patient base, experienced staff, financial predictability, instant cash flow, cost savings, and reduced marketing expenses. But we need to point out it can also be a daunting task. It requires careful planning and execution to ensure a successful acquisition and a smooth transition for patients, staff, and yourself.
To help you navigate the ins and outs, we’ve put together the ultimate guide with everything you need to know for a successful dental practice acquisition:
Step 1: Finding the right Dental Practice for you
The first task is determining the desired practice area, and here, you need to consider a location where you will enjoy living, and that has a relatively low concentration of dentists. In some areas you’ll find a lot of competition, so you need to figure out the level of market saturation.
The second task is finding a practice to purchase, which can be done by hiring a dental practice broker or by seeking listings in trade journals or dental schools. Probably you’ll be interested in more than one practice so list them all to go to step 2.
Step 2: Investigating the existing practice
To help you investigate the practices you’ve chosen, you’ll need a good professional consultant, including a transition consultant, an accountant, and an attorney. These experts will research and investigate literally everything about the practice, including the real financial state and even why the previous dentist is selling it.
This step is crucial, you need to analyze all the cash flow and financial information such as recent profit and loss statements, recent balance sheets, income tax returns, Dental fee schedules, a breakdown of employee expenses (salaries, benefits, payroll taxes, retirement, etc.), revenues and production reports, and more.
Besides the financial health, you’ll have to investigate other details such as the patient and treatment information, including the most popular procedures, treatment philosophy, number of active patients, and patient demographics, including, age, area code, etc.
And don’t forget the practice’s reputation: remember you will inherit the reputation of the dentist who preceded you. Check their online reviews, try to understand how the professional used to work.
Step 3: Offer and Financing
After analyzing all the topics above, you’ll surely have your preferred practice. It’s time to make an offer with the help of an expert to determine the best price. All the legal details can be set in the Practice Sale Agreement, a document that includes information about the assets, warranties, custodianship, details of the transition, and more.
The next step is to secure financing, which can be done by working with a mid-sized regional bank or credit union. Typically, it may be easier to obtain a loan from a larger, national bank, but in the long run, these big banks may not provide the best service. It can be more beneficial to look for a mid-sized regional bank that has experience working with dentists. Besides, try to avoid private equity firms: this option can be more expensive and may require you to give up some control over the practice.
It’s important to do your research and consider all the options available to you before deciding on the best financing option for your situation. You should consult with financial advisors, accountants, and attorneys to ensure you understand the financial and legal implications of your choices.
Step 4: Build a solid transition plan
There are a few different approaches you can take, but it’s important to get all the details figured out and written down from the start. This will help ensure a smooth transition and minimize any potential hiccups along the way.
Some dentists prefer a shorter transition period of 6-12 months. This gives you enough time to get to know your patients, while also allowing for all the necessary transaction details to be worked out upfront. However, every situation is different, and what works for one practice may not work for another.
If you’re buying a practice in a competitive area, it may be worth considering a longer transition period to help minimize any patient loss. Whatever you decide, make sure to communicate with the staff and patients of the practice. Let them know who you are, what changes you plan to make, and reassure them that you are committed to providing quality care. In some cases, it’s also important to keep the existing staff in place, at least initially. They know the practice and the patients and can help you navigate the transition.
Remember, maintaining a dental practice takes time and effort. Stay patient and committed to the process, and you’ll be well on your way to a successful story.
And if you’re looking for professional help, we have a team of experts ready to assist you. Set up a consultation here.