When buying a dental practice, the two most important things to know about your patients (before you own the practice, anyway) are AGE and GEOGRAPHY. Knowing just these two pieces of information can give you a massive heads-up about what kind of practice you’re stepping into.
Q: What is an ideal active patient count for dental practices?
A: There is not a definitive number! However, conventional wisdom says you should see an active patient count of ~900 patients for every $500,000 in collections.
That being said, active patient count is not as important as people think it is. At least, not on its own. Let’s dig into the context.
Q. Should I buy from a multi-practice owner?
A. In general, I recommend steering clear of any dental practice transition where the seller owns multiple locations for several reasons. In this post and the accompanying video, I dive into each of them.
A two-fer! In this blog post, I give some advice to dentists who will become business owners after buying a practice. What are the habits you can cultivate to help your business stay on track?
And in the video (click through to watch), I tackle a related topic. If you’re looking at a dental practice to buy, there are plenty of numbers and hard data to look at to assess the health of the practice. But outside of the quantitative data, what about the qualitative aspects? What should you be looking at to judge whether a practice is the right one for you to buy? I’ve got three business habits that a practice should exhibit to let you know it’s worth your consideration.
You’re usually not benefitting as much financially by purchasing the facility as you think you are. Most lease versus buy analysis come out pretty close. That being said, you are buying control over your space AND you’re buying a forced savings plan in real estate investment. Read on for more details.
Facility costs should account for 5-10% of practice collections, whether you’re renting the facility or purchasing it. This expense is very geographically specific so there is no exact benchmark price you should pay for a facility. But 5-10% is a good range to start with.
When you’re looking at offices that you’ll potentially buy, let the supply costs be your canary in the coal mine. How they manage their supplies and labs may be an indication as to how well, or poorly, the office is managed in general.
Staff costs should be 28-30% of practice collections (or lower if you can find it!) This includes staff salaries, payroll taxes and any employee benefits.
Staff costs are the largest expense in most dental practices. Why?
A: Overhead determines profitability and profitability determines value. (See the video for reason #2.) In conjunction with office collections, overhead is the most important value in practice management.
The relationship between overhead and collections can be like a healthy marriage; they both have to be stable and complimentary to make the marriage (or practice) work.