Top 3 Things to Look For in a Dental Practice to Buy

When you’re looking for a practice to buy, you’ll see a lot of them. So how do you quickly know whether a practice is worth looking into deeper? I’ve got three things you need to know to decide if a practice is worth a closer look, and all three are usually immediately apparent from a broker listing, like the ones you see in our semi-monthly broker listings report.

Here are the top 3 things to look for in a practice to buy: 

#1 – Location

The obvious factor here is geographical: is the practice in a city you want to live in? But the location issue goes deeper than that. Where is this practice actually located in that city? Is there enough traffic to attract walk-ins? Is it in a neighborhood with the type of patients you’d want to work with? What will your daily commute look like?

When considering the location, drill down beyond just the spot on the map and consider what working there every day will actually look like.

#2 – Collections

As a rule, look for a practice that collects at least $750K annually. Preferably more. 

You need a practice that will give you the income to make this all worth it. The higher the collections, the more money you’ll make, and the faster you can pay down your student loans and the practice loan itself, and start building real wealth.

There are certainly situations where a smaller practice makes sense, and there is such a thing as a too-big-for-me practice (see the next point). But the $750K rule will give you somewhere to start.

#3 – Size

Ever seen someone try to drive a car that’s obviously too much for them? When I was in college, I had a friend who made a bundle of money one summer (as measured by monetarily-challenged college students). He came back to school in the fall with a really cool new car, a high-performance German model. We kept asking him to take us out in it, but after a day or two of pestering, he finally admitted: “It’s way too much car for me.”

Don’t do that with a dental practice—you don’t want an eight-operatory practice unless that’s something you’re confident you can handle. Handling a large practice will mean bringing on associates, which means more business stuff and less dentistry for you.

Similarly, don’t go too small either. Too small, and you won’t bring in enough collections to pay off student loans and a practice loan, have some savings, and live a comfortable life. Also, if you have a plan to grow the practice, it needs to have room to grow. So if it’s a three-operatory practice, with no room for more, you’ll tap out its potential a lot more quickly than a five-chair practice.

Nearly everything about “the perfect practice” will be subjective—the question really is, “what’s the perfect practice for you?” But use these three questions to do a quick evaluation and know whether it’s worth it for you to have a look at. And when you think you’ve found The One, give me a call, and we’ll help you run the numbers to know for sure.