In a lecture hall at UNLV earlier this month, I handed a dental resident in the front row an imaginary practice.
“Here you go”, I told her. “It’s a $400,000 practice in Henderson, a turnaround. You can’t wait to get your hands on it. You’ve got a plan, you’ve got energy, and you’re going to take this sleepy little office and build it into something four times its size.”
I gave her that practice on purpose. Every associate who starts looking at ownership eventually gets offered something like it. The listing price sits far below everything else in the market. The loan feels manageable next to a student debt balance that already keeps you up at night, and the story writes itself: the current owner just never marketed, never modernized, never tried. You’ll be different.
Her logic for wanting it was airtight. It’s also the most expensive logic in dentistry.
The assumption hiding inside the bargain
What buyers forget when they fall for the turnaround, and I said it to that room the way I’ll say it to you: the dentist who owns that practice right now is not an idiot. They went to dental school just like you did, they’ve been showing up to that office for years, and they have the kind of work ethic that gets someone through the same gauntlet you survived. So when their practice collects $400,000 in a market where healthy practices collect two and three times that, the explanation is almost never that a perfectly capable dentist forgot to try.
Turnaround practices are never a good choice if your assumption is that the seller is lazier or less competent than you are.
The real explanation for low collections is usually the location, the demographics, the payer mix, the facility, etc. Something fundamental (and usually unchangeable) to this practice. And every one of those things transfers to you at closing. You are not buying the previous dentist’s effort level. You are buying their circumstances, and circumstances don’t sign a non-compete and leave town.
Sometimes the turnaround option is a good play. Sellers retire abruptly, health forces an exit, a burnt out owner takes 20 weeks of vacation a year through his final two years while a good location sits underneath it waiting. Turnarounds like that exist, and buyers do win with them. But you find them by asking one question relentlessly: why is this practice collecting what it collects? When the answer is something that leaves with the seller, you might have a deal. When the answer is something that stays behind, the discount isn’t a bargain. It’s the market pricing in a problem you’re about to inherit.
What the cheap practice actually costs
The cruelest part of the turnaround trap is that it punishes exactly the instinct that makes it tempting. The buyer chooses the small practice to feel safer about debt, and ends up in the opposite situation. A practice’s collections have to do three jobs at once: cover the overhead, service the loan, and pay your household. A healthy practice does all three with room to spare, but a $400,000 practice in the wrong circumstances strains to do two, and the pocket that ends up the emptiest is always the same one. Yours.
Meanwhile, the buyer who took a deep breath and bought the larger, healthier practice, the one with the scarier sticker price, walks into cash flow that handles all three jobs from the first month. The bigger loan was the safer loan. Almost nobody believes that until they’ve seen the numbers side by side, which is exactly why I make rooms full of residents do the math with me.
The question to steal
If you’re looking at practices right now, borrow the question I gave that resident in Henderson: don’t ask what the practice costs. Ask why it costs that. Make the seller’s circumstances explain the number, and be suspicious anytime the explanation is a story about effort, because effort is the one thing that resume of theirs says they already had.
The right practice for you might still be a fixer-upper, but it should be one you chose with the reason in writing, not a bargain you fell for because the loan looked friendly.
If you’re weighing a practice right now and the price seems too good, that’s exactly the moment to talk it through with someone who has seen a thousand of these. Let’s look at the real numbers together before you fall in love.
[Set up a complimentary strategy call with the Dental Buyer Advocates team today.]
Not quite ready for a conversation? Start with the free chapter of How to Buy a Dental Practice. It covers the first steps most dentists get wrong, including how to read a bargain.
