Evaluating Active Patients in Dental Practice Valuations

Why is it important to evaluate active patients during dental practice valuations?

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How many active patients should your dental practice have? (Or the one you’ll buy?)

Conventional wisdom is an active patient count of ~900 patients for every $500,000 in collections. Therefore, a practice that is collecting around one million dollars ideally would have an active patient count close to 2,000.

But hold on… I’m about to tell you something that may seem counterintuitive: Active patient count is not as important as people think it is. At least, not on its own.

Why? Because this “conventional wisdom” is just a nice, professional way for us in the industry to say: “Nobody really has an accurate way to define or rank this number but people want an answer so here’s a stab in the dark.” 

Yes, it’s important but active patient count is a little like loading a dishwasher. 

Is there a right way to load it? I’m sure you think there is. For what it’s worth, so do I. Now go ask a friend the same question and have her load the dishwasher based on what she thinks is the “right” way. Is it the same as yours or mine? Likely not.

The same principle applies to an office. Plus or minus a few hundred may not make the difference you’d think.

Active patient count is like a book’s dust jacket: it gives you something to think about, but it’s not telling you the whole story.

The real story is the story of collections. 

If you are looking at a broker listing or practice report and the office is collecting half a million, on average, but reports three thousand plus patients, you should definitely think there is some skullduggery afoot. 

That report likely means that the office hasn’t archived inactive patients in years and the seller doesn’t even have a rough idea of how many people are walking through his door.

It’s not uncommon for sellers (or brokers) to say, “I know collections aren’t incredibly high but you’d be buying a really great patient base! I’ve been a bit lazy so if you reach out to these patients you can definitely collect more than I have!”

Whenever I hear a broker or seller tell me, “You can do this to easily boost collections,” I automatically think (and sometimes say), “Yeah, well if it’s so easy, why didn’t you do it?”

While there is no tried and true method for counting active patients or the “perfect” number, it’s nice to at least have a guide. 

Use that “common wisdom” but keep in mind that it’s not perfect. Don’t automatically walk away from a practice that’s collecting $1,000,000 but only has 1,700 patients. 

The reverse is true as well: Don’t fall in love with a practice that only brings in $600,000 but reports having 3,500 patients. 

Compare the collections and the production to those patient counts.

Is that $1,000,000 practice doing an obscene amount of crowns? That may mean that their strong collection numbers are coming from over-diagnosing and not because they have the most fruitful tree in the orchard. 

At the end of the day, just remember: Don’t decide to walk away from a seemingly ideal office or run towards a worrisome one just based on active patients. Take any active patient report with a grain of salt…maybe a few… and use that information to prompt additional questions that can be answered during your in-office chart audit visit.

Read more:

How To Analyze A Dental Practice For Sale – The Qualitative Factors

Due Diligence Timing In Dental Practice Transitions

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