Posted on March 13th, 2024

When the decision is made to start a dental practice; probably the first question that’s asked is why? Is this to be by an individual practice or a franchise to an established company? Is this by a group of individuals who are being grouped together to manage this new Dental Practice? Is this about more income, about position, or a long range plan to fulfill a life’s goal? Or is it to provide a necessary and needed service? Or is this just a bold venture to hit the road of independence?

Well whatever might be the underlying reason for the decision being made, it is a decision that carries with it the burden of ownership. With that ownership comes responsibility - a lot of it. There are several things that one ought to consider that goes with the ownership and the responsibility of a dental practice. Is it going to be about general practice or is it going to be specialized dentistry? Would it be in a preferred locality or just about any old city, town or mall? Would an existing practice be purchased or will one be started from the ground up? Questions, questions yes and many more questions that require thoughtful answers.

Financing your Practice

Dental equipment is very expensive equipment and that means that you will have to first consider your finances. Where will the funding to start your Dental Practice be coming from? Would you be taking out a loan? Or do your associates possess within themselves the necessary cash to launch off on their own? The American Dental Association (https://www.ada.org/) says that you will need about $500,000.00 to start a New Dental Practice from scratch. Which is probably the same amount as it is to purchase an existing one anyway.

Build from scratch and you will have all the usual expenses from day one to greet you. Salary, office supplies, equipment, software - the list goes on, but as yet there is no income. There are some companies that specialize in doing business with Dental Practices. They understand all the ins and outs of what makes a practice successful or what will keep it from doing so. Working with one of these companies while in the formative stages can prove to be very helpful.

Location is the main key to success. A practice located in the heart of town where just about everyone can walk up to your door might seem to be ideal. What might not be so visible is the fact that competition in the city will be fierce; while the dental practice located out in the country where folks only means of access to your office, is by use of their private vehicle. That practice however just might have a monopoly of the entire country district wherein it is located and not only knows the folks there but is known by all and sundry. These and several other factors will all go into determining your ideal practice location, and how much it will cost should you decide to purchase it. So building your own or purchasing an ongoing practice - both decisions come with several issues to consider. Both issues will also affect your final cost.

Your Ideal Practice

Should you decide to purchase one: before your decision is final, you will have to do a thorough analysis of the practice. You will need to check into the finances, their equipment, the software in use or lack of it. You will need to analyze their financial statements probably going back about three years. Their tax returns, production data and collection practices. This is one area that is best left to someone who is an expert in the field of dental practice and its setting out. There are companies that specialize in this area. Not only can they offer their technical advice but several can inform you of Dental Practices that are currently up for sale.

To go with the advice that these experts offer might appear to be good advice, however there is as yet another way that has offered more value to those who have given it a try. This works by first finding an elderly dentist who is considering retirement, or who wishes to move to another location. You first befriend them, maybe even work with them for a while which will allow you to get to understand how things are being done in their practice.

Since this is expected to take a while before your final decision, a good move that you might consider is joining the American Dental Association and attending some of their meetings. You could also attend dental conferences and ask around all the senior gentlemen you might meet there. They just might know of a fellow dentist who is thinking along the lines of retirement. You could also take out a membership in associations such as Dental Post. With networking and with direct contact you ought to be able to gather a lot of information. This could allow you to obtain an insight into what Dental Practices in your neighborhood are selling for.

Dental Practice Valuation

Once you have let it be known that you are seeking to become established as the next Dental Practice in the locality, folks would most likely be reaching out to you with information that you can use. Also rather than attempting to negotiate on your own, consider using one of the experts in the field. There are companies like Henry Schein https://investor.henryschein.com/ ; they have built up quite a reputation in the medical field with dental being one of their specialties. They are experts at offering evaluations for Dental Practices. Here is another that you might find very useful: USDental https://www.usdentalpractices.com/ This is a group that you will find very useful in helping in your decision making about your upcoming new Dental Practice and its valuation.

Dental Practices are valued on their earnings, therefore the well efficiently run ones are usually valued higher than the ones that are lacking in these areas. It has been shown that Practices that do well usually sell for around 72% of gross receipts. However they can range from 50% all the way to 100% in valuation. Again you will need to work with attorneys and accountants that are very knowledgeable in that field. It would be totally unwise to attempt to go it alone and negotiate with anyone who has been around in this field a lot longer than you. Your Attorney and your Accountant would be invaluable in negotiating with your lender as well. There are companies that specialize in lending to dentists and will be most happy to welcome into the fraternity of Practicing Dentists.

What Will Your Earnings Be?

In starting your Dental Practice, high on the list of things to consider will be - what will I be earning? There is no fixed answer for this. One way of looking at that is from the fact that Dental Practices sell for wildly varying and different amounts it is to be expected that their income varies just as much. The different dental organizations have it that Dental practices earn from a low of $450,000.00 to a high of about $5.5M annually. I guess you can see yourself being somewhere in there with the earnings graph pointing upward for your practice. If you do your job correctly there will be no need to fear.

Some things that will play a part in determining your income will be your client list. If you are starting from scratch then all this is of no value. However if you are going to be purchasing an ongoing Practice then there are several things that you will have going for you. The goodwill of the present owner; an agreement not to compete. The seller's good name which would have taken a while to become established will now be yours to trade on.. The patient credit list, their contracts with unfinished work that needs to be completed. The intangibles that are there just might be able to get you off up and running.

Transition

If you decide on purchasing an ongoing Dental Practice, then above everything else you should seek for a smooth transition. If you had been working along with the staff awhile, this should not be too difficult. However if you were not able to successfully negotiate this then it is very important to get the present owner to introduce you as the new owner and to work in introducing you to the patients during the handing over period. There should have already been a plan in place where you were introduced to all concerned as the new owner. In your meeting with the staff assurances should have been given about jobs, the continuity of the practice and plans for all other business processes. You should have been holding meetings with suppliers, the companies with whom you will be doing business on a regular basis such as labs and dental inserts and all things dental.

Your marketing should have already been in place so that all in the community should have been aware that their Dental Practice is about to change hands. During this time of transition, you may come under greater scrutiny. The time while you and the outgoing owner are there together sometime should be allocated to addressing all the things that your evaluation and assessment led you to conclude that they need addressing. This ought to be a time of intense work getting the Practice ready for its hand over.

Obtaining Funding for businesses is what is done here. Even before you have decided on which and where you will be setting up your Practice it would be to your advantage to contact me and let us begin negotiating a loan for you. Give me a call, send me a text or email me at: Winston@LoansAndFactoring.com

Legal Notice