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Drilling Down: How to Find the Perfect Dental Practice to Purchase

By July 16, 2024July 18th, 2024Buying a Practice

Are you dreaming of owning your own dental practice but unsure where to start? Deciding to purchase a dental practice is a significant milestone in your career, but it can be daunting. This post will give you insights and tools you need to find the right practice to buy that sets you up for long-term success.

Understanding Your Goals

Defining Your Vision

Before you dive into listings and start visiting practices, it’s crucial to have a clear understanding of what you’re looking for in a dental practice. This vision will serve as your compass throughout the purchasing process. For example, what size of practice do you envision?

  • Do you prefer a small, cozy practice or a large, bustling one?
  • How many services will you offer? Are you interested in general dentistry, focusing on one specialty, or offering a more extensive mix of general and various specialties?
  • Are you targeting families, seniors, or a mix of age groups?

Once you have considered the size and type of practice you want, you need to reflect on the geographical area where you want to practice. Factors such as how long your commute will take, the level of local competition, and the potential patient demographics in the area are essential to evaluate.

When envisioning your practice, don’t just look at your immediate goals. Aligning your vision with your long-term career objectives ensures you choose a practice that will help you grow professionally. If you plan to expand services in the future, look for a practice with room for growth. On the other hand, if maintaining a boutique practice is your goal, you can focus on smaller practices that will allow you to offer specialized services with a personalized touch.

Financial Considerations

Having a clear financial plan is essential before you start looking for a dental practice to purchase. Again, you want to balance your current financial position with your long-term goals.

  • Do you want to build a practice to grow with you throughout your career?
  • Are you planning to build an investment opportunity to sell and retire early?
  • Would you consider financial partners?
  • Are you planning to build wealth for future generations?
  • What do you need to earn in a year to support your lifestyle?

The answers to these questions will help you understand your financial options. Speaking with a financial advisor will also help you map out a plan that considers all your financial goals.

Securing financing is also crucial to streamlining the purchasing process. It not only shows sellers you are serious but also helps you identify your financial limits. Speaking to a banker early will help you understand what sort of expenses you can reasonably commit to. Check out our blog about securing a bank loan for more tips on this process.

Assessing Potential Practices

Finding the right dental practice starts with knowing where to look. Utilize online listing platforms to explore a wide range of listings. For example, DentalPlace.ca offers an exclusive range of dental practices for sale from established dentists. Leveraging your professional connections and joining dental associations can also help you discover opportunities that may not be publicized. Additionally, attending industry events and seminars provides an excellent chance to network and learn about available practices.

Practice Valuation

Once you find potential practices, it’s time to evaluate them thoroughly. Look for key information such as annual revenue, patient volume, employee details, and the reason for the sale. Additional factors influencing valuation include location, patient base, practice reputation, and the condition of equipment and facilities. Understanding how to value a dental practice is crucial for making an informed purchase. Common methods include:

  • Income Approach: evaluates the practice based on its ability to generate future income
  • Market Approach: compares the practice to similar ones recently sold in the area
  • Asset Approach: values the practice based on its tangible and intangible assets.

For more information on assessing a dental practice’s value, check out our valuation guide here.

Due Diligence

You can’t rely solely on the practice listing to determine whether the practice is suitable for you. You will need to look deeper. A thorough financial assessment is critical to avoid future surprises. Review profit and loss statements, balance sheets, and tax returns to get a clear picture of the practice’s financial health. Understanding the revenue streams is also vital to identifying the primary sources of income and assessing their stability and growth potential.

You also want to go beyond the numbers. Understanding the day-to-day operations and business structures will help to show you if the practice will be a good fit for you. Assess the practice management software, appointment scheduling, patient base and data. Evaluate the current team and their roles to understand the operational dynamics and how well they align with your vision for the practice. Carefully review all existing contracts, leases, and any regulatory concerns. A lawyer who understands the dental industry can help you navigate dense legal documents and ensure everything is in order, letting you know if there are any red flags that indicate potential problems down the line.

Making the Decision

Before committing to an offer, review the potential practice against a comprehensive checklist covering all purchase aspects.

Financial Health:

  • Have you thoroughly reviewed the practice’s financial statements, including profit and loss statements, balance sheets, and tax returns?
  • Are the revenue streams stable and diverse, providing a solid foundation for future growth?
  • Have you assessed any outstanding debts or financial obligations that could impact your profitability?

Legal Compliance:

  • Has a legal advisor reviewed all existing contracts, leases, and legal documents?
  • Are there any legal issues that could pose a risk?
  • Is the practice in compliance with all industry and government regulations?

Operational Assessment:

  • Have you evaluated the practice’s management systems, including scheduling, billing, and patient records?
  • Is the current team structure efficient, and do the roles align with your operational strategy?
  • Are the practice’s facilities and equipment in good condition and up to date?

Personal Fit:

  • Does the practice align with your long-term career goals and vision for your professional future?
  • Are you emotionally and mentally prepared for the challenges and responsibilities of practice ownership?
  • Have you considered the impact on your work-life balance and personal commitments?

Opportunities:

  • Is the practice referring out cases to specialists that you would cover in-house?
  • Is the practice open at ideal times for the local patient base?
  • Are any new residential or corporate developments happening nearby?

Ensuring you have addressed these key areas will help you make a well-informed decision and increase your confidence in the transition to practice ownership.

Bottom Line

Purchasing a dental practice is a significant step and requires planning and consideration. Understanding your goals and evaluating potential practices against them is critical to a successful purchase. But there is no need to go about it alone. Assembling a team of professionals to help you assess your options and sort through the complex details is invaluable. From assessing appraisals and practice valuations to reviewing contracts and ensuring compliance, having a dental lawyer by your side can provide the clarity and security you need.

If you’re ready to take the next step towards owning your own dental practice, explore DentalPlace.ca for exclusive practice listings and contact DMC for a personalized consultation. Our team is here to guide you every step of the way, ensuring a smooth and successful transition into practice ownership. Send DMC an email or call us at 416-443-9280.

The Content of this post is provided for informational purposes only. It is not intended to be legal, financial, tax, or other professional advice of any kind. You are advised to contact DMC (or other counsel) to seek specific legal advice concerning your individual situation.
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