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What Do Buyer Dentists Look For in a New Dental Practice?

By November 28, 2023November 30th, 2023Selling A Practice

If you’re considering selling and want to get into the buyer’s mindset, this blog is for you.

When buyer dentists are looking at a dental practice for sale, they’re really looking for a new “house” that becomes their “home.” This is where reason meets emotion, logic meets feelings. And when the stars line up, you’ve got a (hopefully ideal) transition with the right seller and the right buyer on the right price and terms.

Reason and Logic

They want to “think” that it makes “sense” for all the right reasons – i.e. the metrics. They can make money here. That the seller’s best year will be their worst, financially speaking (which means there’s only room to grow). There is opportunity for increasing production – for example, by marketing, keeping referrals in-house, equipping a pan or being open more often).  They want to make sure the risks of owning the practice are mitigated – for example, by checking the lease to see if they can be kicked out due to a demolition clause OR checking the employment agreements to see what their liability would be if they ever needed to terminate anyone.

So, buying the practice makes sense from a logical, rational, opportunistic, and risk management perspective. The “house” has a solid foundation, so to speak. 

Feeling and Emotion

But buyers also want to “feel” good about buying and owning the practice. This isn’t about metrics per se but about a sense of happiness, joy, peace and inner soul development that comes with owning and operating the practice. A purchasing dentist pictures themselves leaving their home in the morning – maybe on a particularly cold and grey Monday morning in the dead of winter – and being absolutely IN LOVE with wanting to come to the office to see their patients and teams and to work on challenging cases. They want to engage with other souls walking around on earth and to try to heal others who are in pain – physical and/or psychological. They want to “feel” satisfied that they’re doing what they’re here to do and learning what they’re here to learn. They want to develop soft skills to help deliver the best possible care – which could be something like calming patients down before a procedure or keeping them calm throughout. That requires a balance of energies and a soft touch (not hard love like our parents used to give us).

So, buying a practice makes sense from an emotional and life-path perspective. They want to feel that their “house” is their “home” outside their actual residential home.

How does this play out in the sale process?

And so when we sell a dental practice, we try to shed light on both the “house” and the “home” aspects of a dental practice to a buyer. We talk about the metrics of the dental practice so the buyer can see if it makes “sense” from a “rational” perspective to them. The metrics include things like:

  • Location (is the location in a busy part of town? What about signage and parking? Are new residential developments happening nearby?)
  • Billing vs. Collecting (is it enough? Is the practice collecting or letting the co-pay slip?)
  • Hygiene vs. Dental Production (is it balanced at roughly 40% hygiene and 60% dental?)
  • Assignment vs. Non-Assignment (is the practice attracting higher calibre paying patients and not having to deal with the nitty-gritty of collecting co-pay from non-assignment patients? Is there an opportunity for the buyer to take on more patients by accepting assignment? )
  • Active Patients (how many patients of any kind came into the practice during the last 12 months for any kind of treatment? How many were emergencies? How many were for hygiene appointments?)
  • EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) or Cash Flow or Normalized Adjusted Net Income (how profitable is the dental practice to the current owner/operator?)
  • Operatories (how many operatories are there, and are they fully equipped and put in use?)
  • Days/Hours (is there an opportunity to keep the office open more to accommodate seeing more patients)?
  • Referrals (how many, and what kind of referrals are being sent out the door and which could be kept in-house?)
  • Accounts Receivables (again, is the practice doing a good job at collecting amounts outstanding from patients, typically the case with assignment practices that receive monies from insurance companies over 90 days after the treatment has been rendered).
  • Staff (are there long-term staff without contracts, which connotes risk to the buyer or is everyone on proper and up-to-date contracts ?)
  • Lease (are there bad clauses in the lease that could allow the landlord to kick the dentist out prematurely, like demolition, relocation, or early termination rights?)

These are some of the more important metrics that go into a buyer’s “thought process” (i.e. making sure the practice has a solid foundation).

When it comes to helping to gauge the “emotional” side of things, we do things a little differently from others to help engage with the buyer on that level. For example, we will:

  • Prepare a walkthrough video and send it out, confidentially, to prospective buyers.
  • Arrange for open houses at the practice so buyers can walk around and see the practice and get a feel for it.
  • Provide buyers with information about what the seller is like and what they are looking for (personality, philosophy, hobbies, soft skills, etc.).
  • We may facilitate in-person interviews at the dental practice during the offer stage (this way, the prospective buyer and our dentist seller get to meet and get a feel for one another).
  • We may encourage open dialogue between the buyer and seller throughout the sale process (this usually helps allay fears that the parties may have concerning one another).
  • Organize all due diligence items before the practice is up for sale and provide as much information as possible while the buyers are putting an offer together (transparency and openness are important to prevent future miscommunications and misunderstandings).

By connecting buyers with sellers on this level, we help foster the start of a relationship that should prove mutually beneficial in the context of a purchase and sale transaction.

Bottom Line

If you’re a seller, don’t treat your dental practice like a shoebox or a used car. You’re selling relationships. There are a lot of rational and emotional elements that go into those relationships, and you need to transfer them in the right frame of mind to the right buyer at the right time.

If you’re considering selling your dental practice and would like a complimentary assessment of your dental practice, please reach out to us. We have the experience and the tools to help you set up your practice to appeal to buyers and get you the best deal possible. Send DMC an email or give me a call directly at 647-680-9530.

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.