Your FUll-Service Dental Broker.
Our Buying Services
Buying a dental practice can be overwhelming for anyone, but we are here to make it easier with our extensive experience and knowledge to help guide you to a painless, seamless transition.
When it comes to buying a dental practice, some of the questions you may be asking yourself are ‘What is right for me? Should I buy an established dental practice, or should I start one from scratch?’. There are certainly advantages and disadvantages to both options, which is exactly why you want to have a knowledgeable and professional dentist brokerage team behind you to help you choose the right path for your future. You may only buy one dental practice in your life, work with an experienced brokerage team who does it often, and has the history to prove our success.
- Knowledge of medical or dental competition
- Patient demographics in your location of interest
- Expertise in dental practice appraisals to determine the fair market value
- Financial assistance for purchases and upgrades
- Real estate, legal, accounting, and strategic knowledge
- Offering complete transition services all in one place
As a national broker who works within 37 states across the country, we have many opportunities available throughout the United States for your dental practice purchase. Feel free to check out our Practices for Sale to see if one is the right fit for you. Of course, if there is something else you are interested in, please contact us directly to set up your buyer profile. Our buyer profiles get first access to new dental practices for sale, as our buyers are contacted prior to a practice being marketed to the public.
Steps For Buying a Dental Practice
Work with a broker
To ensure you are on the right track and not wasting valuable time, it is smart to work with a broker. A broker can assist in figuring out the right dental practice scenario for you.
Pre-qualify through a bank
The bank will look at your net income, stress, and how much debt you can handle to gauge debt-to-equity ratio, debt-to-income ratio, and your credit score.
Dental Practice Analysis
After you are pre-approved, it is time to make sure you have found your perfect practice. Review your potential dental practice’s analysis to become fully familiar with the business and market.
Letter of Intent (LOI)
Once a practice is identified and analyzed, it is time to make an offer through a letter of intent. The LOI is not a legally binding document, but it expresses your intent to follow through with the transaction.
Make an offer
Once you have the green light from the bank to make an offer on the dental practice, you can feel confident that you will be able to back it up financially. Please note that the approval by the bank will be dependent on the type of dental practice you are considering.
The Negotiation Process
Next is the negotiation period. This period continues until the buyer and seller agree on a price, terms, and the closing date.
The Due-Diligence Process
Once negotiations are complete, it is time to move into the due-diligence process. During this period, you and your advisers will review all financials and various aspects of the dental practice.
Asset Purchase Agreement
Now, it is time to finalize the asset purchase agreement. This document will outline all points of the pending deal.
Complete Dental Practice Loan
Once the asset purchase agreement is finalized, you can complete the dental practice loan.
The first step in any loan process is to get pre-qualified, then you begin identifying potential dental practices that fit your location, size, and specifications needs.
After you identify an opportunity, you will go through the underwriting process with the bank. This is a very time-consuming and cumbersome process. You will provide a lot of information and proof of your ability to fund the impending deal. Please note that this time frame can range from a few weeks to a few months. Also note that it is standard for a broker to request needed documents from the seller, so you don’t have to. PTS works to make sure this process is as smooth as possible and can save you time, headaches, and potentially money.
One the funding decision is received, a closing date will be set, followed by the dental practice funding and the deal closing. It is also highly important to choose the right bank for you, and this might not always be the bank with the lowest interest rate. The interest rate is only one part of the overall loan package – other significant factors are term, bank specialization in dental practice lending, and their reputation.
With this large of an investment – whether it is new or existing – the most essential piece is the return on your investment. When you are calculating your ROI, the time value of your money should always be considered. The time value of money theory states that a dollar in the bank today is worth more than the expectation of receiving a dollar in the future. Of course, it is always important to remember the opportunity cost of these decisions.
Choosing Your Advisory Team
The first and possibly the most important step for every buyer, especially first-time buyers, is to build your advisory team.
It is important not to choose the first person you meet in each of the below roles. Instead, talk to a few different options to determine what each company or individual can offer you. Then, decide who you feel most comfortable with, not necessarily who offers the lowest price for their services. Feel free to reach out to PTS for any referrals or recommendations or learn more about putting together your advisory team here. *link blog post
Starting a Dental Practice
The average dentistry start-up will require a total of $500k in start-up loans and capital. And with the average student loan debt for dentistry being near $500k, many are looking at $1 million in debt before they ever start seeing patients.
This means it is wise to have a consultant guide you through your purchasing process, whether you are starting a dental practice from scratch or buying an existing one, we can assist you in and stop costly mistakes from slowing down your process.
In a vast majority of situations, PTS recommends buying an established dental practice rather than starting one from scratch. The reason is that the return on investment (ROI) is typically higher. Keep in mind that if you have student debt, servicing your loan is key. This is one of the reasons why you might very well be better off buying an existing dental practice.
And though only 0.3% of dental offices fail, that doesn’t mean they are all as profitable as they could be, or that their purchase price was fair and beneficial to both parties. Working with a professional dentist broker can help ensure the purchase of your dental practice is a success.
How Much is a Dental Practice Worth?
After you’ve identified a practice of interest, it is time to figure out how much you should pay for a dental practice. And the first step for this is to obtain the dental practice prospectus, a document that tells the story of the dental practice in about 20 pages.
Understanding a Dental
What is included:
- A description of the dental practice
- A biography of the doctor
- Demographics of the area
- Procedures of the dental practice
- Location and facilities
- Types of equipment
- Active and new patient analysis
- Financials for the dental practice
- Photos of the dental practice
- Evaluation of procedure
- Staff information
Most critical parts:
- Location and facilities
- Patients and demographics
- Types of procedures
- Top line of revenue
- Expected take-home income
- CapEx 20
Key Points of a Dental Practice Prospectus
Location, Location, Location
The competitive analysis and demographics of a dental practice’s location are highly important as they will affect your future profits and practice value. It is also noteworthy to mention that just because a dental practice is in a ‘hot new’ location does not mean it is the right location for your dental practice. Typically, dental practices in urban and suburban areas have a higher value than practices in rural areas, however, practices in rural areas have a higher cash flow. Fertility clinics or dental practices in highly desired communities (Malibu. Manhattan, Miami Beach, etc.) have higher values but also higher overhead.
Make sure to examine the demographics of your desired dental practice. How is population growth? What is the age distribution? Is your target market based on income and job types in the area? What is the average education level? Do most residents come from an ethnic background? Does the neighborhood lifestyle align with your dental practice? All of these questions should be considered when looking at the demographics of a dental practice prospectus.
Identify your competition, and what they do in the area you are considering. Do they offer the same type of services as you? How established are the other dental practices? What is your unique value proposition? One of the most important parts about competition is understanding them and how your dental practice will bring better value or better benefits to the area’s clients.
Dental Practice Growth
When you are looking to purchase an existing dental practice, it is a good idea to examine the current status. While looking at the prospectus and financials, identify if the practice is growing in status, or declining. Consider what this could mean for the type of niche practice you are looking to buy – do you need to invest in marketing, additional operation costs, etc.
PTS can help you understand a dental practice prospectus and walk you through each section so you are fully prepared to make an informed decision.
PTS Can Help You From Initial Search to Closing
As the premier dental practice brokerage, we have the experience and knowledge to help you from your initial search to your loan, to closing – and beyond! We want to partner with you to ensure your transition process is smooth and successful.
When you are looking at your loan payment, remember that interest can be written off. Each year in taxes, much like mortgage payments, interest expenses you pay on a loan are tax-deductible. Sometimes it may make sense to take out a longer-term loan with lower payments to help with the cash flow of the practice as it acts as an insurance policy for the buyer.
It is always a good idea to consider how you can best maximize the tax advantages of buying a practice. Section 179 gives you different benefits that you can utilize. All assets depreciate over time, but with the Section 179 Depreciation Schedule, you can depreciate all assets up to a certain amount in the first year. In most cases, no taxes will be paid that year. Talk to your PTS team for more information.