Dental Practice For Sale | Professional Transition Strategies

PTS can help you find your dream dental practice for sale

If only the decision to buy a dental practice were so simple. Before deciding on the type of transition you want to engage in, you’ll want to evaluate your specific financial and personal situation. It’s the literal million-dollar question — and, luckily for you, one that the experts at Professional Transition Strategies can answer.

You’re a busy person; you’ve recently graduated from dental school and are looking to join an established dental practice, or you’re currently practicing and looking to grow your existing dental practice. Whatever you are currently,  PTS has successfully guided hundreds of dentists through a process similar to yours . If making money is your first priority, then a dentist who purchases an established dental practice will make more money within the first few years than one that is started from scratch. That’s just the tip of the advice iceberg here at PTS.

And luckily, the experts at Professional Transition Strategies have been at it since 2006, so you don’t have to go it alone.

When purchasing a dental practice for sale, you may be considering the following questions:

• How long does it take to purchase a practice?
• How much does a dental practice owner earn?
• How do you value a dental practice for sale?
• What metrics determine if a practice is profitable?
• How much does a dental practice for sale cost?
• How much is a successful dental practice worth?
• How to manage work/life balance.

PTS can successfully connect a dentist’s present with their future.

Start a dental practices checklist

Purchasing a dental practice can be a hassle, but PTS can do the heavy lifting, while you continue to focus on your goals.

Build that illusive advisory team

When working with PTS to build your dream advisory team, it is important not to choose the first person you meet in each category. Talk to a few to determine what each company and individual can offer. Go with who you feel most comfortable, not necessarily who offers the lowest price for their services, because as with any team, you’re only as strong as your weakest link. It’s also important to choose advisors who have experience in the dental industry, such as a consultant, technology advisor, real estate broker, equipment and supply representatives, certified public accountant, and attorney. Your situation, whether a startup or purchasing an existing practice will determine the ideal team members.

Crunch the numbers on dental practice business

All things considered when buying an existing dental practice business, PTS will arrange a proper third-party valuation prior to purchase so you know what you’re getting into, including “goodwill.”

Get prequalified

PTS can suggest banks and lenders that are familiar with a dental industry sale. During the prequalification process, banks will look at your net income stress and how much debt you can handle. Loan representatives will gauge debt-to-equity and debt-to-income ratios, as well as your credit score.

Hire a dental practice broker

When looking to purchase an established practice, let PTS will do the heavy lifting to find the right location for you and your practice.  When you choose the location of your practice based on precise demographic data, the right location will expedite that growth. Having an established patient base with proven market potential means you won’t need to spend much on bringing new patients in the door.

For each and every established practice interested in a sale, PTS pulls a true market report. With comprehensive commercial real estate information and analytics, you can be sure you’re purchasing the right dental practice, in the ideal location.

Keeping area demographics and the competitive landscape in mind, PTS will help determine:

• Property comparisons
• City-wide market summary
• Leasing analytics
• Construction: new activity and summary
• Community demographics

PTS will stress that your lifestyle works with the location you are considering, whether it’s in a metro or rural area. Also remember that the old real estate adage of “location, location, location” also applies to your dental practice. Evaluate whether you want to lease or buy, your timeframe, and size requirements, as well as how much sweat equity you are willing to put in.

Determine which transition type is best for you

PTS can help you understand the ideal dental practice transition based on your goals.

Buy-out

A buy-out is exactly what it sounds like: It’s when a purchaser buys a dental practice for a negotiated price. The seller may agree to stay on part-time to help ease the transition for the buyer, employees, and patients.

Buy-in

A buy-in is the opposite of a buy-out. In a buy-in, the buyer purchases a defined portion of the practice for a negotiated amount determined at the outset. In this case, PTS will also perform a personality profile to ensure compatibility, in addition to a practice analysis.

Associate to buy-in

Associate to buy-in is when a potential buyer is courted to buy-in over a defined period of time; road-mapping the ease of transition. Rather than making decisions about the future of the practice upfront, this allows time to assess compatibility. The division of power is the biggest consideration to make. If all expectations and compensations are established and clear from the beginning, the success rate improves with associate to buy-in.

Associateship

A good idea in theory, the route of an associateship places control of the transition in the selling doctor’s hands. Associateships typically fail 80% of the time due to lack of clarity from the outset and different expectations not being met by both parties. Clearly defined expectations for both the current doctor and the incoming associate are a must for an associateship to succeed.

Merger

Combining two dental practices to become one dental practice with equal partnership remains a tried-and-true method as long as compatibility is established upfront and responsibilities and income are equally divided and agreed upon.

Questions to ask when buying a dental practice

PTS can help provide answers to those all-important questions to buy the right dental practice

What should I consider when buying a dental practice?

First, consider where you want to live, specifically how far you are willing to commute to work. Second, think about the kind of dentistry you want to practice and the income you want to make. Consider the income that would fund your retirement and support a comfortable lifestyle. Don’t forget to factor in your expenses such as student loans, mortgage, car payments, insurances, and any other family-related expenses. It is also important to consider the gross production of the office, collections, overhead, location, and patient charts and reports

Will you retain the services of the current dentist?

Selling dentists are typically willing to stay on for a period of time after the sale to assist with the transition, introduce you to patients and referring doctors, and help you understand the processes of the office. You don’t want them to stay around for too long because their presence could interfere with you making the practice your own after the sale. We generally recommend no longer than six months.

Is it in the right location?

A key point to consider when looking to buy a dental practice is the demographic profile of the area. This includes household income, number of residents per dentist, and the number of competing dentists. All of these factors will directly impact the dental practice’s growth potential. Other location-based factors include visibility (pedestrian and vehicular traffic to get new patients), and the proximity to your home.

What type of dental work is performed at the practice?

From general dentistry and pediatric to endodontic and periodontic, it is important to know what type of dental work is performed at the dental practice you are interested in buying. It is also important to review if the hygiene department is under-developed. Practices with underdeveloped hygiene departments give you the chance to increase profitability by shifting hygiene work to a hygienist. This allows you to focus on higher-margin dental work. Also, in practices where dentists regularly perform low-end dental work, there is a big opportunity for the incoming dentist to increase revenue by performing higher revenue-generating dental work. Of course, opportunities like this depend on your dental experience and expertise.

Do the dental clinic’s hours suit my needs?

It is important to consider the number of hours necessary to operate the dental clinic. That, and whether that schedule suits your lifestyle — especially if you have younger children.

Will the sellers’ staff and patients stay in a transition?

It is beneficial for the dental office staff to remain in their jobs during a transition. It is equally important that the purchaser wants the dental staff to stay. With a proper transition, patient retention is in the mid- to high 90% range for transitions handled by the experts at PTS. We suggest making no changes for 6-12 months to improve staff moral and patient retention.

How to buy an existing dental practice

Let PTS guide you on the way to dental practice ownership

The first step to purchasing a practice for sale is to learn of practices available for purchase. While this can seem daunting, we at PTS are very proactive in alerting you to new opportunities. Our Buyers List  has first class service and is made aware of new practices five days prior to publicly marketing. This is the most effective way to learn about new listings catered to your ideal dental practice stats location, number of operatories, collections, transition method, etc.

Our website listing is updated as soon as a new dental listing is available. Remember, dental locations on our interactive map are approximate to maintain confidentiality.

When you’re notified of a dental practice of interest, reach out right away! We offer several methods of communication: email (info@professionaltransition.com ) phone (719.694.8320), or you can use the handy chat box available 24/7 on our website.

You can sign a mutual nondisclosure agreement that protects both your confidentiality as the buyer and ensures the seller’s privacy and continued practice profitability. Learn about some of the reasons to sign a nondisclosure agreement during the dental practice transition process here.

Evaluate the practice

Once PTS has helped you identify a dental practice of interest, we will send you a practice prospectus. A prospectus is a document that tells the story of a practice for sale within approximately 20 pages. It will include the description of the practice for sale, biography of the doctor, demographics of the practice, procedures performed within the practice for sale, location and information on the facility, types of equipment, active and new patient analysis, financials, photos of the practice, evaluation of the procedure, and staff information. The most important things to look for are patient information, dental practice trends, types of procedures, top line revenue, and amount you can expect to take home.

Speaking with the broker can help to answer any questions you may have, as well as ensure both your goals and the selling doctor’s goals are aligned.

Tour the practice

After you’ve had a chance to review the prospectus and speak with the broker, you’ll have an opportunity to tour the practice for sale. Similar to an initial comprehensive dental exam, the in-person or Zoom tour will allow you to gain a real sense of the physical practice space.

Make an offer

PTS will then help you make an offer through a letter of intent, a document of understanding between two or more parties used when a buyer is intending to purchase a practice. In a process that typically takes 10 days, the one-pager is a nonbinding document that states the business terms for purchasing the practice for sale and/or real estate and your intent to follow through with the transaction, including the entity, purchase price, earnest money down, acceptance date, closing date, and generic contingencies — all of which will then help the buyer calculate return on investment.

Begin the negotiation process

The negotiation process doesn’t have to include a lot of papers back and forth over the course of five days. Rather, it is a conversation between PTS, the buyer, the seller, and the seller’s broker. The goal is to come up with terms that are amenable to all parties. PTS acts as a neutral third party with no fiduciary duties on either side. Typically, we act as a transaction broker. Once the terms are reached, both parties sign the letter of intent, and the due diligence process begins.

Start due diligence process

Once the seller and buyer agree to the terms, PTS will ignite the due diligence process, which can take anywhere from 30 to 45 days. In the case of a successful dental practice merger and even affiliation, careful due diligence is imperative. But no matter the type of transition, practicing due diligence will leave little room for error in the long run among your team of advisors. While the documents required may vary depending on the specifics of your transaction and lending requirements, PTS can help assemble a checklist to get everything in place.

Finalize the asset purchase agreement

Now, PTS will help finalize the asset purchase agreement, which outlines all points of the pending deal, such as hard and soft assets, as well as asset allocation. For example, in a straight buy-out, it’s important to outline what assets are included in a practice—most notably, the equipment—just like you would when purchasing a house with or without the kitchen appliances.

Complete practice loan

Once the asset purchase agreement is finalized, PTS will guide the process to getting a practice loan. When you are looking at your loan payment, remember that interest can be written off. Each year in taxes (similar to mortgage payments), interest expenses you pay on a loan is a tax-deductible event. 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 like an insurance policy for the buyer.

Get a return on your dental practice investment

PTS can teach you how to minimize risk when acquiring your dental practice

Rely on teamwork

With a new dental practice, PTS advises factoring in the time spent implementing and executing training for all employees, as well as interviewing and assembling a complete list of vendors. Along the same lines, a new practice requires time and money to market yourself and the practice, as well as a forecast and plan for your growth strategy.

Time value

At the top of your considerations list should be the theory that a dollar in the bank today is worth more than the expectation of receiving a dollar in the future. In other words, spending and earning wisely now will pay off in the long run.

Cash flow

When purchasing an existing dental practice for sale, cash flow should be analyzed by the income stream of the practice, the compensation necessary for the purchasing dentist, and any obligations incurred, no matter if you are looking at the loan for the actual purchase of the practice or any other working capital needed for equipment, supplies, or anything else to get the practice ready for operation.

Sole proprietorship

Rather than taking the safer route working as an associate or for a dental service organization that will only provide a commission for the work you do, owning your own practice will only maximize the investment of your dental degree because you’ll not only receive a commission but also a profit component.

ROI Calculation

When working with the experts at PTS, an approximate ROI equation for the purchase of the practice is included in each prospectus, which adds up the compensation of the doctor, any adjustments made for non-business-related expenses, and net income distributions. The remaining amount is an approximation of the cash flow or immediate ROI available to the purchasing doctor.

Typically, we want to see the annual ROI be 2-3xs the value of the debt service

Bottom line

Let the professionals at PTS find the perfect match for you 

Practices for sale

PTS now offers an interactive map with available dental practices for sale to help narrow down your search to make your dream a reality, based on the type of practice, number of operatories, collections, and among other factors.

Buyer profile

While PTS takes a proactive approach when helping doctors buy and sell denetal practices, creating a buyer profile (for buyers only) ensures you will be the first to find out about new practices on the market up to

five days before everyone else.

Get started on the path toward dental ownership with help from PTS