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Key Questions to Ask When Buying a Dental Practice, Part 1

At Henry Schein Professional Practice Transitions (Henry Schein PPT), we have successfully guided thousands of dentists through the process of buying and selling a dental practice. Our experience shows us that most doctors will only buy and sell once. As you begin the process of buying or selling a dental practice, you will naturally have many smart questions.  This Part 1 article will answer some key questions concerning buying a dental practice and will continue in Part 2. We will follow with a 2-part series for sellers, “Key Questions to Ask When Selling Your Dental Practice.” If you have a question we haven’t answered, please let us know and we will do our best to answer it.

  1. What should I consider first when looking for a dental practice to buy?

Consider where you want to live. The more specific you are about where you want to live and how far you are willing to commute to your practice, the easier it will be for you to understand your options for buying a dental practice.

  1. What should I consider secondarily when buying a dental practice?

Think about the kind of dentistry you want to do and the income you want to make. Consider the amount that is necessary to fund your retirement and support a comfortable lifestyle.      Factor in your expenses: student loans, mortgage or rent, car payments, insurances, and any other family related expenses.  

  1. What factors should I review when looking at a dental practice?

It’s important when buying a dental practice to carefully review factors such as:

  • Gross production of the office – and how it compares to what you can or have produced.
  • Collections – Are collections close to the level of production?
  • Overhead – What makes up your overall overhead?
  • Location – Is the practice’s physical location in an area that will support how you visualize your practice? Also consider the condition of the building and the quality and age of equipment.
  • Patient charts and reports – Eventually verify statistics like new patient flow and number of active patients.
  1. How is the value of a dental practice determined?

Value is a function of risk and net income. The higher the risk, the lower the practice’s value and the less interest there would be for a prospect to buy it.  Wouldn’t you be willing to pay more for a sure thing? Cash is a factor in that a higher net income becomes more valuable.

  1. How do you appraise a dental practice?

The appraisal process includes several different methods of correlating value to the residual net income of a practice after reasonable expenses are deducted from the gross income. An appraisal report, along with detailed documentation, should follow generally accepted methods used in the business valuation profession, the legal community, and the banking industry.

Contact a Professional at Henry Schein Professional Practice Transitions

Have a question about buying a dental practice? Contact us online and have a Henry Schein Professional Practice Transitions expert help take the stress and confusion out of dental practice transitions.

 

Henry Schein Professional Practice Transitions, Inc. is a national leader in dental practice transitions. A subsidiary of Henry Schein, Inc. they provide expert guidance for selling and buying a dental practice, assessing partnership and associateship opportunities, dental practice management, and performing dental practice appraisals and valuations.

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