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10 Things You Must Know Before Buying a Dental Practice
Thinking about practice ownership? Here are the 10 most important insights that could save you from costly mistakes and set you up for success.
1. You Need Less Cash Than You Think (But More Than Banks Advertise)
Most dental practice lenders will finance 100% of the purchase price. However, you still need cash reserves—either 10% of the purchase price or $50,000, whichever is less. This isn’t for a down payment; it’s to demonstrate financial responsibility and provide an emergency fund. Many buyers focus so much on the loan that they forget about working capital needs.
2. The “Cheap” Practice Will Cost You More
One major mistake buyers make is targeting practices under $700,000 thinking they’ll save money. These practices are usually small for a reason—bad location, declining patient base, or poor systems. Banks struggle to finance them, and you’ll struggle to generate enough income to pay off student loans. Target practices collecting $800,000+ annually instead.
3. Most Great Practices Never Hit the Market
About 80% of your search effort should focus on building relationships with dentists who might sell, not browsing broker listings. The best practices often sell through word-of-mouth before ever being formally listed. Start networking with dentists in your target area who are 5-10 years from retirement.
4. Your Broker Doesn’t Work for You
This might sound obvious, but many buyers forget that brokers are paid 8-10% of the sale price by the seller. Their job is to get the highest possible price, not to find you the best deal. They can be valuable, but remember whose interests they represent when negotiating.
5. The Real Estate Can Kill Your Deal
The practice purchase and real estate are technically separate transactions, even when they happen simultaneously. Lease negotiations often take longer than expected and have derailed many deals. Start early, and ensure your lease term matches or exceeds your loan duration—banks will require this.
6. Staff Wages Rarely Go Down After Transition
If the practice has high staff costs (over 32% of collections), don’t assume you can easily fix this by cutting wages. Staff members often expect raises after a transition, not cuts. Factor current compensation levels into your financial projections rather than planning to reduce them.
7. Patient Attrition Isn’t as Bad as You Fear
The average well-managed transition actually sees a 2-3% increase in collections during the first year. However, you should still model scenarios with 5-10% patient loss to ensure you can handle worst-case situations. The fear of mass patient exodus is usually worse than the reality.
8. Shopping Too Many Banks Hurts You
Contrary to what you might think, talking to more than 2-3 banks often leads to worse loan terms. When banks know they’re competing against many others, they don’t put their best offer forward. Stick to reputable dental-specific lenders and keep the competition focused.
9. The First 90 Days Make or Break Your Transition
How you handle the initial transition determines long-term success more than any other factor. Avoid making immediate changes to staff compensation or office systems. Focus on building relationships with the team and having the seller introduce you to patients. Changes can come later, once trust is established.
10. You’re Buying an Income Stream, Not Equipment
Don’t get caught up negotiating over $20,000 when the practice will generate hundreds of thousands in profit annually for decades. If you’ve found your ideal practice in the perfect location with great systems, paying a slightly higher price is often worth it. Remember, the purchase price is amortized over 10-15 years.
These insights barely scratch the surface of what goes into a successful practice acquisition. The difference between a smooth transition and a costly mistake often comes down to understanding nuances that aren’t immediately obvious.
Want the complete roadmap?
We’ve created a comprehensive guide that covers everything from finding off-market practices to structuring your first day as an owner. Get the full guide with templates, checklists, and detailed strategies at https://dentalpodcast.org/guides/how-to-buy-a-dental-practice/
dentalpodcast.org
How to Buy a Dental Practice - Dental Podcast Directory
As you consider buying a dental practice, you're probably experiencing a mix of excitement and apprehension. That's completely normal. After all, this is
I am a general dentist and founder of Proximal Contact, LLC where we operate:
American Dental News, Embrasure Space, DentWoo. -
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