Navigating the Path to Practice Ownership: Key Considerations Before Making an Offer | Dental Office Brokerage

Dental Practice Sales & Transitions

Embarking on the journey to own a dental practice is an exciting venture, but it requires careful consideration of various factors beyond just market conditions. In addition to finding a practice that aligns with your location, demographics, equipment, and profitability preferences, assessing your personal timing is crucial. Let’s explore the essential elements to contemplate before making an offer.

Assessing Affordability:

Determining whether you can afford to buy a practice involves a comprehensive evaluation of acquisition costs, planned upgrades, personal debt levels, and risk tolerance. This financial introspection is pivotal in ensuring a successful and sustainable transition to practice ownership.

Profitability Insights:

While a profit margin of 40 percent or more is a solid benchmark, it’s vital to delve deeper. Analyzing net income by excluding doctor-related expenses, interest, amortization, and depreciation provides a truer picture. Consulting with an experienced dental practice broker can help dissect Profit and Loss statements for a more informed decision.

Collections as an Indicator:

Annual collections ranging from $800,000 to $1 million or more are positive indicators of a healthy practice. These figures suggest well-run systems, adequate staffing, and a favorable location. Evaluating collection trends provides valuable insights into the practice’s overall performance.

Managing Payroll and Benefits:

Examining the ratio between employee costs and total collections is crucial. Dental teams constitute a significant portion of expenses, and it’s essential to strike a balance. Decisions regarding team compensation, benefits, and payroll taxes require careful consideration to optimize the practice’s financial health.

Controlling Lab Fees and Supplies:

Lowering the costs of supplies and lab fees is a key indicator of effective practice management. Negotiation and price shopping can significantly impact these expenses. Striving for a benchmark of 10 to 14 percent ensures financial efficiency.

Rationalizing Rental Costs:

Committing to high rent solely based on impressive aesthetics requires thoughtful consideration. You must question whether a prestigious address is essential for success and seek guidance from a local dental broker to determine reasonable rental costs.

Planning for Upgrades:

Consider planned alterations, upgrades, or special equipment leases and factor them into overall expenses. This includes assessing the physical flow of the practice and creating a comprehensive financial plan for seamless integration.

Considering Your Financial Picture:

Ensuring the ability to compensate the team, pay off loans, manage student debt, support your lifestyle, and save for the future is paramount. A holistic understanding of your financial standing is crucial for a smooth transition.

Before making an offer on a dental practice, a thorough examination of these key factors is imperative. Our dental brokerage team is here to guide you through this process, offering valuable insights, cost-saving strategies, and a comprehensive understanding of the seller’s financials. Contact us today to schedule a complimentary consultation and take the next step toward practice ownership with confidence.

Schiff Dental Brokerage
Phone: (410) 321-7707 Ext #1205
100 West Road Suite 410
Towson, MD 21204