Should You Buy a Turnaround Practice? | Dental Practice Transitions
Dental Practice Sales & Transitions
When buying a dental practice, you will undoubtedly come across some that appear to be great deals and a few that will seem too good to be true. Many of these may turn out to be turnaround practices – fixer-uppers, if you will.
Whether it is a good investment is in the eye of the beholder, of course.
A turnaround might include an office that has outdated equipment, needs a renovation, or has a lower-than-average patient flow. While some might present an excellent opportunity, others might limit your ability to recoup your investment.
First, ask yourself these questions:
- What issues, if corrected, would yield a positive return on investment?
- What would be the easiest system to improve?
- What system would be the most challenging to fix?
- What is a reasonable timeframe for improving or replacing subpar assets?
- How much time and money will be required to make all necessary changes?
These questions will have to be viewed through the lens of your personal finances. Above all, analyze the cash flow of the practice.
An experienced dental broker can help you calculate the Profit and Loss (P&L) sheet, accounts receivable and other financials. In general, cash flow should be analyzed by practice income, the compensation you are seeking, and any outstanding loans or obligations.
To decide whether you want to invest in a turnaround practice, you must also factor into the actual purchase price any working capital needed for supplies, equipment, physical upgrades, and anything else needed to get it up to your standards.
If the practice you want to buy appears to have a low patient flow, you will naturally want to find out why. Often, it comes down to a handful of reasons.
Perhaps the providers do not enjoy a sterling reputation or the quality of service has dropped off. Maybe personnel or staffing issues have forced the provider to cut back appointments, or the team has not been trained to deliver excellent service and has been losing patients.
You can turn this around, if you have a good patient base from which to draw, with diligent marketing efforts. You would want to consider mounting a campaign to show the practice has a new owner, perhaps with a new practice name and fresh branding.
It is always wise to work with your seasoned dental broker in 21304 to get the right team in place, write a letter to patients, and leverage experts in creating your dream practice out of a turnaround.
If you’re ready to consider the next steps, contact our dental office brokerage in Towson, MD for advice and assistance in evaluating and buying a dental practice.