Do you know a new dental school graduate – or are you one yourself? There are a lot of mixed emotions: relief, pride, excitement, and nervousness just to name a few. Dental CPAs has been down this road with many young dentists and while we don’t profess to know exactly what you’re going through … we have a pretty good idea.
With many young dentists we work with, entrepreneurship comes to mind sooner or later and the inevitable questions start to come up: Can I afford to buy my own practice? Is it the best decision?
There’s a trend that many newer dentists are affiliating with DSOs right out of school, so it’s a valid question to wonder if buying your own practice is really the best path. Only you will know what works for you, but if you decide to pursue practice ownership as a young dentist – or really, at any age – here is my advice:
Don’t look for the perfect practice. It doesn’t exist.
Instead, look for a practice with solid numbers and even more solid potential. I’ll give you some examples.
First, the price. I’ve said it before, and I’ll say it again: buying a dental practice is about more than just price. Assess the price and practice performance. Calculate averages and percentages, normalize the cash flow (especially overhead), and look for trends and variances. This will give you a complete picture of the practice’s financial situation and help you spot opportunities to increase profits and patient revenue, and/or decrease unnecessary expenses or overhead costs.
Next, the location. Yes, we all want the practice on the corner with the heavy foot and/or vehicle traffic; the practice that’s impossible to miss with the great signage, parking lot, and other complementary, well-known businesses surrounding it. Because really great practices will often get sold quickly and also come with a premium, look for the diamonds in the rough.
Look for the locations that are a little off the beaten path that could use some room for improvement. As long as the demographics reports indicate that the dentist to population ratio is low or somewhat low, that the local population is growing, and you have a good handle on your competitors – then go for the location that’s under the radar.
Here’s a good article on our blog about choosing a great location for your practice.
Third, even though you probably want a practice with new technology and upgraded equipment, don’t let the lack of it be a deal breaker. Most seasoned dentists will tell you that you don’t need the latest in dental tech to offer great service. As long as the practice has the minimum equipment you need to offer the kind of dentistry you need, ignore the outdated stuff. Make a plan with your CPA to invest in your practice after six months and buy the tech you want. A tip: look for the sales offered by dental suppliers if you’re really watching your budget those first several months.
Keep in mind that what you’re really buying are the intangibles: the patient records, goodwill, and reputation. Most new dentists find lots of opportunity to bring existing patients back into the fold or expand the service offerings within the first year. When the foundation of the practice is strong – meaning the core financials and metrics – the rest often falls into place with a little elbow grease and strategic planning.
Nearly all the dentists we work with as practice owners tell us that ownership is the best decision they’ve ever made. As an owner, you’ll get control over your schedule and the chance to really do what you love. It’s not an easy road, by any means. But I think if you focus on the right areas when buying a practice, instead of holding out for the perfect one, you’ll find satisfaction and happiness. And in the end, that’s what it’s really about.
Do you have questions about buying your first practice? Ask me!
About Tim Lott
Tim Lott, CPA, CVA has decades of experience working with dentists at all stages of their careers. He is a regular speaker at study clubs, societies, and dental schools. Tim is a frequent participant and a moderator on Dentaltown.com. You can reach Tim at firstname.lastname@example.org or any of the other dental partners/principals at (800) 772-1065 or email@example.com.