Buying an existing dental practice comes with some advantages over starting one from scratch.
When you purchase an existing dental clinic, you’re getting:
- An established location and clientele
- Immediate cash flow
- Experienced staff
- Existing equipment
If executed properly, buying a dental practice can lead to a massive increase in compensation and personal freedom.
But the devil is in the details, and the process of buying a dental practice is comprised of many decisions that can go awry if you’re not informed and don’t have the right people on your team to help you.
If you’re ready to start thinking about one of the biggest steps of your dental career, keep reading to find out:
- What to look for when appraising existing dental practices
- The right questions to ask when assessing dental clinics
- How to develop a budget for the acquisition and transition of an existing dental clinic
- How to assess the value of existing staff
- How to make an offer on a dental practice and where you may have leverage to negotiate
- How to execute a smooth transition after you purchase your dental practice, including staff communication, new processes, and patient acquisition and retention
What to look for when buying a dental practice
When you’re assessing existing dental practices for purchase, you’ll feel overwhelmed by information and may not know how to prioritize one variable against another.
The purpose of this section is to surface all the factors you’ll need to consider when you’re assessing the five most important things about purchasing a dental practice: location, clientele, financials, equipment and technology, and existing staff.
Here’s a checklist of characteristics you’ll need to weigh against each other based on your own priorities and future vision for your dental practice.
When you’re buying into a dental practice, location is everything – and not just for professional reasons.
Your dental practice will consume a large portion of your life. You’ll likely want to live close to your practice, meaning personal factors like cost of living, neighborhood amenities, and considerations for your family are all relevant to your location assessment.
Here’s a mix of professional and personal characteristics to consider for your dental practice location:
✅ Neighborhood demographics – household income, age, foot traffic, etc.
✅ Number of competing dental practices: services and accepted insurance (PPO, HMO, and Medicaid)
✅ Building condition (for maintenance and insurance)
✅ Curb side appeal and visibility
✅ Surrounding amenities: gyms, restaurants, cafes, shops, etc.
✅ Lease terms
✅ Option to purchase the property
✅ Cost of living
✅ Schools (if you have a family)
✅ Commute time
✅ Surrounding amenities: gyms, restaurants, cafes, shops, etc.
Nothing is more important than knowing the people you will serve at your new dental practice.
We encourage anyone buying into a dental practice to get deep into the weeds and understand a clinic’s existing clientele. The details will help you determine whether or not you feel comfortable serving them based on your own priorities and skills, and whether or not you can grow the practice and retain existing patients.
Here’s a list of everything you should know about an existing dental practice’s clientele before buying:
✅ Total number of active patients within the last 12-18 months
✅ Number of new patients per month
✅ Patient retention rate
✅ Most popular and profitable procedures
✅ Insurance plans
✅ Patient demographics, including age, profession, address, and family status
Next to your potential clientele, dental practice financials are the most important thing to consider when acquiring an existing practice.
While the following checklist will help you understand what to look for when you’re digging into a practice’s finances, we highly recommend getting a formal dental practice appraisal from a professional who understands the ins and outs of dentistry finances.
See below for more on assembling a team to help you acquire your first dental practices – this isn’t something you’ll want to do alone.
✅ Profit and loss statements from the last 18 months
✅ Balance sheets from the last 18 months
✅ Income tax returns from the last three years
✅ Fee schedule
✅ Percentage of revenue for overhead
✅ Employee expense breakdown (salaries, benefits, payroll taxes, retirement, etc.)
✅ Revenue by procedure
✅ Revenue by practitioner
✅ General cash flow
✅ Current owner’s take-home revenue
Equipment and technology
One of the advantages of buying an existing dental practice is the equipment you’ll inherit. While you may discover you want to upgrade your equipment and technology after you purchase your dental practice, inheriting equipment is much cheaper than starting from scratch.
Site visits and equipment valuations are a must, and we highly recommend hiring a professional to help you assess the quality of the equipment.
Here’s a basic list of equipment and technology you’ll want to check and test with a vendor as part of your practice appraisal:
✅ Automated external defibrillator (AED)
✅ Emergency drug kits
✅ Autoclave/sterilization equipment
✅ Dental unit water lines
✅ Patient monitoring equipment
✅ Emergency oxygen equipment
✅ Fire extinguishers, smoke detectors, and carbon monoxide detectors
✅ Lab ventilation and filters
✅ Ultrasonic cleaners and handpieces
✅ EHR and practice management software
✅ EHR software integrations, such as online booking and patient communication platforms
See this American Dental Association checklist for a full list of semiannual maintenance and safety checks for dental equipment.
We’re not going to lie – you won’t know the quality of the staff until you purchase the dental practice and begin working with them.
You may be faced with some tough decisions about existing staff. You may want to replace some staff with trusted colleagues and people you love working with.
But existing staff do know the practice you’re purchasing. If you want to keep some of the original staff, you can ask some basic questions about them before you acquire the practice.
✅ How many years of experience does each staff member have in their respective positions?
✅ Is the existing practice missing essential positions?
✅ Are all positions essential for providing excellent care, acquiring new patients, and retaining existing patients?
✅ Do online reviews mention specific staff members, whether positive or negative?
✅ How are patients greeted during your site visit?
9 steps to purchasing a dental practice
Now that you know what to look for in a dental practice, how do you actually acquire one?
Here’s a step-by-step guide to successfully acquiring an existing dental practice.
Step 1: Conduct research – a lot of research.
We recommend two kinds of research when you’re considering buying a dental practice: talking to other dentists who have done it and reviewing many, many listings.
Find dentists in your network who have acquired existing practices, and ask them the following questions:
- What do you wish you’d known when you were buying your practice?
- What was the most difficult decision you needed to make when you were buying your practice?
- Who did you work with when you were buying your practice? Do you feel there were gaps in your consulting team that could have been filled?
- Were there any unforeseen costs in acquiring your practice?
- Do you wish you would have done anything differently?
You can scour the internet for hours on end, and nothing will replace the insight you’ll get from the people who have been where you are.
But also – you need to scour the internet for listings. We recommend starting with Henry Schein’s listings, which you can search by specialty and zip code. When you’re reviewing listings, you’ll want to focus on:
- Gross revenue
- Square footage
- Number of locations
- Mention of equipment type
- Fee-for-service vs. PPO revenue
- Number of years in service
- Reason for seller departure
- Number of new patients per month
Step 2: Develop a budget.
The cost of acquiring a dental practice can range from $200,000 to $600,000. Cost depends on a variety of factors, including:
- Size of practice
- Practice appraisal
- Your team of consultants
- Legal fees
The first person you’ll want to talk to is a financial planner who understands dental practice acquisition. They’ll be able to help you draft a budget that accounts for all potential line items you’ll encounter during the process.
Since every dental practice is different, there is no clear-cut answer as to how much it costs to purchase an existing clinic. Real estate listings will give you a bare bones answer, but they won’t include any legal fees or consultant fees.
Step 3: Hire a team of consultants who can help you.
We can’t stress this enough – don’t try to hack this process alone. Hire a team of experts who can help you make informed decisions and perform thorough appraisals – future you, who owns a thriving practice, will thank you.
Hire these experts to help you purchase a dental practice:
- Dental practice lawyer
- Dental practice financial planner
- Dental practice business/transition consultant
- Dental practice accountant
- Dental practice lender
- Dental equipment appraiser
- Commercial real estate appraiser
It’s important to choose professionals who have extensive dental practice-specific experience, so they understand all the financial nuances of acquiring a dental practice.
It may be tempting to save on costs and forego the hiring of a team, but the short-term spend will save you a lot of money in the long term by preventing mistakes and ensuring you acquire the practice with the most potential at the lowest possible cost.
Step 4: Choose potential practices.
Here’s the fun part – sitting down with your financial planner and business consultant and choosing potential practices.
By now you should have a list of requirements for your dream practice – number of locations, neighborhood, gross revenue, number of new patients per month, etc. Compare all potential listings against your wish list, eliminate any deal breakers, and move forward with appraisals.
One thing to note: when you’re choosing a practice, investigate the seller’s reason for leaving. If the reason is not retirement, you’ll want to ask deep questions about the financial status of the practice and determine what’s going wrong (if anything) and whether or not you could turn things around.
Step 5: Perform appraisals on practice locations, financials, clientele, staff, and equipment.
Here’s where you get into the details – and use the checklist we provided above.
To really understand cash flow, you and your team will need to conduct thorough due diligence on assets, overhead, production, collections, accounts receivable, insurance, and taxes. Understand how much you’re paying for goodwill, and how the seller is quantifying that price. Don’t accept numbers, especially projections, unless you understand them.
Appraisals are almost never straightforward – refer to this guide on how to get an accurate appraisal for more details from experts.
Step 6: Make an offer and negotiate price.
If you’ve made it this far, it’s an exciting time! But it’s also nerve wracking.
If you’re not a skilled negotiator, outsource this skill to a commercial real estate agent to negotiate on your behalf. Hire someone who has helped someone else acquire a dental practice in the past.
Equipment appraisal becomes important when you’re negotiating price. If your appraisal has determined that existing equipment is old and had depreciated significantly, you may be able to use this as leverage when negotiating the final purchase price for your practice.
Step 7: Secure financing.
Your business/transition consultant will be able to help you secure financing for your practice, but you’ll want to consider whether to choose a large national bank or a small regional bank.
We recommend moving all personal accounts, business accounts, and loans to one institution to make the lending process easier.
Step 8: Sign the practice sale agreement and lease.
The practice sale agreement is not a complicated document, but we highly recommend the expert of a lawyer to review it. The sale agreement will include:
- Buyer and seller warranties
- Allocation of sale price for tax purposes
- Identification of assets sold
- Patient record custodianship details
- Practice transition agreement (the seller may remain at the practice to ease the transition)
- Covenant-not-to-compete agreement
Step 9: Perform final transition tasks.
You’re almost there! After signing the lease and the practice sale agreement, you’ll need to perform some last tasks to complete the transition.
Apply for your own tax ID number and open a business checking account. Most importantly, however, is that you’ll need to transfer any insurance policies that require contracts for preferred provider status.
Transitioning the dental practice into your network
If you’ve made it this far, congrats! You’re the proud owner of a dental practice. Take a moment to celebrate this career milestone … then get to work on your transition plan.
You may have signed a practice sale agreement that includes a transition period between the seller and yourself, meaning the seller might stay on for a few months to show you the ropes of the practice.
If this is the case, your first job as a new owner is to listen – listen to the seller, the staff, and the patients to gain a full understanding of the business before a complete takeover.
Here are some tips to help you carry out a smooth transition to owning your own dental practice.
First things first: you should not be meeting staff for the first time after you’ve purchased the dental practice.
If you’ve performed thorough due diligence, you will have met all staff members prior to buying your dental practice. The seller will have communicated the sale of the practice well before it transpired, and staff are all aware of who you are and what they can expect from your leadership.
When you begin your new role, treat legacy team members with respect – they are your greatest allies in maintaining goodwill with existing patients and acquiring new patients.
Resist the urge to make staffing changes right away, even if you see the need to do so. Write down your observations about legacy staff members, and let those observations marinate as you come to understand the nuances of the team.
Communicate with legacy staff openly about your treatment philosophy and how you like to manage staff. Transparency is key – staff members may feel apprehensive about what new leadership means for their positions, so remain open and empathic to build trust.
New staff recruitment
After a few weeks or months of observation, you may see some gaps within your current team and want to recruit more staff.
You’ll be hiring new staff for two possible reasons:
- You’ve identified a potential new revenue stream and need someone to provide a new service.
- You’re seeing that current staff members are overextended and you need more team members to maintain or improve patient experience.
Either way, a solid job description is a great place to start when you’re hiring a new team member. Even if you have someone in mind for the role, take the time to ask yourself the following questions to define the job description:
- What are the goals of the new position?
- What will this person’s day-to-day look like?
- Who will be supervising the position?
- How much autonomy does this position come with?
- Which technical skills are required for the role?
- Which soft skills are ideal for the role?
When you have a solid job description, you have several choices for recruitment.
- Use a dental staff recruitment agency.
- Post the job on standard job boards like LinkedIn, Indeed, etc.
- Reach out to your personal network for recommendations.
- Post the job on dentistry-specific job boards, like Dental Staffing, the American Dental Association job board, etc.
When you buy a practice, your number one priority will be to show existing patients they can trust you.
You’re the new kid in school – and you’ll need to prove yourself to existing patients. Patients may have developed a significant rapport with the selling dentist, and it’s your responsibility to show them they’re in good hands.
Here are three ideas for retaining patients after you’ve acquired your dental practice:
- Hold an open house. If the pandemic is still happening when you take over your practice, find an outdoor venue and invite people to a BBQ. Enjoy the process of meeting your clientele and take the opportunity to ask them what they wish would change about your clinic.
- Film a one-minute video telling patients who you are and why you’re excited to serve them. Send it to them as a link via email or text. You may want to send them a series of videos, the first as an introduction followed by others that describe elements of your treatment philosophy. Attach a survey that asks for feedback on how you can improve patient experience.
- Send a personal letter to patients introducing yourself. Invest in a graphic designer to draft a clinic brochure that describes the new patient experience at your clinic.
Investing in the patient experience as a new clinician may require new tactics the seller didn’t consider. Here are some new strategies that can further help with patient retention:
- Free offers for loyal patients
- Small birthday gifts
- Online booking – because almost 3 out of 4 patients book appointments during off hours
- Online payments that automatically sends invoices via email and/or text
New marketing tactics for patient acquisition
When you feel you have a good handle on the ins and outs of your new dental practice, the time has come to grow your practice with new marketing tactics.
This is the final step in the process of buying a dental practice: optimizing new patient acquisition and lowering the cost of acquisition per patient.
Effective patient acquisition requires the following:
- Understanding your patient acquisition cost: Dig into your cost per lead, cost per new patient acquisition, and conversion rates by marketing tactic. When you understand these numbers, you’ll know where to devote your marketing spend.
- SEO for dental clinics: When people search for a dentist, they’re performing local searches with queries like “dentists in [your city/neighborhood]”. If the seller hasn’t already done so, you’ll need to optimize your website and Google business listing for these search keywords.
- Social media marketing for dentists: Consider becoming a local thought leader on dental practices for your community. Through keyword research, you can gain a sense of the most common healthcare questions about your specialty, then connect with a wider online community by providing answers to their questions on social media platforms.
- Online reviews: You can invest thousands of dollars in marketing, and one thing will always remain true: word of mouth is king. To stimulate word of mouth among your patients, adopt an easy way for patients to leave online reviews after a good appointment. You don’t get what you don’t ask for, so don’t be shy and ask for the reviews!
Good luck with your dental practice purchase! Don’t forget to make time to celebrate after you’ve sealed the deal – what you’ve accomplished is big and cause for a pat on the back.