Deciding to buy a dental practice is a major life decision. Finding the right practice for you can feel equally as daunting. To make a smart decision, it’s important to understand the different types of dental practices available and the pros & cons of each as they relate to your goals. At face value, each practice may appear the same, but when you look closer you’ll find there is a myriad of differences.
The most common purchase options are partnerships, phased buy-ins, or individual purchasers. One of the first things to take into consideration is size. Size determines if the dental practice is large enough to support one or multiple providers. If the office space is large enough, this may present the opportunity for an associateship with the option to “buy in” as opposed to being a sole owner. As a buyer, consider whether you want a clean break from the seller or if you want to continue to run a very similar practice.
Partnership:
What is it?
A partnership involves sharing the responsibilities of a dental practice with another dentist.
Pros
Less individual risk
Opportunity to offer multiple specialties within one practice
Cons
Less control over the direction of the practice
https://www.dentaleconomics.com/money/article/16389576/using-a-partnership-for-a-flexible-transition
Associateship:
What is it?
An associateship is similar to a partnership but involves a group of owners.
Pros
Less individual risk
Opportunity to offer multiple specialties within one practice
Cons
Less control over the direction of the practice
Phased Buy-in:
What is it?
A phased buy-in involves working with the current owner for a period of time and ultimately purchasing the practice from them.
Pros
Opportunity to gain insights from the seller
A less risky transition – active patients get to know you prior to the transition
Cons
Not a quick & clean break from the seller
Individual Purchase:
What is it?
One individual purchases a practice and serves as the sole owner and operator.
Pros
A quick & clean break from the seller
More control over the direction of practice
Cons
Current patients and staff may not embrace change
Higher financial risk
Consider some of these questions as you begin your search:
- Is the practice growing revenue, stable, or in decline? Your dental specialty lender will be curious about this. A retiring dentist may be just “slowing down” but knowing where the practice is on that arc is important.
- What is the mix of PPO vs. fee for service dentistry? Depending on location and insurance mix, the practice’s growth strategy will be dependent on this.
- Does the practice refer out a lot of specialty work? Does your dentistry skill match the current Seller/Provider? A lot of dentistry referred out might be an opportunity for growth for the multi-skilled Buyer.
- What is the technology like in the practice? Many selling dentists scramble to “upgrade” technology, only to make choices different from those you would make. There are pros & cons to buying a practice with requirements for equipment, software, and technology upgrades
- Does the practice lease it’s space or does the practice own the real estate? This will impact your cash flow and taxes in numerous ways. Which option is best for you and what will your dental specialty lender think about the options? As you peer more closely at the variety of dental practices for sale, lean on experts in your community to help you reveal what’s unique about each one. Contact an ADS Transitions Specialist now to help you determine what practice is right for you.
Questions?
Still have questions about buying a dental practice? Talk with one of our experienced practice brokers.
