If you’re reading this, you’re probably ready to strike out on your own and buy a dental practice. It’s an exciting time and it’s easy to get caught up in the bigger picture of your new practice and neglect the finer details involved in actually buying a practice.
Buying a dental practice is no small investment, after all, so it’s important to tick all the boxes when you’re setting up your new business.
If you’re creating a new dental practice, organizing everything perfectly from the start will help make your transition from a dentist to a dental business owner much easier. And if you’re taking over an existing practice, the transition from the previous owner to you will run much smoother if you’ve been attentive to the details.
Here, we’ll be going over some of the essential things you need to know before you launch or buy a dental business or practice. We’ll include tips on making the transition and working with the seller. We’ll also go over some handy financial pointers when it comes to financing and buying your new dental business or practice.
But first, let’s cover some of the early buyer considerations when it comes to buying dental practices.
Buying a Dental Practice 101: Is a New or Existing Practice Better?
Before anything else can happen, you need to decide whether you want to purchase an existing dental business or buy your very own, new dental practice. There are pros and cons to each and both buying options are viable ways of creating successful, and profitable, dental practices.
Buying an Existing Dental Business or Practice
Buying a dental practice that’s already operational can mean that you’ll hit the ground running straight away. The practice is set up and ready to go. You’ll also have the chance to check over the seller’s books and see if the dentistry practice for sale was profitable.
Another boon to picking up an established practice is that fact that most dental practices for sale will come inclusive of all, or most, of the dental equipment you need. Frequently, dental staff and a team of dentists already work there as well.
The seller’s clientele may stay with the dentistry practice they’re accustomed to, meaning you’ll have a ready-made customer base for your practice, too. At the very least, there will likely be name recognition that comes along with existing dental practices. This can make it a little easier for you to get started and may help to shape a successful business.
A Dentist’s Reputation Matters – What’s in a Name?
Name recognition isn’t always a good thing when it comes to buying a practice that is for sale. If the dental business you’re considering purchasing comes with a negative reputation, give your purchase a lot of thought. You may still move forward with buying the practice, but be prepared to do some serious rebranding.
Is this the situation for your potential practice? If so, try and hire a consultant to help with a physical remodel after the sale is complete. You’ll also want an advertising campaign in place for your new dental practice to help make the transition better and keep your practice firmly separated from the seller’s in clients’ minds.
Buying a Brand New Dental Practice
Starting your practice from the ground up — either literally if you intend to build, or figuratively if you’re repurposing an existing dental space — offers a few benefits over buying an existing dental practice.
As a buyer, you’ll have a greater choice when it comes to the location of the practice. A new buyer is also able to create a company culture, branding, and a team of dentists and staff who best suit your brand spanking dental practice.
While you will be able to customize your dental practice just the way you want it, you may find it significantly more expensive to start from scratch. You’ll be spending money on purchasing a location, building your practice, and also dental equipment. You won’t have pre-existing dental clientele and will need to build your practice’s reputation.
You’ll also need to hire dental office staff and potentially other dentists and hygienists. Before you open your dental practice’s doors, you’ll need to have the staff and the other dentist (or dentists) in place. Make sure your dental business plan and financing accounts for the fact that you may be paying your practice’s employees even when you don’t have clients.
If you’ve never had a dental practice before, you’ll also be learning the ropes when it comes to the business side of both buying and running a practice. On top of the required legwork to get your dental practice operational, this can be a challenging transition. Without a seller’s books to follow from previous business years, you may even find your practice facing unexpected expenses.
Before Moving Forward With Your Dental Business Purchase
Once you’ve determined what kind of dental practice is right for you, you’ll need to move forward with getting your business established. Before leaping into the purchase of your new dentistry practice, you’ll want to take the following steps:
Determine If You’ll Be Working With Another Dentist or Dentists
It’s tempting to rush forward and purchase the first location or dental practice that becomes available. Buying a dental practice isn’t something you want to rush into, though. Making a mistake at this juncture can leave you with a non-viable business.
Patience is a virtue. You’ll need more of it than you think when it comes to the process of buying a dental practice. Not only will you need to wait for the perfect location and opportunity, but you’ll also need to wait for the right dental staff and dentists for your practice. Make sure you align yourself with staff and a partner who wants to be part of the same kind of dental practice you do.
If you do end up partnering with another dentist, you’ll find that a similar attitude and business goals can make your dental business transition easier. Not all dental practices are the same. If you have a particular focus you’re interested in — say a pediatric or reconstruction dentistry practice — your choice of partnership will be vital to your dental practice’s continuing success.
Create a Business Plan for Your Dental Practice
When you have a clear picture in mind of what your dental practice will look like, start putting together a business plan for your new venture.
A business plan for your practice will give you a clear trajectory for where you are and where your dental practice is going. It will also become a crucial document necessary for obtaining financing for your dental business in the future.
When it comes to creating your new dental practice’s business plan and establishing your working philosophy, know that you can always make changes as needed. A business plan can help you see where you need to strengthen your practice’s plan and preparation processes. It’s better to identify any problems and rectify them early on before your new dental practice is at risk.
You don’t want to overly focus on the potential negative outcomes that come with launching a new dental business. You do, however, want to take into consideration an exit strategy for yourself with your practice. This will help prepare you for every possibility that can come along with starting a dental practice.
Searching For, and Selecting, a Dental Practice for Sale
When considering future sites for your dental practice, you’ll need to know exactly how much space you need for your practice. While it is better to have too much space for your practice than not enough, you also don’t want space to go to waste. It comes at a premium, after all, so don’t spend money needlessly.
To accurately assess your dental practice’s space needs, you’ll also need a good idea of the kind of practice layout you’re looking for. Will certain dental procedures happen in certain areas in the practice? Will you and other dentists have a consistent room? A clear picture, provided by your business plan and expected dental business practices, will be invaluable to you here.
When you are establishing your dental business needs, don’t forget to include lobby space and staff space in your ideal layout. Your practice should also include a private area for your staff to take breaks and eat meals in.
You’ll also need to account for storage in your practice. You may choose to store the bulk of your supplies in a separate room or in the main dental procedure spaces. Wherever you create storage, though, make sure there’s enough in the dental practice to give you and your dentists functionality.
Once you have a good idea of what your new dental practice needs in a space, you can start looking for the ideal location. People will travel for great dentists and great dental practices. However, if you’re buying a dental practice there are a few things you can look for in a location to get your dentistry business off to the best start.
Location, Location, Location
First, you need a dental location that’s central to your potential clients. You’ll also want a practice that’s relatively easy to get to. If there’s your dental practice can be easily seen from the road, that’s even better. Your practice will bring in passing traffic as well as those who’ve intentionally sought you out.
Remember that repeatedly coming across your dental business will create needed familiarity with your dental practice. This can leave potential clients more comfortable with your practice and more likely to make an appointment.
Great parking at your practice will be key to a thriving business. A parking lot can be an incredible asset to your dental practice. Nothing annoys clients more than never being able to get a park at their preferred clinics. Don’t forget, practices need parking for dentists, dental staff, and patients.
You’ll also need to accommodate your clients as they come and go from the practice. Keep in mind that your patients will overlap. Some will be in the lobby, others in the dental procedure rooms, while still others will be on their way out of the practice.
Financing Your Dental Business
Once you have the other pieces put together, it’s time to get to talking about the financing of your practice. You may be dreading this part of buying a dental practice, but finances are critical to getting your dental business in place. There are three main ways you’ll be financing your new dental business. Let’s take a look at each.
- Loans — It’s not unusual to borrow money to launch a new business or practice. You may choose to borrow money informally from family or friends or opt for financing through a lending institution.
- Self-financing — If you have a large amount of existing capital (from the sale of a previous business or practice for example) you may consider financing with your own money.
- Partnerships — When working with multiple people, you won’t be responsible for the entirety of the financing. This can help you tap a greater amount of resources. It may also mean your business financing comes with less risk.
You may find a partner (silent or active) to help support your newly purchased dental business. You may also find yourself in a financial position whereby you don’t need financing for your dental practice. For most people, though, buying a dental business and getting it up and running involves financing through loans.
Financing a practice can be a complicated procedure. Like buying a home, you’ll likely present your business plan to lending institutions prior to finding and buying the ideal location for your dental business. Once you’ve chosen your preferred location, you may have to return to your lender to iron out any final financing details before buying your practice.
Before you commit to anything in regards to your future practice, make sure you have a lawyer you trust on hand to review the fine print of your financing. As the buyer, it’s better to be extra thorough during this financing process than to regret your purchase at a later date. Keep in mind that you will likely need a business loan upwards of $500,000 dollars to launch your business and get your practice going.
Loan Options for Your Dental Business
When it comes to choosing a dental practice loan that’s right for financing your business, you do have options. There are several different loans you may want to consider for financing your practice:
- Small business loans — These loans can be for 5,000 to 5 million dollars with repayment terms of 5 to 25 years. Approval time varies but is generally between three weeks to a few months. Timings will be impacted by the amount of financing you’re asking for.
- Conventional bank loans — Conventional bank loans can be used for loans that amount between 30,000 and 5 million dollars. Repayment terms are up to 25 years and approval time is usually just 2 to 6 weeks of time.
- Short-term and medium-term online loans — These loans can be a great option if you’re looking for quick start-up cash for your practice. In as little as 20 minutes you can have your application complete and in less than a day you can have access to 2,500 to 250,000 dollars. The downside is that this financing option comes with high interest rates and repayment terms are just 3 months to 5 years.
- Business credit lines — A credit line for your dental business can be a good way of financing your practice. You’ll apply and be allotted a certain amount of money (between 10,000 and 1 million dollars) in as little as a single day. Take what you need when you need it to get your dental business going and you’ll only pay interest on what’s been used.
- Financing dental equipment — It’s not surprising that dental equipment for your practice can be pricey. Fortunately, you can choose to finance the individual pieces of dental equipment. Monthly payments can help make big purchases more manageable when you’re still getting your practice up and running.
When buying a new practice, people frequently opt to choose more than one of these financing approaches to get their business going. Just remember, you’ll need an accurate picture of where the money is going in — and where it’s going out.
Don’t be lulled into a false sense of financial security by taking on many smaller loans or lines of credit for your practice. This is one time where you want to keep a keen eye on the bigger picture of financing. Not to mention the accrued interest.
When you’re looking to finance your practice purchase with a loan, you will usually work directly with the bank or lender as the buyer. It is possible that a seller will be willing to work with a buyer to make a sale happen, but it’s not as likely and you don’t want to rely on a seller’s cooperation.
Make sure you have all your financing in order so you can move forward with your chosen loan option and buy your practice.
Purchasing the Dental Business of Your Dreams
Hopefully, you now have a better idea of what you need to do when launching and buying the dental practice you’ve been dreaming of.
If you’re ready to move forward from being a dentist and become a dental practice owner, you certainly have a lot to think about. The good news is that with some proper planning and forethought, and all your finances in place, that new dental practice purchase you’ve been itching to make can be a reality.
Still a bit puzzled over the financial ins and outs? If so, please get in touch with us today and we can help steer you in the right direction.