Buying an established dental practice or veterinary hospital is an experience unlike any other. It’s fun. It’s exciting. It’s an essential step in your journey if you want to be a practice owner (if you’re not going the startup route). If you’re ready to get moving and have your own practice, let’s do a quick recap of the basics so you can navigate the acquisition like the boss you’re about to be.
Considerations of the purchase
Buying a healthcare practice is an exciting time (yes, we know, we literally just said this). It’s also an exciting time to be a seller (these doctors are selling their life’s work!). It may go without saying (but we’re going to say it anyway) buying a practice is different from buying a house. When acquiring a practice, you’re purchasing more than the physical building and existing patient base. You’re taking on the existing cash flow, the equipment, the staff — even the previous owner’s mission, vision, and values are wrapped up in the deal. As a buyer, there’s a lot to consider before you make an offer, so be sure the established practice aligns with what you envision for your future — aside from a home, this is likely the largest purchase you’ll ever make.
(By the way, you can browse current listings today. Our practice marketplace pulls thousands of listings from top brokers across the country and makes it easy for you to find your dream practice from a trusted broker.)
A second for NDAs (you know, fun legal stuff)
There’s a lot of confidential information shared during a healthcare practice sale. In case you haven’t signed one yet, don’t be alarmed if you need to sign a non-disclosure agreement (NDA) to get any information on a practice you’re interested in. NDAs are official legal documents that are part of almost every business sale. They’re truly meant to protect everyone involved.
There are a lot of legal, financial, and other documents involved in a practice acquisition. That’s why we recommend you cultivate a network of trusted industry experts, including a trusted attorney, to have your back and guide you throughout your practice acquisition. Best-case scenario, they stick around for your entire ownership journey. (We’ll be mentioning this again. AND we wrote two articles on this: ‘5 experts you need on your practice acquisition team’ and ‘How to build your dream practice acquisition team’ that we recommend you check out.)
It’s not the same as it was.
Just like the housing market, the dental and veterinary industries have continued to change and face new challenges in recent years. The pressure’s on, from rising staff costs to stagnant insurance reimbursement rates. The good news? Many experienced professionals are retiring, leading to a surplus of practices on the market.
As a buyer, you truly have the advantage. With an abundance of practices for sale and fewer buyers, there’s potential for favorable deals. Some sellers may be willing to accept lower prices to expedite the sale of their practice. This presents a significant opportunity for aspiring owners to become practice owners. Plus, new practice owners are helping preserve the independence of the dental and veterinary industries and shape the future for other healthcare providers.
Let’s talk financials.
If student loan debt is something you’re worried about (totally normal if it is), this should not compromise your willingness to acquire a practice. Although student loans may impact immediate affordability, the potential for higher income as a practice owner can outweigh these concerns.
Financial institutions (like us and other lenders) typically require evidence of production capability, making it important for buyers to gain experience as associates before transitioning into ownership. Dental- and veterinary-specific CPAs and members of our team are true experts in this area. We highly recommend chatting with them about your unique situation.
Who’s in your corner?
Do yourself a favor and engage the services of dental- and veterinary-specific experts like a CPA from the beginning (yes, we already mentioned this a few times, and we’re mentioning it yet again). Establishing relationships with trusted advisors early on can help streamline the buying process and ensure financial readiness. Waiting to secure professional assistance may result in missed opportunities, as ideal practices can be quickly snatched up by other buyers.
If the price is right
When evaluating a practice’s listing price, there are a couple of things to consider and prioritize to be sure you’re getting a fair deal. Given their substantial financial obligations, new grads often prioritize stability and financial security, as the practice’s ability to cover debt service is crucial.
However, there’s also room to consider upside potential. Practices with a solid patient base and room for growth can be more appealing, even if the initial income is lower. This allows buyers to build on existing patient flow and increase their income over time. You can work with your team of experts to evaluate the practices you identify for potential purchase. Cash flows provide a clearer picture of the practice’s financial health and its ability to generate income. Additionally, active patient numbers are essential as they directly impact the revenue potential of the practice. Ultimately, you need to find the balance and price that’s right for you.
Remember, you’re not in this alone. From lenders like us who specialize in healthcare-specific lending to CPAs, accountants, and brokers, we’re all here to support you so you can achieve your practice ownership dreams and deliver the standard and type of care you so strongly believe in. (We’re rooting for you!)
Editor’s note: This article has been adapted from episode 22 of The Path to Owning It podcast with Tom Whalen, a certified public accountant (CPA) at Edge Advisors. Listen to the episode for more on the current landscape of the dental industry, the opportunities available for young buyers, the factors affecting practice acquisition, and the importance of financial planning.
This content is for informational purposes and does not constitute the rendering of legal, accounting, tax, or investment advice, or other professional services by Provide or any of its subsidiaries or affiliates, and it is being provided without any warranty whatsoever. Please consult with appropriate professionals related to your individual circumstances.
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