What To Look For In A Practice

May 1, 2001
In 10 years of working with young dentists, I have found practice ownership to be their greatest goal. An entre preneurial spirit is at the heart of most dentists.

In 10 years of working with young dentists, I have found practice ownership to be their greatest goal. An entre preneurial spirit is at the heart of most dentists. Finding the right practice to fulfill the desire for ownership is the difference between a successful dream and a dismal nightmare.

So what should you look for? Consider these elements before buying the practice that feels like "home":

  • geographic location
  • facility
  • equipment
  • cash flow
  • value
  • patient base
  • growth potential
  • practice philosophy
  • staff

While everyone wants a practice in prime geographic areas that are close to family, there is money to be made in areas where patients need dentistry. The community, as well as the location within the community, is important. A good location has good traffic, access, and visibility. Location, however, is just one element.

Don't overlook the diamond in the rough. The physical layout of the facility is more important than the appearance, which can be changed with reasonable expense to reflect your image. Equipment plays a very small role in the value of a practice. Covering chairs and painting X-ray heads can be adequate until your practice grows and can afford new equipment.

Click here to enlarge image

Cash flow and patients are the reason a practice has value; therefore, cash flow and value are closely tied. A simple equation for cash flow is:

While placing a value on a practice is more art than science, the "numbers" have to work. If the numbers work within the equation, the practice probably is appropriately priced.

Since patients create income, do the following: Audit charts for treatment, date of last visit, and appointment patterns; review X-rays; note insurance; review operative and hygiene schedules for the last six months; look for at least an 85 percent compliance rate; check schedules for cancellations, activity level, weeks booked ahead, recall system, and new-patient count per month. This should give you a consistent picture of the patient base and growth.

Younger patients are naturally attracted to a practice acquired by a younger dentist, so this can be a real plus. Growth occurs largely because of practice and patient management. The practitioner who is successful in any community is the one who is liked by patients, has good internal referrals, treatment acceptance, and staff members who are personable and professional in meeting patients' needs.

Dentists develop their own philosophy and find what style suits their personality, treatment beliefs, skills, and patient needs. Finding a practitioner with a similar concept is wise when looking for a practice to buy. Staff members contribute to that philosophy and success. Learn how the staff is compensated, who has expanded duties, and who is cross-trained. Continuity of staff in a transition is critical. Creating rapport and gaining the trust and respect of the staff should be a major focus in the early months of transition.

Making the transition from associate to owner brings its own success. Reviewing these practice elements, assessing your own work ethic and abilities, and knowing your personal financial needs will help you choose the right practice. Now you are ready to create your vision of success, be your own boss, and own your practice!

Ted Schumann is president of DBS Professional Practice Brokers and Dental Business Services, Inc. He has over 15 years of experience specializing in dental practice sales and is a founding member of American Dental Sales. He can be reached at (517) 894-0022 or by e-mail at [email protected]. Randy Daigler has been with DBS since its inception, specializing in practice sales, acquisition, and transition consulting. Contact her at (248) 474-0948.

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