Business Insights

Key Insights for Dental Practice Buyers and Sellers

Originally published on the Great Dental Websites Blog

The world has been changing rapidly over the last couple of years; however, one thing seems to keep moving on an upward trajectory, and that is the market for buying and selling dental practices. 

Whether you’re considering buying or selling a dental practice, there are many moving parts to consider. The more you know and plan for your transaction ahead of time, the better your chances are of having an efficient sale process where you can maintain goodwill. 

This article will cover some basic information both buyers and sellers should keep in mind, so your transaction can go as smoothly and efficiently as brightening a smile! 

Insights for Sellers to Keep In Mind

If you’re thinking of retiring or selling your dental practice, you’ll want to consider some of the current trends as you prepare to put it on the market.

Even after the effects of the pandemic over the last two years, the sales market for dental practices remains strong. Many buyers are young dentists coming out of DSO (corporate dental service organizations) and are now ready to practice independently. Therefore, purchasing an established dental practice can benefit a dentist who is just starting out independently.

Today’s young dentists are looking for urban locations, so if your practice location is in a city, you’ll likely be able to ask for a higher price. Today’s buyer is also very tech-savvy and looking to offer a modern dental experience for their patients. So the more technology and innovation you can offer them, the better.

Consider the Aesthetics of Your Dental Office

Just as a beautiful smile helps your patients feel confident about interacting with other people, an aesthetically pleasing dental office will help potential buyers feel assured about purchasing your dental practice. A modern, organized, clean dental office space is essential for most buyers.

State-of-the-art technology and equipment in your dental office will also help increase your asking price when it comes time to sell your dental practice.

Getting a professional appraisal of your dental office prior to putting it on the market can be helpful so you can see and understand where you might need to make improvements. Then you can decide if you’re willing to make those improvements before putting your dental practice on the market or if you will reflect it in your asking price.

Review Your Dental Website

An effective dental website provides engaging and relevant information for current and potential patients. Today’s dental website should be user-friendly and packed with relevant information. It should provide online scheduling tools that make booking an appointment or contacting your dental office quick and convenient for patients. 

Take some time to review your current website and determine if there are some changes or upgrades you can make before you list your dental practice on the market. Updating and enhancing your website can make your practice more appealing to buyers as they will be able to begin attracting new patients right away. 

What Is the Lender’s Perspective?

Lenders want to see pre-covid numbers from dentists who are selling their practices. Meaning, did your dental practice bounce back after the COVID closures? Are your numbers back to pre-COVID production figures?

Lenders will want to see two years of tax returns. Both buyers and lenders will want to look at your annual revenue from the past few years and profit and loss (P&L) statements.

Buyers will also want to know information like the current market value of the dental practice. Also, what does cash flow for the practice look like? Cash flow is critical to lenders because good cash flow will help secure the loan for the buyer, so looking at production reports for the dentist and hygienist(s) is helpful.

Insights for Buyers to Consider

If you’re considering buying a dental practice, it’s an exciting time! Many dentists are retiring, and there are a lot of advantages to purchasing a dental practice that’s well established in the community you’re looking to serve.

Surround Yourself with a Team of Experts

One of the wisest things you can do as a buyer is find a team of seasoned experts that can guide you smoothly through the sales process.

This could include a dental sales broker. Of course, a broker will take a fee out of the sales price, but they can be an invaluable resource in helping you throughout your transaction.

Your team should also include an attorney and an accountant, preferably people experienced with dental sales transactions. You’ll also want to work with a reputable lender.

Generally, dentists who work with an experienced team have a more straightforward and shorter sales time than those who try to do it independently.

buyers and sellers - team of experts

Prepare Yourself Ahead of Time

Understanding what lenders are looking for will help you prepare yourself ahead of time, making the sales and acquisition process much more straightforward.

Lenders are looking for buyers with good credit scores and some cash liquidity or savings on hand. Your lender will also consider the cash flow of the dental practice you’re looking at versus the debt you’ll be taking on after the purchase. They want to ensure that you’re taking on a manageable monthly payment before moving forward.

So be sure to look closely at the current and recent production and revenue numbers of the practice you’re looking to buy. This is where an experienced accountant is helpful.

Thinking Things Through – Important Facts for Buyers to Keep in Mind

It’s essential to have a meaningful discussion about goodwill, the existing patient base, and staff with the current dentist.

Goodwill is essentially buying (what you hope is) the excellent reputation of the current dentist. Consider how long they’ve been practicing. Are they retiring? Or perhaps there are other reasons they’re selling the dental practice? How established are they in the community? What is the reputation of the dental practice? Will the current dentist stay on for some time before ultimately leaving the practice?

Keep in mind that with any transition, there are likely to be some patients who leave the practice. You should consider this in the final asking price.

You’ll also want to think about the current employees. How long has the current staff been with the practice? Will they be transitioning with the new dentist or leaving the practice? If you need to hire new team members, you should consider this when negotiating the final asking price.

The location of the practice will also impact the asking and final purchase price. For example, dental practices located in cities will be priced higher than rural practices. Buyers should also consider the current condition of the practice. Will you need a lot of new equipment and technology to modernize the practice?

Starting Your New Chapter!

Whether you’re the buyer or the seller, you’re embarking on a new chapter of your career and your life.

Hopefully, with the proper preparation, and these helpful tips on what to plan for, your new endeavor will be successful!

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