Most doctors will practice dentistry an average of 35 years. The number of years a doctor ultimately practices multiplies by the average annual income he or she earns over that period equals that doctor’s career income. A dentist’s career income Potential is greatly affected by the decisions the dentist makes along his or her career path. Decisions such as joining a practice as an associate, buying an established practice, entering the military or public health, and starting a practice from scratch all have a lasting impact on a dentist’s career income. It’s probably not possible to make all the right decisions along the way, but an informed dentist can certainly minimize the negative financial impact of decisions, thus maximizing his or her career income potential.
Purchasing a practice may be the single largest event in your professional life. It’s very easy to allow your emotions to have a negative impact on the process. It’s very easy to get focused on little things that really don’t matter in the big picture! A practice acquisition is a logical process. The key is to define YOUR transition plan, and then stay focused on the implementation of that plan!
It is very important that you keep the following thoughts and suggestions in mind as you proceed through the practice acquisition process.
Practice Location: Make a decision that is economically sound for your long-term future. This normally means you should only consider a practice in an area where you want to live and raise a family. However, many buyers have acquired practices with substantial growth potential in areas in which they did not intend to call their final home. These practices were acquired with the intention of increasing the practice value and then selling the practice a few years later for a substantial profit. We have clients that have followed this path numerous times and each time was able to pocket substantial profits. Over time, these doctors have vastly increased their net worth while progressing to their dream practice and desired final location. We call these opportunistic dentists “entrepreneurial dentists.” So, when we say practice location, this really means that you need to decide what type buyer you are. The correct practice location for the entrepreneurial dentist may or may not be the correct location for you.
Age of the Dental Equipment: Focusing on the age of dental equipment is probably the biggest mistake we encounter. You are purchasing a practice, not dental equipment. Others may tell you how much you need the latest and greatest equipment with all the latest “bells and whistles.” There is nothing wrong with wanting ultra-prime dental equipment, but it shouldn’t be your primary focus when considering a practice opportunity. A dental practice is an ongoing business and should be considered on the financial opportunity, not the equipment.
Questionable Dental Policies and Procedures: A seller who hasn’t been providing his or her patients with the latest “sophisticated” procedures is a major positive, not a negative! If you are more aggressive in your diagnosis and treatment planning than the previous doctor, that alone will create more production. Often the best practice opportunities are those in which the seller has been operating a maintenance-only practice (indefinitely putting off work that needs to be done until the next patient visit). These diamond-in-the-rough practices often double or triple production the very first year of new ownership!
Keep Your Eyes Open A “good deal” is a transaction that is fair to both parties. Beware of any deal that seems heavily weighted in your favor or is obviously valued too low.
Keep Everything in Perspective: Purchasing a practice is not a $300,000, $400,000 or $500,000 decision. It is a multi-million-dollar decision. If a practice is grossing $400,000 and you expect to practice another 35 years, then (without adjusting for inflation) it’s a $14,000,000 decision. Don’t forfeit millions by getting hung up on nickels and dimes. Negotiating the little things will only end up upsetting the seller and jeopardize the success of the transition. Think logically!
Be Respectful: This should not have to be discussed, but you would be surprised how often this is a problem. Show respect for the seller and the practice. Yes, the seller may not utilize the latest treatment methods and may not have kept up with the times… but, don’t be judgmental. Think about how you may be viewed by a potential purchaser 25 or 30 years from now. A purchaser who shows that he or she is eager to learn and appreciative of what the seller has accomplished will be afforded much more support and respect than the purchaser who comes across as an arrogant know-it-all.
Several years ago, a new graduate purchased a practice with more than 2,000 active fee-forservice patients. This new graduate earned over $250,000 his first year out of dental school. At the beginning of his third year in practice, he purchased and merged another 1,800 active patients. This dentist hired two associates to help him work the practice. Five years into his career, his annual net income was already more than $350,000. If he decides to practice 35 years at this pace, his career income will exceed $12,000,000.
The practice acquisition process is a long road and can be full of potholes. However, you can improve the path with a little logic and common sense.
Futures Are Not Found … Futures Are Made: All that’s required is getting started in the right direction early in your career. Having access to the necessary information to make intelligent and wise decisions is paramount. It’s not what you pay for the practice that really matters, but what you end up with that matters. And what you end up with is largely dependent upon the process you go through to acquire the practice.