How to Buy a Dental Practice

The decision to buy a dental practice is a significant step toward professional growth and business ownership. However, it demands meticulous planning, thorough research, and a strategic approach. 

Finding the right practice and negotiating terms can be a long and complicated process. In this guide, we will explain how you can set yourself up for success long before you sign on the dotted line and buy a dental practice. 

Conducting Due Diligence

Before initiating the purchase process, extensive due diligence is vital. Here are some critical steps you should thoroughly consider when deciding whether to buy a dental practice. 

Financial Review

Analyze the practice's financial records, including revenue, expenses, profitability, and any debts or liabilities. Look at trends over time. Is the practice growing or struggling to bring in new patients? Are the current owners carrying significant debt?

Patient Base Analysis

Understand the patient demographics, retention rates, and potential for practice growth. Do they have a loyal patient base who come in every 6 months for cleanings or do they usually see patients only once? 

Staff Evaluation

When buying a dental practice, you are buying an existing business with staff who will likely be working for you on your first day of ownership. It’s critical to understand who the current team is and how they work together. Assess the team dynamics, and employment contracts, and understand their roles in practice operations. Are you inheriting a team with camaraderie and well-defined roles or individuals who may jump ship at any moment? Might staff turnover actually be a good thing? Work over these questions as you look at the team you’d be inheriting.

Infrastructure and Equipment

Inspect the facility, equipment condition, and any pending maintenance or upgrades required.  Think carefully about all aspects of the patient experience. Is there enough parking? What does the waiting room look like? Is equipment well-maintained or will you need to invest additional capital to create a facility that meets your standards?

Technology

Buying a practice with outdated technology means you’ll need to invest in modernizing your tech stacks. Is the practice using clunky server-based practice management software? Will switching to a cloud-based system be a big ordeal? 

Learning about how they handle referrals can be a good indicator of their technological proficiency. Do they regularly use a fax machine? Do they send protected patient files over insecure channels like email? If they’re using a sleek, HIPAA-compliant patient referral software system like Sindi, chances are they’re tech forward.

Navigating the Acquisition Process

Initial Negotiation and Valuation

Engage in negotiations with the seller while ensuring the practice's valuation aligns with its worth and market standards. Try to understand the seller’s reasons for selling and factor that into your negotiation strategy. Do they need cash now and value speed over top dollar or are they willing to string out negotiations for months or years? Is their valuation reasonable and a starting point for negotiation or are they looking for something way above market rate?

Legal and Financial Advisors

Seek assistance from legal and financial experts to review contracts, perform thorough evaluations, and guide you through the legal aspects of the acquisition process. Before moving too far into the buying process, consult your lawyers and financial advisors to make sure you are doing everything by the book. When making a substantial investment like buying a practice, don’t cut corners on professional services; they will save you headaches down the line.

Transition Planning

Develop a transition plan that ensures a smooth change in ownership, minimizes patient disruption, and retains the existing goodwill. Collaboration with the current owner is key here. Plan out all communications – both to employees and patients. Emphasize continuity and stability. Make sure institutional knowledge is documented and passed along. Software subscription passwords and closet keys are common things that can be lost in translation. Remember that no detail is too small to include in the plan.

Financing and Acquisition Funding

Secure financing options such as loans, grants, or partnerships to facilitate the purchase. Have a plan for how you’re going to finance the acquisition before engaging in serious discussions. Be well-versed in different types of financing options and payment terms. Consult financial advisors to help understand risk associated with terms you’re considering. If you’re planning to take out a bank loan, factor in current interest rates and how increases or decreases will affect you in both the short- and long-term.

Key Considerations in Acquiring a Dental Office

Location and Demographics

Analyze the practice's location, local demographics, and potential for patient growth. Is the population increasing or decreasing? Is median income rising or falling? How’s the education system nearby? Is it in a place where dental care is valued? Consider if your target demographic likely has dental insurance and/or has the means to pay for the services you provide out of pocket. 

Practice Culture Alignment

Ensure the practice's values and culture align with your professional goals and vision. From staff attitudes to office ambiance, you are attaching your name and financial commitment to the business. As the owner, you will be held accountable for anything good or bad that happens at the practice. Make sure it meets and exceeds your standards. If it doesn’t today, make sure you have a detailed plan to get the right people hired and values established before going through with the purchase.

Growth Potential

Evaluate the potential for expansion, modernization, and diversification of services. For example, you might see an opportunity to offer additional services like cosmetic dentistry based on the area and existing client base. 

Similarly, if the dental practice has outdated systems or hasn’t yet upgraded to modern technology, you may consider adopting HIPAA-compliant software like Sindi to streamline dental referrals and improve patient satisfaction. 

Post-Acquisition Integration and Growth

Establishing a New Leadership Style

Implement your managerial approach while respecting the existing practice culture. Clearly communicate expectations and then have grace for your staff when they inevitably make mistakes. Provide thorough training when launching new processes and policies. Be patient, but also make it clear that you will lead differently than the previous owner.

Patient Retention Strategies

Focus on patient relationships, maintaining continuity of care, and enhancing services. An easy way to keep your patients happy is to integrate a software system like Sindi that can help you make your specialist referral process quick and seamless and keep the patient engaged every step of the way. 

Professional Networking and Marketing

Engage in local networking, community engagement, and strategic marketing to attract and retain patients. This will help you develop relationships with fellow dentists and better understand the market.

Embarking on Your New Dental Practice Journey

Purchasing a dental office is a transformative step in a dentist's career, merging clinical expertise with business acumen. With meticulous due diligence and a strategic approach to acquisition and integration, aspiring practice owners can embark on a successful ownership journey, driving growth and patient-centric care.

In addition to laying the foundation for a successful dental practice, you’ll need to manage risk and avoid liabilities with HIPAA-compliant systems. Get started with Sindi today for a seamless patient referral program that will save you time and money in your new business venture.