1. Define Your Goals and Vision 

Conduct a thorough self-assessment before buying a dental practice to understand your personal and professional goals.

Start by asking yourself what type of dentistry truly excites you. Consider whether you prefer a private practice's autonomy or corporate dentistry's structure. You can make a more appropriate decision when you understand the differences between corporate dentistry and private practice. The practice you purchase should align with the clinical work that satisfies you.

There are many things to consider when buying a dental practice, but location and demographics are especially important. Decide whether you prefer an urban or rural setting.

• Population demographics: Analyze the local population demographics to match your target patient base.

• Competition analysis: Assess the number of competing practices in the area.

• Visibility and accessibility: Consider the practice's visibility and whether it has adequate parking.

• Growth trends: Research whether the area is experiencing population growth or decline.

Work-life balance considerations and your long-term growth trajectory should also inform your decision-making.

2. Prepare Financially

Before starting your search, get your financial house in order. Lenders will scrutinize your financial profile to determine if you're a good candidate for a dental practice loan.

Check and improve your credit score: Address any inaccuracies or issues that might negatively impact your score.

Understand your debt-to-income ratio: The lower this ratio, the more favorable your position will be with potential lenders.

Build liquid savings: Aim to have at least $50,000 in liquid savings when applying for a dental practice loan.

Speak with multiple lenders: The American Dental Association recommends talking to three banks specializing in dental practice financing.

Get pre-qualified: This helps you understand your budget constraints, shows sellers you're serious, accelerates the buying process, and gives you confidence in negotiations.

3. Build Your Dental Acquisition Team

The success of your dental practice acquisition depends significantly on the team of professionals you assemble.

Dental practice lender: Look for one with experience financing dental practice acquisitions, competitive rates, understanding of dental practice cash flow, and willingness to work with first-time owners.

Dental attorney: These attorneys understand state dental regulations, HIPAA compliance, patient record transfers, non-compete clauses, and employment transitions.

Accountant with dental experience: They can analyze financials, identify red flags, evaluate true profitability, structure the transaction for tax benefits, and develop realistic financial projections.

Dental practice broker: Brokers have access to practices not publicly listed, provide initial valuations, manage communication between parties, and offer insights into local market conditions.

Practice management consultant: Consultants assess practice workflow, staff capabilities, technology systems, marketing strategies, and growth opportunities.

The cost of fixing a single major oversight can far exceed the combined fees of your advisory team. Invest in expertise upfront to secure your long-term success.

4. Start Searching for Dental Practices to Buy

You can find available practices in various ways. Some of the more successful options include: 

1. Dental practice brokers: Specialized brokers focus exclusively on dental practice transitions.

2. Professional journals and publications: Publications like JADA and Dental Economics often feature classified sections.

3. Dental society meetings: These provide networking opportunities to learn about practices considering a transition.

4. Professional networks: Word-of-mouth referrals often lead to the best opportunities.

5. Online platforms: Websites dedicated to dental practice transitions list available practices.

Rate each practice against criteria like location preferences, minimum revenue requirements, patient demographics, specialties, physical space, equipment condition, staff retention, and growth potential.

5. Perform In-Depth Due Diligence

Due diligence keeps the process more organized and prevents any issues down the road. There are multiple elements of due diligence. 

Financial Analysis

Review at least three years of tax returns, income statements, and collections reports. Analyze production reports by provider. Examine accounts receivable aging reports. Evaluate the practice's overhead ratio compared to industry benchmarks. A thorough dental practice overhead breakdown can reveal areas for cost optimization. Also, scrutinize all ongoing financial obligations.

Evaluating these factors can help you identify areas where you can maximize dentistry practice profit.

Evaluate the Patient Base

A practice’s value hinges mainly on the strength and stability of its patient base. Start by analyzing the number of active patients (those seen in the last 18–24 months), average production per patient, and demographic factors like age, insurance mix, and payer types. Examine new patient flow, referral sources, and treatment acceptance rates to identify strengths and improvement areas.

Low retention or acceptance rates may signal communication issues or gaps in patient trust, while a balanced demographic mix and strong referral base point to long-term growth potential. This analysis also helps uncover opportunities for expanding services or refining marketing efforts to increase revenue.

Assess Staff and Equipment 

The existing team can either support a smooth transition or present challenges. Review compensation, benefits, and employment agreements. Assess staff experience, tenure, and performance to gauge stability and culture fit.

Inventory all clinical equipment, noting age, condition, and maintenance history. Outdated tools may require immediate replacement. Also, evaluate the practice’s software and digital systems; modern, well-integrated tools can improve operations.

Review Legal and Compliance Regulations

Work with a dental attorney to review all contracts and the office lease. Verify compliance with HIPAA, OSHA, and other regulations. Check for pending litigation or malpractice claims, and review insurance participation agreements.

Understand state-specific regulations regarding dental practice ownership, as these can affect your legal compliance requirements. For example, knowing the states where dental hygienists can own a practice underscores the importance of being informed about local laws.

An effective legal due diligence process identifies potential liabilities before they become your responsibility.

6. Understand Valuation and Make an Offer

Valuing a dental practice requires both financial analysis and contextual insight. Factors like performance trends, market conditions, and patient base stability all influence the final number.

Common valuation methods include:

• Income-based methods:

  • Capitalized earnings method: Divides average net income by a capitalization rate (typically 25–31%).

  • Discounted cash flow method: Projects future cash flows and calculates their present value.

• Market-based methods:

  • Values practices at 70–75% of gross annual revenue, though this varies by location, specialty, and payer mix.

• Asset-based methods:

  • Assesses tangible and intangible assets, with goodwill, such as patient loyalty and brand reputation, typically making up 80–85% of the value.

Before making an offer, develop a clear negotiation strategy. Use due diligence to identify leverage points, prioritize key terms, and define your walk-away limits.

Submit a formal offer through a qualified advisor, backed by data from your analysis. Consider terms beyond price, such as transition support, non-compete clauses, staff retention, and equipment inclusions. Be prepared for counteroffers, staying flexible on minor terms while holding firm on your essentials.

7. Secure Financing to Buy a Dental Practice

Dental-specific lenders evaluate historical practice performance, future revenue potential, patient retention rates, practice location, and equipment condition.

Prepare comprehensive documentation for lenders, including:

• Personal and business tax returns

• Current personal financial statements

• Detailed business plan with growth projections

• Practice valuation report

• Production reports and patient statistics

Having a strong credit score and demonstrable liquidity are particularly important. Most dental practice loans feature terms of 7–15 years.

Alternative financing strategies include:

1. Seller financing: The practice owner finances part of the purchase price

2. Partnership buy-ins: Gradually increase your ownership percentage over time

3. Equipment financing: Separate from the practice acquisition

4. Private investors: Family members, colleagues, or other private investors

8. Finalize the Legal Details

This central legal document is the purchase agreement, and it must address asset allocation for tax purposes, representations and warranties from the seller, and transition terms outlining seller assistance.

If the practice location is leased, you must obtain landlord consent for lease assignment, negotiate terms aligned with your long-term plans, and address any needed modifications.

You should also prepare a non-compete agreement and transition terms. A well-drafted non-compete agreement should define reasonable geographic boundaries, establish an appropriate time period (typically 2–5 years), and be legally enforceable in your state.

Many buyers have faced serious problems when non-compete clauses were overlooked.

There is also the matter of transferring patient records. The transfer requires strict adherence to HIPAA regulations, proper notifications, and secure transfer protocols. Failing to handle patient records properly can result in severe penalties.

9. Plan for a Smooth Transition

When you buy a dental practice, you need to develop a structured patient communication strategy. This strategy should include:

• A joint letter from you and the selling dentist

• Personal introductions during scheduled appointments

• Updated website content and social media announcements

• A brief bio highlighting your qualifications

Productive dental front desk management plays an important role in executing your patient communication strategy. Emphasize what will remain the same while being transparent about planned changes.

It's also important to manage the staff during the transition with transparency. Meet individually with each team member to address concerns about job security, clarify your vision for the practice, discuss any planned operational changes, and invite their input on potential improvements. 

Learning and implementing strategies for efficient dental practice management can improve staff productivity and practice success during the transition. Consider offering retention bonuses to key staff members to maintain continuity.

If you work with the selling dentist, establish clear expectations regarding their schedule, responsibilities, patient introductions, and knowledge transfer during the transition period (typically 1–3 months).

10. Post-Purchase Management Tips

1. Track metrics like patient retention rates, production per visit, collections percentage, and new patient numbers to identify areas needing attention. Monitoring dental KPIs helps you measure and improve practice performance.

   
   

2. Understand patient demographics, treatment preferences, and communication styles before enacting changes. Incorporating patient relationship management strategies can help you maintain and strengthen patient loyalty.

   
   

3. Consider improving patient loyalty through programs like a dental membership club.

   
   

4. Before making changes, learn about team members' experience levels, strengths, and concerns. Involve your team in adding new protocols.

   
   

5. Create a phased implementation plan: Months 1–3: Observation and relationship building. Months 4–6: Address urgent operational inefficiencies. Months 7–9: Begin introducing your clinical philosophies. Months 10–12: Apply broader practice culture changes.

As you make changes, consider integrating new technologies, such as AI in dental practice management, to improve organization and patient care.

Make Sure You're Equipped with the Right Staff in Your New Dental Practice

As you embark on the journey of dental practice ownership, having the right team in place is paramount to your success. One of the significant challenges new owners face is maintaining consistent, high-quality staffing. This is where Teero can make a difference.

Teero simplifies dental staffing by connecting your practice with top vetted hygienists, eliminating hiring hassles. With benefits like free permanent hires and dedicated local support, Teero helps keep your schedule full and your operations running smoothly.

To learn more about how we can support your staffing needs, visit our website or give us a call.