How to Buy a Dental Practice: A Step-by-Step Guide

Buying a dental practice can be beneficial for the dentist as it avoids the hassles of a brand new start-up and instead acquires all sorts of patients and cash flow as well as the infrastructure of a dental practice that is already up and running.

By buying a dental practice, you can easily compete with 202,304 in the USA ( according to the American Dental Association.

However, it is nothing close to a simple procedure. It needs careful planning, financial preparation, and a good understanding of the practice’s operations, culture, and profitability.
To walk you through this process, we have outlined in the guide how to buy a dental practice step by step.

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How to Buy a Dental Practice? 11 Potential Steps to Consider

Let’s break down the steps to buying a dental practice to help you go through the process with confidence.

Step 1: Preparation and Research

Before beginning the purchase process for dental services, it’s crucial to establish solid foundations through thorough research and preparation

This is a method to ensure you make the right choices and avoid costly mistakes in the process. Let’s take a look at this in detail

Determine Your Desired Practice Area

Before you begin your search, make sure to select:

Geographical zone: Where do you want to conduct your business? Think about the density of your population, income levels, and also the proximity of your competition.
Demographics: What kinds of clients do you want to serve? Different communities have different dental needs, so determining the most appropriate client base is important.
Competition: Do you see an oversaturation of dentists within the area? Look up the number of dental practices in the area to determine if this region is crowded or requires another service.

Understand the Types of Acquisitions

There are multiple ways to approach the acquisition of dental practice:

Asset purchase: Purchase of the equipment as well as patient records and goodwill of a practice that is already in operation. This is the most popular method and lets the buyer avoid the burden of the former owner.
Stock purchase: Taking charge of the management and ownership of a complete business entity and its liabilities. This is not as common however it can be beneficial if the company structure offers tax benefits or contractual advantages.
Mergers: combining one practice with another to grow your business. This is a good method to increase your patient base and services while maintaining an established brand on the market.

Step 2: Starting Your Search for Dental Practices

Once you have identified your goals and conducted your initial research the next step is to look for dental practices that meet your preferences. This is the process of exploring different ways to discover possible opportunities and the evaluation of them for their viability.

Where to Start?

Online Listings: Websites dedicated to buying and selling dental practices (like integrity practice sales) often list available opportunities with key details about each practice.
Dental Practice Brokers: Specialized agents who match buyers with sellers. They can provide insights into the market and help navigate negotiations.
Networking: Industry events, dental associations, and local meetups are excellent ways to connect with potential sellers and learn about unlisted opportunities.

Key Considerations Before Buying a Practice

Dimensions and layout: Does the space fit your requirements? Make sure the office has enough operators and room to allow for growth in the future.
Condition of the equipment: Are there any upgrades required? Examine whether the equipment is in good condition or if it needs expensive replacements.
Patients’ demographics: Are they in line with your expertise? The kind of treatment you offer must be in line with your expertise and goals.
Retention rate of patients: What percentage of current patients will continue to see after the change? Patients might be attracted by their dentist, so ensuring you have a transition plan is necessary.
Practice reputation: What do reviews on the web and recommendations show? A practice with a good reputation is more likely to retain patients and attract new clients.
Effectiveness of operations: Are the technologies and systems up-to-date? Older systems may require significant expenditure on upgrading.
The stability of the revenue objective: Do you think the business is financially sound? Examine the financial statement, production report, and expenditures to confirm that the dental practice is profitable.
Understand the practice’s philosophy and culture: Make sure the practice aligns with your values and patient care approach. A mismatch in philosophy can create challenges in staff and patient retention.

Connecting with Private Practice Owners Looking to Sell

Networking can lead to private sales that aren’t publicly listed. Some owners prefer direct negotiations to avoid brokerage fees and ensure a smoother transition for their patients.

The Role of a Practice Transition Consultant or Broker

Engaging a dental transition expert can help you determine the most effective methods, negotiate terms, and avoid costly errors. A broker has access to listings and industry connections that can give you an insight into the trends in the market.

Finding a Dental-Specific CPA, Attorney, and Lender

A specialist CPA as well as an attorney can help you in analyzing legal and financial agreements, whereas dental lenders can provide the most suitable financing options. These experts will make sure that the purchase is legal and financially feasible.

Using Mailers and Networking

Sending direct mail to dentists in your preferred area can uncover off-market opportunities. Personalized letters expressing your interest can lead to potential deals before they hit the open market.

Step 3: Evaluate the Practice’s Financial State Before Purchase

A deep financial dive will ensure the practice is profitable and sustainable.

Performing Due Diligence in the Practice

Due diligence is a critical phase in buying a dental practice where you verify all claims made by the seller. Areas to focus on include:

Financial due diligence: Reviewing past financial statements, tax returns, and profit margins.

Analyze:

Profit and loss statements
Tax returns
Production and collection reports
Overhead expenses

Legal due diligence: Checking for outstanding legal issues, liabilities, and contractual obligations.
Operational due diligence: Evaluating the effectiveness of staff, appointment scheduling, and patient retention.

Analyzing Patient and Treatment Information

Patient volume and new patient flow
Insurance Participation
Treatment acceptance rate

Evaluate Growth Potential & Room for Expansion

Look for:

Potential to add services
Space for more operatories
Marketing opportunities

Step 4: Determining Practice Value

The value of the dental practice is essential to ensure that you pay a fair amount and make an informed investment.

Quantitative vs. Qualitative Practice Valuation

You can determine the practice’s value by using both quantitative and qualitative metrics.

Quantitative valuation takes into account revenue, cash flow, and asset valuation

While qualitative factors include patient loyalty, location desirability, and brand reputation.

Cash Flow as an Indicator of Practice Valuation

A consistent cash flow can provide insight into a practice’s overall health. Practices with consistent cash flows tend to be more desirable since this ensures long-term stability post-acquisition

Common Valuation Methods Used in Dentistry

Market Approach: Comparing sale prices of similar practices.
Income Approach: Projecting future earnings and applying a valuation multiple.
Asset-Based Approach: Calculating the total value of tangible assets such as equipment or real estate.

Avoid Overpaying for a Practice

Conduct careful due diligence, evaluate valuation methods, and seek expert guidance to prevent overpaying for a practice.

An overpriced practice could take years for its initial investment to return profits.

Step 5: Secure Financing for Your Practice Acquisition

The process of securing financing is an essential step in the process of acquiring a dental practice.

How to Find a Bank?

Not all lenders are the same. Finding a bank that specializes in dental practice acquisition financing is important. Many national and local banks offer healthcare-specific loans, which come with better terms tailored to dental professionals.

Best Banks for Dental Practice Loans

Bank Name	Key Features
Bank of America	A top lender for dental practice loans, endorsed by more state dental associations than any other lender.
Live Oak Bank	Leading dental lender offering acquisition loans, equipment financing, and working capital.
Wells Fargo	Competitive rates with strong experience in dental lending.
BMO Harris	ADA partner offering preferred dental practice loans.
PNC Bank	Provides dental practice loans and financing for companies with under $10 million annual revenue.
21st Century Bank	Offers dental financing, practice loans, and refinancing options.
Henry Schein Financial Services	Provides dental practice financing, including project financing for new practices.
Fifth Third Bank	Offers practice financing solutions.
First Citizens Bank	Offers dental practice purchase financing, as well as startup and buy-in financing.

Talking to Banks: Why Three Banks?

Consult at least three banks to compare lending options, rates, and terms before choosing a financial partner. Different lenders may offer varying loan structures and benefits tailored to dental practice acquisitions.

Choose a Dental-Specific Lender

Dental-specific lenders understand the unique financial landscape of dental practices. These lenders typically provide:

Lower interest rates
Higher approval chances
Better repayment options
Industry-specific guidance

Loan Structure and Interest Rates

Understanding how your loan is structured is critical. Loans can have:

Fixed vs. variable interest rates
Short-term vs. long-term repayment schedules
Balloon payments or early repayment penalties

Consult your CPA to determine the best loan structure for your acquisition.

Step 6: Making an Offer and Negotiating the Purchase

After you have found a dental practice that fits your criteria and you have secured financing your next step is to submit an offer to the practice and then negotiate the conditions of the purchase

Writing and Submitting a Letter of Intent

A Letter of Intent (LOI) is a non-binding agreement that outlines your offer for the practice. It typically includes:

Purchase price
Payment terms
Transition period details
Contingencies such as financing approval and due diligence

Download Letter of Intent Now

Step 7: Lease Negotiation or Real Estate Purchase

Choosing the best site for your dental practice is a critical step. If you decide to lease or purchase the property and negotiate favorable terms, it will determine the long-term success of your dental practice.

Should You Buy or Lease Commercial Space?

Depending on your long-term business goals, you may choose to lease or buy the property where the practice operates.

Buying offers long-term equity benefits, while leasing provides flexibility and lower upfront costs.

Key Considerations for Lease Negotiation

If leasing, consider:

Lease term and renewal options
Rent increases and caps
Responsibility for maintenance and repairs
Termination and exit clauses

Step 8: Finalizing the Purchase

At this point, you must examine the legal contract, verify financing, and ensure that all necessary due diligence has been completed prior to officially assuming ownership.

Closing on Your Practice and Becoming an Owner

Once due diligence is completed and financing is secured, you’ll sign the final purchase agreement. This legal contract transfers ownership and ensures all terms are accepted.

Transitioning Ownership Smoothly

For a smooth transition, consider:

Announcing the change to patients with a formal letter
Retaining key staff members for continuity
Gradually introducing any operational changes

Step 9: Hiring and Managing Your New Dental Team

The hiring and management of a skilled dental team is essential to the achievement of your new dental practice.

Retaining Existing Staff While Making Necessary Changes

The existing staff is an essential part of the practice. Retaining them while making gradual improvements can help ensure continuity and a positive workplace culture.

Meet with Current Employees: Introduce yourself, learn about their roles, and discuss your vision for the practice.
Evaluate Strengths and Weaknesses: Identify key team members and assess whether additional training or restructuring is necessary.
Offer Competitive Compensation and Benefits: Retain valuable employees by ensuring they are fairly compensated and provided with incentives.
Encourage Open Communication: Address concerns and provide reassurance about the transition.

Hiring New Team Members

If staffing changes are needed, follow these steps:

Define Job Roles: Clearly outline responsibilities for each position.
Use Multiple Recruitment Channels: Post job listings on dental job boards, network within the industry, and use recruitment agencies.
Conduct Thorough Interviews: Assess technical skills, communication abilities, and cultural fit.
Onboard and Train New Employees: Provide a structured onboarding process to ensure a smooth transition into the practice.

Manage Your Team Effectively

Set Clear Expectations: Establish guidelines, workflows, and performance benchmarks.
Implement Ongoing Training: Encourage professional development through continuing education.
Recognize and Reward Excellence: Motivate employees with incentives and acknowledgment of their hard work.
Create a Collaborative Work Environment: Encourage teamwork and open communication to create a positive workplace culture.

Step 10: Grow and Manage Your New Practice | Post-Purchase Action Plan

Now you bought the dental practice and gathered your staff, the next step is to grow and manage your business efficiently.

The success of your practice depends on a keen concentration on patient retention marketing strategies, as well as operational efficiency.

Enhance Patient Experience

Improve Customer Service: Train staff to provide excellent interactions with patients and provide an inviting environment.
Provide New Services: Think about expanding your treatment options to satisfy the demands of your patient base.
Ask for feedback from patients: Use surveys or online reviews to determine areas of improvement and make the changes that are needed.

Advertise Your Practice to Attract New Patients

Create an SEO-optimized website: Make sure your website is mobile-friendly, user-friendly, and ranks well on search engines. Take expert SEO services for your dental practice.
Make use of social media: Use platforms such as Facebook, Instagram, and LinkedIn to interact with existing and prospective patients.
Introduce Referral Programs: Inspire the current patient to refer family members and acquaintances by providing incentives or discounts.
Community Outreach: Work with local schools, businesses, and events to increase brand awareness.

Financial and Operational Management

Monitor Key Performance Indicators (KPIs): Track measures like retention of patients and treatment acceptance rates as well as revenue growth.
Enhance Scheduling Efficiency: Minimize waiting times and reduce interruptions in appointments with efficient scheduling systems.
Streamline Insurance Processing and Billing: Ensure smooth payment processing and reduce claims rejections.
Insist on Staff Development: Continue to provide training and education to boost morale and team performance.

Step 11: Tech and Software Upgrades to Consider

Making the right investment in technology can enhance the experience of patients and operational efficiency. It can also ensure long-term success. Consider upgrading:

Practice Management Software: The latest solutions simplify billing, scheduling, and patient records.
Digital Radiography: High-quality, digital radiographs enhance diagnostic accuracy and increase patient engagement.
Intraoral Cameras help in the education of patients as well as treatment planning.
Teledentistry Solutions: Expand reach by offering virtual consultations as well as remote patient services.
Automated tools for patient communication: Reminders via email and text online booking systems and automated follow-ups increase the retention of patients.
Cloud-based Data Storage: Secure accessible patient records to increase efficiency and protect data.
Electronic Health Records (EHR): The transition to a digital HIPAA-compliant system to improve documentation and workflow.

Checklist for Dental Practice Buyers

This checklist helps keep the process organized and ensures you don’t miss critical steps:

Sr #	Action
1	Define your goals and desired practice location.
2	Research market conditions and potential practices.
3	Secure financing options and understand your budget.
4	Engage professional advisors (broker, attorney, CPA, lender).
5	Conduct preliminary practice evaluations.
6	Contact sellers and request detailed financial and operational data.
7	Perform in-depth due diligence (financials, patient retention, legal compliance).
8	Draft and negotiate a Letter of Intent (LOI).
9	Finalize financing and secure loan approval.
10	Negotiate lease agreements or property purchases.
11	Sign final contracts and complete the acquisition.
12	Plan for post-purchase transition and integration.

Avoid Common Mistakes When Taking Over a Practice

Making sudden changes that disrupt operations
Neglecting patient communication
Underestimating financial planning

Is It Worth Buying a Dental Practice?

Many dentists choose to buy instead of starting with a blank slate, which is a wise one. An established practice already includes:

A built-in patient base
Immediate income
Operational systems that are in place
Staff members who have been trained
The name is well-known within the local community

However, purchasing dental practices will require a substantial budget, a thorough study, and professional guidance.

Knowing the risks involved will ensure that you make the right decision. If it’s done right, the acquisition of a dental practice could be a profitable investment that can kick-start the career path of a dental practice owner.

FAQs

If you are financially secure and wish to avoid the difficulties of starting a business, purchasing an office is a good investment. Perform due diligence before proceeding.

You can make the investment by buying an existing dental practice, partnering with another dentist, or becoming a stakeholder within the dental group.

Ask the following questions when buying a dental practice:

What have been the financials of the practice in the last 3 years?
Are there any compliance or legal issues?
What equipment and technology require updating?
Is there a non-compete contract with the seller?

A typical formula is:
Practice Value = (Annual Net Income x Multiplier) + Asset Value
Multipliers generally vary between 1.5 to 3 depending on the practice results and market conditions.

If you are looking to buy an existing dental practice, the typical cost is around $520K.

Some lenders don’t ask for down payments while others charge 5-10% of the total value of the practice.

Final Thoughts

Buying a dental practice is a major decision that requires strategic planning, financial analysis, and expert guidance. By following this blog on how to buy a dental practice, you can successfully become an owner of a thriving dental business.

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