Key Considerations When Buying a Dental Practice

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There’s always a lot involved in purchasing a business and purchasing a dental practice is no different as this can be a challenging and daunting process.

The following article goes through some important considerations a potential purchaser should consider before entering a possible purchase of a dental clinic.

Firstly, we need to be thorough and patient to find a dental practice which currently performs or is similar in a way to how we would want to run and manage a prospective clinic and business in the future or can be modified to be like this.  

The following may help in providing information and considerations pre-purchasing. 

The Ideal Dental Practice Location

There are a few key points that need to be considered here and checked: We should consider. 

  • The demographics of the suburb and the suburb population and specifics. Does this fit with the overall fit of the purchaser and is the purchaser familiar with the suburb through connections or growing up near there or living proximity?
  • How many other dental practices are in this suburb and the amount of competition would be another key consideration.
  • We should check if the practice is in an easy-to-access location and publicly visible location and is it located in retail, commercial or residential zone or located on a main street. Is there public transport close by?

Is there good exposure and is there sufficient and effective signage in place currently? 

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The Dental Practice Revenue and Growth Potential

Once a potential purchaser has signed confidentiality clauses the clinic’s practice revenue and practice financials from treating and consulting with the client base will be made available. The information can then be viewed and analysed by qualified accountants and possibly a qualified consulting valuer. Revenue growth patterns can be viewed or if the revenue is in decline, growing or plateauing.

We can establish if there is future growth potential with new treatments and marketing opportunities. The practice figures need to be examined further sometimes to identify what type of treatments are being performed and will a new purchaser be able to fulfil the scope of practice of treatments being performed going forward and does the clinician have the experience and clinical skills to take on types of practices. Practitioners who are considering purchasing should always check the overall clinical picture or profile of the practice and if it’s a match for themselves and not a bridge too far when it comes to treatment options including considering how much if any orthodontic, implants or aesthetic work is performed. 

We would check if the practice had any exclusive preferred provider arrangements with any health insurance companies. 

Checks should be made about how many patients the practice has whether is there an effective recall system and any marketing strategies already in place.

Palladium Business brokers can help qualify purchasers and provide valuable advice as our broker has been a dentist and has had a large amount of experience in purchasing and selling dental clinics himself.  

The Layout of the Dental Practice

It’s Important that the alignment, floor plan and space suit the potential purchasers’ needs. The waiting room space, the general layouts, bathrooms, furnishings, and general flow should be compatible with the wants and needs of a new purchaser.   

You should check how many treatment rooms there are, if there is space for storage and if there is enough staff and sterilisation room area. Is there scope for expansion at a later stage with a further treatment room?

things to consider when buying a dental clinic

Is the Dental Practice Premises Leased or Owned?

Another big decision clinicians are confronted with are whether to purchase the practice freehold if available or whether to lease it. 

Sometimes the selling dentist may decide to sell the business and clinic. Palladium business brokers can also assist here as we are licensed real estate agents and specialise in healthcare property sales. We can also source property based on purchasers’ exclusive requirements and parameters. 

Sometimes the seller will only want to sell the business and not the property freehold. In these circumstances potential purchasers should wish to ensure there is a secure and long tenure being offered and legal advice should always be sought in relation to this.

Purchasers should always check with the council in regards also to permitted use and any car parking requirements for the council zone 

Owning the practice freehold has the advantage of not needing to deal with any landlord issues and can be a good investment. However, purchasing property can be a very expensive exercise and may not be possible in some locations. Sometimes it may be more cost effective to lease the premises.

Before deciding to purchase a business, buyers should also give thought to the possibility of a future transfer to new premises and if this is going to be part of any plans as it can be a long, expensive, and complicated process to relocate a dental clinic. 

Seek Professional Advice

Before even commencing the purchasing process the dental professional should organise building a team of qualified professional advisors including accountants a, legal advisors and dental business brokers like Palladium business brokers. 

Initial discussions with accountants that are experienced with dental practice purchases are vital to making sure structuring for the purchaser is done optimally. Lawyers also appointed should be experienced in business sales and transactions and familiar with regulations specific to healthcare and dental practices. Palladium business brokers can refer practitioners to suitably qualified professionals through our extensive networks and as mentioned Dr Philip Baker, a broker with us has personally been involved in numerous dental clinic sales and post-sale arrangements to help make for smooth transitions post settlement. 

All the professional team along with financiers can help with ensuring due diligence is optimal during any pre-sale process.

Staffing 

The staff of a dental practice perform a crucial role in any practice’s success and patients’ overall acceptance and satisfaction. For long-term success and growth, we should ensure the competence, suitability and experience, and qualifications of the current staff are consistent with the plan and target goals of the owner of the new clinic. We need to assess how many dentists will be required post-sale and how this is structured.

Staff may need to be retrained post-purchase and new processes and procedures will need to be thoroughly explained and taught. Practice management and communication are vital here. 

Checking Equipment & Software 

Purchasers should always check the practice inventory of the equipment including its age, brand, and suitability to themselves as operators. We would check, clinical software and any practice management software. Newer graduates may want to purchase more up-to-date equipment and the purchaser should check if they will be comfortable with the equipment in place or whether they feel they should overhaul the practice’s equipment. 

Practice software can be a key driver of efficiency and success for the modern Australian dental clinic. This is paramount in the effective ordering of stock, marketing the practice, recall of patients and patient retention, complying with privacy, financial reporting, staff management and clinical patient records and information.

Written by

Dr Philip Baker

As a former healthcare professional of 28 years, Dr Philip Baker is now a registered Sales Agents Representative and Business broker. Philip has been involved in numerous sales and purchases of large successful dental clinics. Philip is a Licensed Agents Representative and a member of the REIV and is also a member of the Australian Dental Association (35 years), Australian Institute of Business Brokers. Phil’s extensive experience and knowledge, along with his professional manner will help his clients achieve their ultimate aims and help achieve successful sales and purchases for their health care businesses.

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