Ryan Holzinger (CPA, Medical-Dental Consultants, Inc.), Scott Franklin and Aaron Frankel
Lately, we’ve been doing a lot of exciting work at Scott B. Franklin & Associates with young dentists thinking about and pursuing dental practice ownership. Last week, we had the pleasure of speaking with an excited and engaged group of dental residents at the University of Connecticut School of Dental Medicine about the business side of practicing dental medicine. This week, we celebrated the closing of a dental practice sale to our client, a young dentist just a year or two out of dental school. These experiences highlight an important truth: the opportunity for young dentists buy a practice is more attainable than ever. Here are some key reasons why now could be the perfect time to consider taking this step, along with some critical points to keep in mind as you evaluate potential practices.
A Generational Shift and High Demand: Opportunities for Young Dentists
The dental industry is undergoing a significant generational shift, with many older dentists retiring and seeking successors to take over their practices. This transition creates a wealth of opportunities for young dentists, as new dental associates are in high demand. The shortage of new dentists entering the field with the desire and means to purchase a practice has made it a good time for younger buyers to enter the market, where practice owners are more willing to negotiate favorable terms to ensure their practice continues under capable leadership. This scenario is particularly advantageous for recent graduates, who can step into ownership roles sooner than anticipated, especially in cases where practice owners prefer not to sell to larger dental support organizations (DSOs).
Financing is More Accessible Than You Think
One of the biggest hurdles new dentists often perceive is the financial aspect of purchasing a practice. However, many banks and lenders are willing to provide loans to young dentists, often in an amount equal to the entire purchase price of the practice, especially if the practice they are interested in has strong financials and a solid patient base. These institutions understand that while operating a dental practice is a significant investment, it is also likely a stable and profitable business. They are often willing to take on the risk because they see the potential for a steady return on investment. It’s important to shop around and find a lender who understands the dental industry and offers terms that align with your financial situation and goals.
Start Thinking About Practice Acquisition Early
New dentists should start considering practice acquisition as soon as they enter the job market. It’s crucial to gauge opportunities for future ownership from the outset. When negotiating employment agreements, dentists can include terms that provide an option to buy into the practice, and often the practice real estate, at a later date. This foresight can set the stage for a smoother transition into ownership and ensure that you’re aligned with a practice that values your long-term career goals. Be proactive in discussing these possibilities during your initial employment discussions to position yourself for future success.
Key Considerations When Evaluating a Practice
If you’re considering purchasing a dental practice, here are some essential factors to consider:
- Financial Health of the Practice: Review the practice’s financial statements, including profit and loss reports, balance sheets, and tax returns. Look for consistent revenue streams and assess the practice’s profitability.
- Patient Base and Demographics: Consider the size and demographics of the patient base. A loyal and diverse patient base can indicate a stable and sustainable practice.
- Location and Market Conditions: The practice’s location can significantly impact its value and your success. Research the local market to understand competition, the area’s economic health, and population trends.
- Staff and Transition Plans: Evaluate the existing staff and their willingness to stay on during and after the transition. A smooth transition with experienced staff can help maintain patient continuity and practice stability.
- Technology and Equipment: Assess the state of the practice’s technology and equipment. Up-to-date and well-maintained equipment can save you from future investments and help provide high-quality care from the start. At the same time, a practice that has not yet implemented the most current practice management and marketing systems may be ripe for upgrade, allowing a buyer to realize significant growth in revenue and patient base.
- Your Support Team: Assemble a good team behind you from the get-go as you start thinking about buying a practice. An attorney and an accountant who specialize in dental practice transitions can be invaluable resources to help you evaluate a potential transaction and they can even connect you with sources of financing and other specialists.
Conclusion
Purchasing a dental practice is a significant decision that requires careful consideration and planning. However, the current landscape offers many opportunities for young dentists to step into ownership roles sooner than they might expect. With a favorable market for buyers, accessible financing, and a wealth of practices seeking successors, the path to owning your own practice may be closer than you think. Take the time to thoroughly evaluate potential practices, seek advice from experienced professionals, and take ownership of shaping the career and practice you desire for yourself.