Congratulations! You’re at a point in your dental career where you’ve decided to purchase a dental practice. This is a big, exciting step for you, but you may also find it a bit daunting and overwhelming. And that’s very understandable. You may have a lot running through your mind, but take a step back and consider first things first.
Setting Dental Practice Goals
Before you even start to look at dental practices to purchase, you should sit down and list out goals. What do you envision for your dental practice? What do you want your dental practice to become? Here’s a list of some items to consider when setting your goals:
- What size of practice do you want? Do you want a large client base, or a small client base?
- How much revenue do you want/need to bring in?
- What kind of patient demographics do you want to serve?
- How large of staff would you like to start out with?
- Where do you want your dental practice to be located?
- Do you want state-of-the-art equipment in your practice, or would you settle for less modern equipment?
- How flexible do you want your schedule to be?
- How long do you plan to own your practice?
Once you have a clear vision and understanding of what you want your dental practice to look like, you’ll have a better idea of what you need to consider as you select your dental practice.
Three Key Considerations When Purchasing a Dental Practice
Of course, you want to find a practice that is successful, thriving and has long-lasting vitality. But there are a few other areas you should consider as well. Consider the following:
1.) What is the dental practice’s profit margin?
You may be asking yourself, “What is profit margin?” It’s probably not something your professors covered in dental school. Profit margin is a way you can measure the profitability of a company. In this instance, you should figure out what the practice’s net profit divided by its revenue is, and multiply by 100 to get a percentage. This calculation will provide you with the practice’s profit margin. The better the profit margin a practice has, the better you’ll be able to manage the practice’s debt and provide for you and your family.
2.) Where is the dental practice located?
If a dental practice is in the middle of nowhere, but your goal is to have a large client base, you might not want to consider purchasing it. Likewise, you might not want to purchase a dental practice located in the heart of a thriving metropolis if you want a small client base. A good way to get a solid picture of a dental practice’s location is to have a demographic study conducted. This will provide you with statistics that you can use when comparing multiple dental practices.
3.) What is the size of the patient base?
If your goal is to maintain a large client base at your dental practice, then purchasing a dental practice with a small client base might not be the best approach. At the heart of this consideration is the amount of revenue you need to bring in. The smaller a client base, the less revenue you will bring in. Depending on your revenue goals, the size of the patient base can be critical.
Dental Practice Business Help
Purchasing a dental practice is a huge undertaking, and can be quite a challenge. It can also be a very rewarding experience. Don’t go it alone. Contact Rea & Associates. Our team of Dental CPAs has helped many clients in purchasing dental practices, and we’d love to help you realize your dreams of owning your own practice.