How to Buy a Dental Practice (Guide & Purchase Checklist)

How to buy a dental practice

Buying a dental practice is a big deal for any dentist and isn’t something you should jump into without doing some research. Whether you’re buying a dental practice right out of school or moving to a new location, our checklist will show you how to buy a dental practice with confidence. Here’s what you need to know to get started on the right foot.

What Are the Pros and Cons of Purchasing a Dental Practice?

Many dentists dream of owning their practice, but the reality of buying and owning a dental practice is often more complicated than many anticipate. If you want to buy dental practices and turn your passion for dentistry into a successful business, you'll want to make sure you're taking the time to review all the pros and cons of purchasing a dental practice.

Buying an existing dental practice can be highly beneficial when done correctly and by the books. Some of the most notable pros of purchasing a dental practice include:

  • You gain access to a turn-key operation with all the equipment and tools you need to start.
  • You have the freedom of flexibility, allowing you to create your own schedule.
  • You have the freedom to practice the type of dentistry you want to practice.
  • You’re in charge of your business and your success.

Of course, with any purchase, there will always be some potential drawbacks worth considering. Here are some of the most common disadvantages of buying a dental practice:

  • You have to wear multiple hats. You are more than a dentist – you are also a business owner, a bookkeeper, a marketing professional, and more.
  • Flexibility may be limited, especially as you are just getting started. You need to take the time to get to know your practice and your staff and learn how to manage your practice. This will take time.
  • Financial risks – purchasing a dental practice is a significant financial commitment. You need to ensure you are prepared for all the financial risks and responsibilities of owning a business.

The Importance of an Advisory Team When Buying a Dental Office

Buying a dental office can be an overwhelming process. There are so many things to consider, and you want to be sure to make the best possible purchase. That’s why having an excellent advisory team is essential.

An advisory team is a group of professionals with experience in the dental industry who can help you navigate the buying process. They can help you understand the ins and outs of the dental industry and help you with your decision-making. More importantly, they can help you with important tasks, such as finding the right practice/location, proper funding for the purchase, and help you avoid any legal issues along the way.

When you invest in an advisory team, you'll get the benefits of:

  • Industry knowledge
  • Professional advice
  • A team of people who are invested in your success

Access to a Dental Attorney

It can be imperative to have a legal team on your advisory team who is familiar with the process of buying a dental practice. A dental attorney can help you identify any potential pitfalls and will help you navigate the legal aspects of the purchase.

They will help you with all the paperwork and ensure everything is in order. That way, you won’t run into any issues in the future. They will also help you understand any legal requirements for purchasing a dental practice, such as the need for a dental license.

If you're looking into how to buy a dental practice, then reach out to the team at Cueto Law Group today. We can help you navigate the purchase’s legal aspects and protect you from potential legal issues.

Working with a Dental Accountant

Working with a dental accountant is another excellent way to ensure you’re taking the proper steps to buy a dental practice. A dental accountant will help you understand the financial aspects of the purchase.

They should be able to identify any financial red flags or issues you will need to address before purchasing a dental practice. This will help you ensure you’re moving forward with the purchase in the best way possible.

They will also help you understand any potential tax implications of buying a dental practice, such as how you can maximize your tax deductions. This will help you get the most out of your financial investment. They will also help you understand any potential tax liabilities you will face in the future.

A dental accountant can also help you understand how to best structure your dental practice to maximize your financial success. They will help you understand how to set up your dental practice to maximize your revenue.

Finally, these advisory members can help you source the proper funding to buy a dental practice. The cost of buying a dental practice is a significant investment, so having a dental accountant on your side will help ensure you're making smart moves.

Access to a Dental Consultant

A dental consultant is a person who is qualified to advise on how to set up a dental practice properly. These individuals are skilled in the financial aspects of the dental profession, as well as the marketing and sales aspects of the business.

Not only can they help you choose a financially viable practice, but they can also help scope out existing practices that have:

  • A good reputation with the local community
  • A team of skilled staff members that are well-rounded and have a good reputation, etc.
  • Positive patient/client reviews

Then, once your purchase has been finalized, they can help you with marketing advice, human resources, equipment purchases, and so much more.

Finding a Dental Lender

Financing the purchase of a dental practice or buying into a dental practice is a massive investment, and finding the proper funding for this venture can be quite tedious. That's why having a dental lender on your advisory team is crucial.

A dental lender is a person or institution qualified to give you a loan and other financing options for your purchase. They will work with you to understand your current financial situation and help you find the best financing for the purchase. This will help you find the best loan to fit your needs.

Here’s How to Buy a Dental Practice

If you’ve ever thought about buying a dental practice, you know it can be an incredibly challenging process. Our “Buying a Dental Practice Guide” will walk you through each step of the process and what you can expect as you go forward. You’ll learn how to find the right practice, how to get financing, what to look for during the due diligence process, and so much more.

Let's get started:

1. Choosing the Location of the Dental Practice Purchase

If you want to purchase a dental practice, then you first need to take the time to choose a location. If you're buying a dental practice right out of school, this will require a lot of time and consideration because you may not be too sure where to begin.

On the other hand, if you're a seasoned dentist looking to expand your practice, you may have a better idea of where to begin. Either way, it's always a good idea to put some time into researching your options.

You'll want to make sure you're choosing a location that:

  • Has an excellent reputation
  • Has the best equipment for the job
  • In a good location for both you and your new patients

Other things you'll want to consider when choosing the location of your practice include:

  • Convenience for patients (available parking, quiet streets, easy to navigate to, etc.)
  • How much it will cost to purchase
  • Travel time to and from the location

Planning Ahead: How Much to Buy a Dental Practice?

One of the first questions you're likely to ask yourself even before you start looking into a location is, “How much is it to buy a dental practice?” The answer to this question will depend on several factors, including:

  • What type of practice you're looking to buy
  • How much you want to spend
  • Your own financial situation
  • What assets may come with the practice or be needed

While all of these factors will play a role, choosing the location is arguably one of the most significant factors to consider. Where you decide to locate your practice will determine how much you can afford to spend on the practice.

Different locations may have different rates for insurance, taxes, utilities, etc. Big cities tend to be more expensive than smaller towns, and rural areas tend to be more costly than urban areas.

This is where your financial lender and dental consultant can be extremely helpful. When researching the question, “how much is a dental practice worth,” they will be able to help you determine the cost of buying a dental practice and the total cost of ownership before you even start looking at locations.

2. Do Your Due Diligence When Purchasing Dental Practices

When buying into a dental practice or taking over a practice completely, you must do your due diligence. That means taking the time to find out as much as you can about the practice before you make any decisions. Below are only a handful of questions you'll want to get answers to while doing your due diligence:

What is the Financial State of the Practice?

Arguably one of the most important questions to ask yourself while doing your due diligence is, “what is the financial state of the practice?” You'll want to collect as much information as possible about the practice's financial health before you make any decisions. Things you'll want to find out include:

  • Fee schedule
  • Last three years of income tax returns (if applicable)
  • List/Breakdown of employee expenses
  • Profit/Loss statements
  • Recent balance sheets
  • Revenues by procedure

What Does the Typical Patient Profile Look Like?

You'll want to also look into patient demographics while researching different practices worth buying. This is important in determining if an existing practice will have a market for your particular skill set. This is especially true if you are looking into owning a specialty practice.

Does the Practice’s Current Philosophy Match Your Own?

The philosophy of an existing practice can also be an essential thing to consider when buying a dental practice. For example, if you are a big supporter of preventative dentistry, you may not want to purchase a practice that only focuses on more advanced procedures. If you buy a practice that focuses on patient education, you'll want to ensure that the practice you're considering has that philosophy.

Do You Need to Buy Dental Practice Equipment?

Finally, you'll also want to look into whether or not the practice you're considering purchasing has the equipment needed to provide quality care to patients.

If you're just starting, then buying a practice with only the essentials could be more than enough to get you started. However, there is a strong possibility that you'll have to replace or upgrade equipment as you grow. 

3. Hire an Advisory Team

One of the most important decisions you'll make when purchasing a dental practice is deciding who to hire for your advisory team. This is the team that will help guide you through the entire buying process. The team will be able to answer questions about the process, help you find the right practice, and provide you with financing.

4. Have Your Top Facilities Appraised

It's essential to have your top dental offices appraised during the purchase process. This will allow you to better understand the office's current value, which is extremely important for future decisions and growth.

The appraisal will also help you confirm that you're getting a good deal on the purchase. If you're purchasing the practice from another dentist, you can use the appraisal to ensure you're paying a fair price. Things that should go into the assessment include:

  • The practice's net income
  • The market value of the practice
  • The value of the equipment and inventory
  • The current cost of services

5. Prepare Your Dental Practice Acquisition Plan

The acquisition process can be overwhelming, but you can set yourself up for success with the right preparation. When working with your advisory team, you'll need to create a detailed plan for the acquisition. This plan will outline the steps you'll take to purchase the practice and provide you with a timeline for the process. Your plan should include (at minimum) the following:

Prepare Your Dental Practice Acquisition Letter of Intent

A dental acquisition letter of intent is a document that outlines the terms of the proposed acquisition. It's an excellent way to ensure that both parties are on the same page and that you're ready to move forward with the purchase.

Many buyers and sellers use a letter of intent to outline the basic terms and conditions of an intended purchase. A letter of intent can help you and the seller come to an agreement about the basic terms of the purchase, which can help finalize a sale.

A letter of intent is not a contract, but it can help you and the seller move forward with the sale and finalize the purchase once the final terms are agreed upon.

Draft Your Practice Sale Agreement and Lease

A practice sale agreement and lease are two crucial documents that every buyer and seller needs when purchasing a dental practice. A practice sale agreement outlines the terms of the sale, including the price of the practice and the terms of the sale.

A practice lease outlines the terms of the lease, which can include the length of the lease and the amount the tenant will be required to pay each month in rent. Both documents help to ensure that both parties are on the same page and move forward with the acquisition.

Consider a Covenant-Not-to-Compete Agreement

A covenant-not-to-compete agreement is a legal document that prevents the seller from competing with the buyer after the sale is complete. A covenant-not-to-compete agreement is a good idea if you buy a dental practice in a specialized area, like cosmetic dentistry or orthodontics.

By agreeing to a covenant-not-to-compete agreement, the seller agrees not to compete with you for a certain amount of time, which can help protect your investment. This is especially important if you're buying a specialized practice, where the seller will have more experience and education than you.

6. Secure Financing to Purchase the Dental Practice

The right financing can make all the difference when purchasing a dental practice. You'll want to ensure that you have the right type of financing in place to ensure that you can close the deal. There are a variety of financing options available, including:

  • Traditional Bank Loans: A traditional bank loan is one of the most popular ways to purchase a dental practice. Traditional bank loans offer competitive interest rates and can help you get the cash you need to buy a dental practice.
  • Small Business Administration (SBA) Loans: An SBA loan is a government-backed loan that can be used to purchase a dental practice. SBA loans are often offered at a lower interest rate than other types of financing, which makes them a good option for financing your practice acquisition.
  • Business Lines of Credit: A business line of credit is another popular financing option that can be used to purchase a dental practice. A business line of credit is often used to provide a small business with a source of financing to meet short-term cash flow needs. They're often used in conjunction with other financing options to help small businesses purchase larger quantities of equipment or expand their operations.

7. Present Your Offer to Your Top Dental Practice

When you’re ready to present your offer to buy a dental practice, you should notify the seller in writing. It’s a good idea to prepare a presentation for your offer to buy a dental practice, which will help you outline your offer and why you want to purchase it.

When you’re ready to present your offer, you can call the seller or set up a meeting to discuss the proposal and answer any questions. Be sure to have all the documents you need available, such as your background check and appraisal, so that you can answer any seller's questions.

8. Complete the Dental Practice Acquisition

With your presentation complete and your offer accepted, you can now close the deal. With the help of your legal and advisory team, you can complete the transaction and have the dental practice transitioned into your ownership.

Typically, this will involve the buyer and seller's team drafting a final contract, including a purchase agreement, a seller's disclosure, a buyer's disclosure, and a promissory note. Once the final contract is signed, you can close on the purchase.

Recap: Buying a Dental Practice Checklist

The more prepared you are when buying a dental practice, the easier it will be to navigate the process and make the best decision for your future. When purchasing a dental practice, having a checklist at the ready will help you make smart decisions and ensure you are following all the proper steps. This will also help you avoid making costly mistakes, such as purchasing a dental practice that is in poor financial shape or has a poor reputation among existing patients.

Use the checklist below to make sure you are prepared for the process of buying a dental practice:

  • Take the time to research your options and choose a location that works for you.
  • Do your due diligence on the practice (does the practice's philosophy match your own?) and its existing patients.
  • Hire an advisory team to help you through the process.
  • Have your top dental offices appraised by your advisory team.
  • Prepare your dental practice acquisition letter of intent and other necessary legal documents.
  • Secure financing to purchase the practice of your choice.
  • Present your offer to your top dental practice.
  • Complete the dental practice acquisition.

Of course, this checklist is just a start. The process of buying a dental practice is a complicated one, and there are many moving parts. This is why it's advised that you hire a team of advisors to help you through the process.

Key Takeaways on Buying Dental Practices

Whether you’re wondering how to sell a dental practice or how to buy a dental office, you need the proper guidance to help make the process as smooth and successful as possible. The team at Cueto Law Group is here to help you navigate the process of selling or buying a dental practice the right way.

If you have any legal questions regarding how to buy a dental practice, please contact us today. Our team will be happy to help you with your dental practice acquisition.