Purchase Price = Success or Failure?

The price of a dental practice is determined by the marketplace, which can range from 65% – 75% in rural areas to 100% or more in very desirable urban areas. And there are so many ways to evaluate a dental office these days. CPA’s, attorneys, equipment reps, banks, etc. all have a different opinion depending if the client is a buyer or seller. Trust me, I have seen it all. But the reality is the characteristic of the city; region and neighborhood play a large part in the variance in price.

2017 Story: I recently sold a dental office in a highly desirable area in Columbus Ohio. The office was collecting approximately $900,000 out of 6 Operatories. The net cash flow to the dentist was very good at somewhere above $400,000+. His dental practice sold for 100% of collections. Yes, that number is correct and there was more than one buyer who made the 100% offer. The seller agreed to work as an associate for two years. The buyer was ecstatic. With the seller referring out all Endo, Implants and Ortho…the buyer saw real value in his purchase.

In contrast, I sold a similar dental practice 45 minutes west of Columbus for 77% of collections. The numbers of both offices were similar, and the selling dentist also agreed to stay long term after the sale. With the rural area in less demand, the practice price was significantly lower.

So, my question to you is: Which practice was the better purchase? Will the price of a practice determine the success or failure of that practice?

Based on my experience, the results of either office will vary greatly depending on the skill, maturity, chair side manner, and integrity of the dentist who acquired the office…..not the PRICE. PRICE is not the issue. Acquiring a dental practice at a great price does not determine the success of a dentist. It’s the SKILLSET of the dentist that is the issue. The financials of an office matter very little if a dentist is not prepared to make up or maintain the procedures not currently performed by the seller.

I often tell first time buyers that we are not interested in looking at the $1million plus practices yet, because their skill sets are not prepared and their maturity in running a $1million+ office is not on par with that of the seller.

As a practice broker, I can guide you to a number of amazing offices with modern equipment and impressive collection numbers. But it’s you, the dentist, that must determine if the practice is a good value based on your skill set, not the price.