Philip A. Cooper, DMD, MBA
Until about a decade ago, most dentists owned only one office. Of course, there were some exceptions to this, such as specialists who had a number of locations. The landscape has changed considerably. One of the major changes has been the growth of corporate dentistry. Another is the deep recession that reduced the busyness of many practices.
As a result of these changes, many owners have entered the market to acquire additional practices. Some of them have been solo owners and some have been groups of dentists. The groups usually have administrators to oversee and manage the business aspects of the practices. In order to afford an administrator, there usually needs to be a critical mass of at least four or five locations.
Dentists who are successful in one office often think they can duplicate that success in additional locations. For a solo owner contemplating buying additional practices, there are a lot of things to consider:
1. Is the person going to be working at the new location? In most cases there will be the need for another dentist. Even if the seller stays awhile, eventually he or she will have to be replaced.
2. How much time is the dentist willing to invest in managing and overseeing this office? Will he or she be using days off or cutting back on time spent in the primary office?
3. What will the cost be for upgrades and improvements that might be necessary?
4. There tends to be a lot of turnover with associates unless they are given some equity. Will the buyer be willing to have a partner, with all the associated issues? If not, replacement dentists will have to be found from time to time.
5. Will there be profit left after the overhead, compensation to the associate, and payment of the bank loan? Even if a loan is not needed, there is the opportunity cost of using one's own money.
I have found the success rates of solo owners buying additional offices to be mixed. Some of these offices are sold after a number of years if there is limited financial success and a lot of time and energy invested. The dentists might have been better served devoting their efforts to maximizing the productivity and profit of their main offices. Then there are those who are successful and eventually add more locations and dentists, some of whom become partners.
Another option is to buy a nearby practice and merge it into an existing location. In some instances, only the charts are purchased. In others, the seller works in the buyer's office for a time. Either way, these opportunities tend to be very successful for the buyer. The buyer gets an influx of patients without the cost and overhead of another location. Prices for these situations can vary widely.
For those considering buying another dental office for the first time, it is important to have a plan and to thoroughly think through the pros and cons. Evaluate various financial projections, and be sure to have a realistic idea of the breakeven point. If the plan is to expand and have multiple locations, make sure to have someone on board who will be a good administrator. Most successful groups already have one in their organizations.
Dentistry has become quite competitive. One way to compete is with multiple locations. Just be sure you know what you're getting into.
Philip A. Cooper, DMD, MBA, has been assisting dentists with practice transitions in New Jersey and Pennsylvania since 1985. He is a member of ADS Transitions. He can be reached at [email protected] or (800) 400-8550.
