Opening Vs Buying a Practice

[duycuonggg]

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I will be starting D1 in the fall and have heard many different things concerning these two paths. What are the pros and cons of the two and if one were to open/buy, how long after graduation would it most likely happen?

BTW I've read through all of the "Lets Buy a Dental Practice" by the hammer and its good stuff! I just haven't heard much about the latter.

 

[Daurang]

I didn't believe in digging myself deeper into debt and further into stress by borrowing another $500K-$1Million to pay for someone else's retirement when I can build up a practice cheaply myself. Hey if they can do it, why can't I? and so I did. I can't say it'll work for everyone but I know it worked for me.

 

[scandalouslj]

They are both good paths but it depends on so many things. As a D1 concentrate on school before even looking at things like this. You have to make sure you get through school (and want to be a GP vs specializing first). It then depends on so many things including, the area you want to practice in, what you like and dont like to do, what you are good at and not good at, how much competition is there, what existing practices are available for sale, if you can secure financing, demographics of surrounding area, etc, etc, etc. But you can be successful either way depending on the circumstances. I have colleagues that have opened scratch start ups and done over a million in their first year, and others who have had to shut down after 2-3 years.

 

[omaralt]

everybody is different; however i'm of the strong opinion that buying an existing practice is usually the better bet. when you buy a practice you see how the practice has been doing for the past few years; so you know that this area can sustain a dentist. if you find a good practice fit; the transition is usually easy and you get immediate cash flow from day 1. its usually a lot less stressful. setting up a new office can be very stressful because it usually costs at least $100K to set it up (not everybody can set up 3 ops for $80K) and you have 0 cash flow. and how do you get cash flow? you have to advertise ($$) and you also have to have at least 1 or 2 staff (more $$). so no matter what your going to have to be spending $$, however in one case you have immediate cash flow (and a stable hygiene pool is key) and the other you have nothing.

at the end of the day you may not be able to open a new office unless your using personal money; most banks will not loan you money for a start up (especially as a new/recent grad). most are more than willing to loan you money for purchasing an existing practice; as they know that they usually work

 

[duycuonggg]

Thanks everyone! This is exactly what I was looking for.

 

[phungy]

I know of a dentist who bought a practice from another retiring dentist. The retiring dentist referred all his patients to his friend and now the original dentist is SOL. It's rare but it happens.

 

[Daurang]

I know of a dentist who bought a practice from another retiring dentist. The retiring dentist referred all his patients to his friend and now the original dentist is SOL. It's rare but it happens.

Typically 40% of the patient base move on when you takeover someone else's practice. If your friend bought it for ~$200K, then it's like starting from scratch anyhow...no loss really.

 

[Cold Front]

I'm in favor of start-up too, only if you know what you are doing and have done your homework many months/years in advance.

 

[jlicious]

OK, so I'm a D4 and about to graduate, hopefully going to buy an existing practice this Apr/May...

I NEED A COSIGNER! If anyone out there is willing to talk to me about Co- signing on my loan, I will talk turkey with you.

I don't want to ask my relatives, so don't try to tell me to do that...

If you have good credit, a stable income (already a dentist would be nice!) and are willing to give a hand to a needy new Doc, please consider this. Everyone always likes to say "Pay it forward" right?

Please send me a private message and I can give you more details about myself and my vision for the practice.

Thanks, JH

 

[omaralt]

OK, so I'm a D4 and about to graduate, hopefully going to buy an existing practice this Apr/May...

I NEED A COSIGNER! If anyone out there is willing to talk to me about Co- signing on my loan, I will talk turkey with you.

I don't want to ask my relatives, so don't try to tell me to do that...

If you have good credit, a stable income (already a dentist would be nice!) and are willing to give a hand to a needy new Doc, please consider this. Everyone always likes to say "Pay it forward" right?

Please send me a private message and I can give you more details about myself and my vision for the practice.

Thanks, JH

ya sure i can do it for you, just send me a first class plane ticket to wherever the hell your from and i'm there

hahahaha are you serious? you want a random stranger to sign on line that would make them liable for hundreds of thousands of dollars??! your own relatives wont do it for you, but you want a stranger?! your nuts dude; you shouldnt even need a cosigner once you've been practicing a year or two..

 

[DrReo]

OK, so I'm a D4 and about to graduate, hopefully going to buy an existing practice this Apr/May...

I NEED A COSIGNER! If anyone out there is willing to talk to me about Co- signing on my loan, I will talk turkey with you.

I don't want to ask my relatives, so don't try to tell me to do that...

If you have good credit, a stable income (already a dentist would be nice!) and are willing to give a hand to a needy new Doc, please consider this. Everyone always likes to say "Pay it forward" right?

Please send me a private message and I can give you more details about myself and my vision for the practice.

Thanks, JH

I. Am. Absolutely. Speechless.

 

[NonTradHopeful]

I know of a dentist who bought a practice from another retiring dentist. The retiring dentist referred all his patients to his friend and now the original dentist is SOL. It's rare but it happens.

You can typically avoid that situation if you ensure that the retiring dentist works with you (as an associate) for 6-12 months after you have bought the practice. This type of arrangement is actually quite common, and most retiring dentists agree to do this.

 

[NonTradHopeful]

Typically 40% of the patient base move on when you takeover someone else's practice. If your friend bought it for ~$200K, then it's like starting from scratch anyhow...no loss really.

You can GREATLY reduce the 40% turnover by making sure the retiring dentist stays with your newly-purchased practice for a little while after you buy it from him (see my post above). Another great idea is to make the selling dentist agree that he will send a letter to all of his active patients that introduces you and vouches for you as a new owner/dentist.

I would never buy a practice without having the selling dentist agree to this first.

 

[NonTradHopeful]

ya sure i can do it for you, just send me a first class plane ticket to wherever the hell your from and i'm there

hahahaha are you serious? you want a random stranger to sign on line that would make them liable for hundreds of thousands of dollars??! your own relatives wont do it for you, but you want a stranger?! your nuts dude; you shouldnt even need a cosigner once you've been practicing a year or two..

👍 HAHAHAHA seriously. Makes you wonder: if somebody is naive enough to ask a stranger to co-sign their dental practice loan, how impractical would they be in running an actual dental practice?

I really hope this guy was being sarcastic or joking around, because if not, then he has A TON to learn about how to run a business.

 

[duycuonggg]

You can typically avoid that situation if you ensure that the retiring dentist works with you (as an associate) for 6-12 months after you have bought the practice. This type of arrangement is actually quite common, and most retiring dentists agree to do this.

This is really good info! Thanks a bunch!

 

[omaralt]

You can GREATLY reduce the 40% turnover by making sure the retiring dentist stays with your newly-purchased practice for a little while after you buy it from him (see my post above). Another great idea is to make the selling dentist agree that he will send a letter to all of his active patients that introduces you and vouches for you as a new owner/dentist.

I would never buy a practice without having the selling dentist agree to this first.

not only that; but it's imperative to find a practice that has a very similar philosophy as you do. for example; dont purchase a practice that places implants, does molar endo, etc if you dont. when i was looking for practices i made sure that i provided all the same services as the doc that was leaving, and even added some services (invisalign, implants). and i had the other dentist hang around (not 6-12 months, just a few weeks) introducing me to patients, etc. to my knowledge we didnt lose a single patient. production and collections have only gone up since i purchased. so again, my point is that if you do your homework, buying an existing practice can be a very smart thing to do.

 

[OceanDMD]

not only that; but it's imperative to find a practice that has a very similar philosophy as you do. for example; dont purchase a practice that places implants, does molar endo, etc if you dont. when i was looking for practices i made sure that i provided all the same services as the doc that was leaving, and even added some services (invisalign, implants). and i had the other dentist hang around (not 6-12 months, just a few weeks) introducing me to patients, etc. to my knowledge we didnt lose a single patient. production and collections have only gone up since i purchased. so again, my point is that if you do your homework, buying an existing practice can be a very smart thing to do.

Even more advantageous to find a practice that doesn't provide some of the services that you can bring in. I can't emphasize how important as a young dentist it is to be proficient at endo (including molars) and extractions. This can be a nice practice builder. Quick and thorough RCT's that take care of the problem build trust. Many of the older practicing dentists don't want anything to do with this stuff.

I have heard start-ups are much harder to get financed than buying existing practices in today's day. I personally would look to buy someone out. You can always tweak to what your vision is, but its nice to already have some patients for cash flow.

 

[omaralt]

Even more advantageous to find a practice that doesn't provide some of the services that you can bring in. I can't emphasize how important as a young dentist it is to be proficient at endo (including molars) and extractions. This can be a nice practice builder. Quick and thorough RCT's that take care of the problem build trust. Many of the older practicing dentists don't want anything to do with this stuff.

I have heard start-ups are much harder to get financed than buying existing practices in today's day. I personally would look to buy someone out. You can always tweak to what your vision is, but its nice to already have some patients for cash flow.

yup, and i can attest to the fact that extractions are key. most general dentists refer them out; and patients love it when you can do them. and they are VERY profitable. there is almost no overhead involved (every once in a while you'll have sutures, etc) but usually the overhead is very minimal. and most of the time the tooth is out in a matter of seconds or minutes. very profitable and patients love it

 

[NonTradHopeful]

not only that; but it's imperative to find a practice that has a very similar philosophy as you do. for example; dont purchase a practice that places implants, does molar endo, etc if you dont. when i was looking for practices i made sure that i provided all the same services as the doc that was leaving, and even added some services (invisalign, implants). and i had the other dentist hang around (not 6-12 months, just a few weeks) introducing me to patients, etc. to my knowledge we didnt lose a single patient. production and collections have only gone up since i purchased. so again, my point is that if you do your homework, buying an existing practice can be a very smart thing to do.

Even more advantageous to find a practice that doesn't provide some of the services that you can bring in. I can't emphasize how important as a young dentist it is to be proficient at endo (including molars) and extractions. This can be a nice practice builder. Quick and thorough RCT's that take care of the problem build trust. Many of the older practicing dentists don't want anything to do with this stuff.

I have heard start-ups are much harder to get financed than buying existing practices in today's day. I personally would look to buy someone out. You can always tweak to what your vision is, but its nice to already have some patients for cash flow.

yup, and i can attest to the fact that extractions are key. most general dentists refer them out; and patients love it when you can do them. and they are VERY profitable. there is almost no overhead involved (every once in a while you'll have sutures, etc) but usually the overhead is very minimal. and most of the time the tooth is out in a matter of seconds or minutes. very profitable and patients love it

👍 Yep, these are all excellent points as well. Let me add to this the idea of a non-compete clause in your purchase agreement that states the retiring dentist cannot open a new practice (or take your current patients away) within a 15 mile radius of your newly purchased practice. I'm not sure about the legalities involved with this, but I've heard of many purchasers doing this. This is because a few dentists have purchased a practice from another dentist, and found out later (after the purchase) that this was a SECOND satellite practice that was owned by the dentist...whose primary practice was just 20 miles away. In that case, a boat-load of patients can continue to see the selling doctor, and you're screwed as the buyer.

The main point: make sure you exhibit your due diligence when opening/purchasing a practice...unturn every stone, protect yourself, and always be weary about a selling dentist who doesn't want to divulge ALL of the practice info to the buyer.

Remember: it is a buyer's market, so the selling dentist wants to sell his practice MUCH more than you want to buy it. This gives you (the buyer) more leverage and more power in the negotiation. So protect yourself with the proper agreements!

Hope this helps!

 

[doc toothache]

I didn't believe in digging myself deeper into debt and further into stress by borrowing another $500K-$1Million to pay for someone else's retirement when I can build up a practice cheaply myself. Hey if they can do it, why can't I? and so I did. I can't say it'll work for everyone but I know it worked for me.

Do you suppose we will be hearing a different tune when the time comes to retire your 558? Maybe retirees should just hand over the cash cows just for the asking.

 

[omaralt]

👍 Yep, these are all excellent points as well. Let me add to this the idea of a non-compete clause in your purchase agreement that states the retiring dentist cannot open a new practice (or take your current patients away) within a 15 mile radius of your newly purchased practice. I'm not sure about the legalities involved with this, but I've heard of many purchasers doing this. This is because a few dentists have purchased a practice from another dentist, and found out later (after the purchase) that this was a SECOND satellite practice that was owned by the dentist...whose primary practice was just 20 miles away. In that case, a boat-load of patients can continue to see the selling doctor, and you're screwed as the buyer.
The main point: make sure you exhibit your due diligence when opening/purchasing a practice...unturn every stone, protect yourself, and always be weary about a selling dentist who doesn't want to divulge ALL of the practice info to the buyer.

Remember: it is a buyer's market, so the selling dentist wants to sell his practice MUCH more than you want to buy it. This gives you (the buyer) more leverage and more power in the negotiation. So protect yourself with the proper agreements!

Hope this helps!

ya that's a no brainer. You don't enter this alone. You need an accountant and a lawyer and do your due diligence. The restrictive covenant is based on the area your in. If your in a high saturation area you probably can't get more than 3-4 miles. In a more rural area you may be able to get 15 miles. These are things you should be going over with your lawyer

 

[Daurang]

Do you suppose we will be hearing a different tune when the time comes to retire your 558? Maybe retirees should just hand over the cash cows just for the asking.

The days of asking a ridiculous sum for your practice is over just like the days of asking a ridiculous sum for your house. I'll accept whatever the free market will bear...no big deal really.

 

[The Hammer]

everybody is different; however i'm of the strong opinion that buying an existing practice is usually the better bet. when you buy a practice you see how the practice has been doing for the past few years; so you know that this area can sustain a dentist. if you find a good practice fit; the transition is usually easy and you get immediate cash flow from day 1. its usually a lot less stressful. setting up a new office can be very stressful because it usually costs at least $100K to set it up (not everybody can set up 3 ops for $80K) and you have 0 cash flow. and how do you get cash flow? you have to advertise ($$) and you also have to have at least 1 or 2 staff (more $$). so no matter what your going to have to be spending $$, however in one case you have immediate cash flow (and a stable hygiene pool is key) and the other you have nothing.

at the end of the day you may not be able to open a new office unless your using personal money; most banks will not loan you money for a start up (especially as a new/recent grad). most are more than willing to loan you money for purchasing an existing practice; as they know that they usually work

Dr. O is all over this one. The biggest obstacle to opening your own practice is having enough money to float you while it takes off. There is no telling how long it will take for you to start being profitable but you will be paying off your debt from day one.

Even when you are buying an existing practice there is a cash flow lag between the time you buy it and when your accounts receivable allow the practice to start paying for itself.👍

 

[druidhill]

Of course the answer to this question is case by case. One of the big variable factors to such a general question is location. I would recommend checking into mismanaged practices that are being foreclosed on. I have been seeing them offered by banks every few months now.

 

[Daurang]

Of course the answer to this question is case by case. One of the big variable factors to such a general question is location. I would recommend checking into mismanaged practices that are being foreclosed on. I have been seeing them offered by banks every few months now.

In SoCal toward the inland area of Temecula/Murrieta, the are numerous brand new abandoned practices that you can just pay the lease and open for business. Sounds awefully tempting.

 

[EdwardKim]

yup, and i can attest to the fact that extractions are key. most general dentists refer them out; and patients love it when you can do them. and they are VERY profitable. there is almost no overhead involved (every once in a while you'll have sutures, etc) but usually the overhead is very minimal. and most of the time the tooth is out in a matter of seconds or minutes. very profitable and patients love it

If this is true, why does OMS practices have overhead of nearly 50%?

 

[omaralt]

If this is true, why does OMS practices have overhead of nearly 50%?

i have no idea what OMS overhead is; but you have to keep in mind they usually are doing the more complex cases involving sedation or even general anesthesia. overhead (and profit) will shoot up dramatically.

 

[EdwardKim]

i have no idea what OMS overhead is; but you have to keep in mind they usually are doing the more complex cases involving sedation or even general anesthesia. overhead (and profit) will shoot up dramatically.

Thank you. I just wondered why the overhead is so high for OMS. You don't seem to use that much materials in extracting third molar.. They don't really have to get full time assistants (unless you want to work every day), their offices don't have to be in an expensive location because of referrals..

Any ideas?

 

[DocJL]

If this is true, why does OMS practices have overhead of nearly 50%?

Overhead of 50% is low, that's why.

The average general dental practice overhead is in the 60-70% range.

 

[UBDent19]

i can attest to the fact that extractions are key

Really? Aren't extractions pretty cheap? Why do patients love when you can perform them?

 

[UBDent19]

i have no idea what OMS overhead is

The oral surgeon I'm shadowing right now says his overhead is 54%. His practice has four doctors and 27 staff members.

 

[Daurang]

Four doctors and TWENTY SEVEN staff members? Why so many staffs when you're not in the government sector?

 

[UBDent19]

I know. I couldn't believe it either. They do have two locations though.

 

[armorshell]

Oral surgery overhead comes from: Staff (Many offices use two assistants per procedure, a procedural assistant and an anesthesia assistant), drugs, implant stock, advertising (gotta pay for all those lunches with GP's with something). Also, generally dedicated OMS offices are a little bigger sq. ft. wise since you have to jam so many people and so much anesthetic equipment into a room and most OMS work standing.

Also, 50% overhead isn't bad considering the average OMS produces $1.4M/year.