Purchasing a practice right out of dental school

[JTini27]

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As a 3rd yr dental student, I've been entertaining the idea of purchasing a practice right when I graduate. I'm hoping to get advice from those who have taken this path and what their opinion is in regards to pluses and minuses of going down this road vs becoming an associate. Thanks!

 

[aggie-master]

I didn't take that path, but I highly recommend that you find a job as an associate in a busy practice and get some experience doing dentistry and learning about the busness side of things before you jump into ownership.

I believe that buying a practice as soon as you can is a good idea, but you'll be so much more prepared for success after a year of experience and hopefully learning from a mentor. Also, without any history to prove your production capabilities, banks may not be willing to loan you as much.

 

[Lethstang]

The sooner you own the sooner youll realize your earning potential.

 

[dentalWorks]

I didn't take that path, but I highly recommend that you find a job as an associate in a busy practice and get some experience doing dentistry and learning about the busness side of things before you jump into ownership.

I believe that buying a practice as soon as you can is a good idea, but you'll be so much more prepared for success after a year of experience and hopefully learning from a mentor. Also, without any history to prove your production capabilities, banks may not be willing to loan you as much.

thats exactly what my sister (12 year DDS, solo owner) recommends for new graduates.... I swear word for word the same.... graduate -> associate -> learn business + insurance + speed up hands = ready to buy into practice

 

[diasIItema]

It's situational. In general, I would take aggie-master's advice. However, if an opportunity opens up in a place you KNOW you want to settle long-term, then you might as well, especially since many associateships have non-compete clauses.

 

[txaggie03]

not all purchasing has to happen at one time either.

I am looking at a transition-period type buy at the moment. Instead of hopping into the hot seat, it is more of a slide in gently.

 

[Silent Cool]

not all purchasing has to happen at one time either.

I am looking at a transition-period type buy at the moment. Instead of hopping into the hot seat, it is more of a slide in gently.

+1.

Partial-buyouts are a great idea. Don't take on all the financial stress until you are ready to.

 

[txaggie03]

depending on prior relationship, another real or perceived benefit to the partial buyout is that the old dentist can talk-up the incoming dentist before he or she even steps foot in the building. It helps the patients build a relationship with the new dentist before he or she even takes the helm.

 

[dantemac]

I would say do it only if you're extremely confident. Buy-in/buy-out agreement would probably be a better idea.

 

[Bcat]

There is no right way to do it. It all depends on your confidence, planning etc. I bought my first practice immediately after graduating-- worked it 4 days/wk and also worked as an associate on Fridays. I never felt overwhelmed by the business because I hired a good office manager and accountant. I quit the Friday job after one year. It definitely helps to join a study club and your local dental society. There are many experienced dentists who are willing to mentor or share their experience.

Good luck!

 

[JTini27]

I just wanted to post an update to my original post from a little over 3 years ago. In 2015, I purchased a practice from a retiring doc within 2 months of graduating. Best decision I ever made! We transitioned for about a month or so whereby the retiring doc would come in once per week to finish up a few cases that he was in the middle of, then he was done. It's been a whole year since taking over and I could not be happier. I had zero experience running a business coming out of dental school, but the beauty about buying an existing one is that it's already running. You would have to really try to fail. In just 1 year, I was able to increase the production of my practice by over $100,000. While trying to obtain financing is definitely difficult, it's not impossible. Do not let anybody tell you it is! Local banks who know the area and the history of the practice will be your best friend if you decide to take this route. The biggest hurdle most people will have in going this route is a psychological one... confidence. The earlier you can conquer this hurdle, the more successful you will be. There will always be something that you don't know as dentistry is a career of lifelong learning, but if you have confidence in your abilities, the possibilities are truly endless. I would highly recommend taking this route to anyone who is considering it.

 

[pilotdentist]

what percent of client did you retain? Is 75%+ pretty standard? How did you increase revenue 100k ? what kind of interest rates did the local banks charge for a loan like this? How did you come to a valuation of the existing practice? Was it a certain % of his annual revenue? What is the norm for buying practices? Did you keep all of the staff? What kind of market are you in? Do you stick with mostly filling and crowns and out source any Endo and more complicated extractions?

Any other details appreciated!
I am a D2 currently and will be graduating with no debt (thank you department of Veteran Affairs) and a high credit score. I am interested in buying a place quickly but I know most people advise being an associate first, so I would love to hear more details from you since you went for it.


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[JTini27]

what percent of client did you retain? Is 75%+ pretty standard? How did you increase revenue 100k ? what kind of interest rates did the local banks charge for a loan like this? How did you come to a valuation of the existing practice? Was it a certain % of his annual revenue? What is the norm for buying practices? Did you keep all of the staff? What kind of market are you in? Do you stick with mostly filling and crowns and out source any Endo and more complicated extractions?

Any other details appreciated!
I am a D2 currently and will be graduating with no debt (thank you department of Veteran Affairs) and a high credit score. I am interested in buying a place quickly but I know most people advise being an associate first, so I would love to hear more details from you since you went for it.


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I would say we retained over 80% of our clients easily. I'm not sure what the national average is. Most who left did so right away before I even got the chance to see them. The previous doc was only open 2 1/2 days and I expanded to 4 days/week. It took about 3 months to get hygiene built up but my schedule was there in a few weeks. We're in an underserved area and most patients will travel up to an hour to get to a dentist. We also had a large influx of patients because I was able to better accommodate people's work schedules. Apart from increasing days we are open, I did a larger variety of procedures (perio, simple and complex ext's, endo) then the retiring dentist who referred everything out apart from simple fillings and crown and bridge.

In regards to a practice loan from my experience, interest rates will vary depending on your area. The bigger national banks can be as low as 4.5% with local banks being slightly higher for a 5-10 year note.

I kept all of the staff on for the first 8 months and then made changes accordingly to get people in who fit my practice philosophy.

The biggest benefit to buying right out is how fast you can get to your potential. I'm able to afford better CE courses that actually help increase my earning potential (ex. live surgery implant courses, Invisalgin, etc.) then most people I know who are associates who are just making enough to live and pay back their student loans. Granted, this will not be your situation but you will be much better off. I graduated with over $400,000 in student loan debt and am able to aggressively pay it down while still working to pay off my practice.

If you do take this route, I would highly advise you hire your own practice broker to represent you. They will help you with the valuation of your practice. Many of the companies claim to offer dual representation but in reality they only make money if they sell a practice, so you can easily see that everything will generally be in the seller's favor.

 

[pilotdentist]

Thanks for the follow up and congrats on doing so well and taking a calculated risk.

I will have to learn more about the practice broker trade as I don't know too much. Is it similar to real estate where a buying agent and selling agent get a certain % of the sales price of the practice? What incentives are there for the broker to get you a lower price on the practice if it is a percentage of sales price?

I always felt like in real estate it comes down to trust and relationship with the agents as there really is no incentive for them to advise you to walk away from a bad deal beyond building relationships and having a good reputation.

Thanks!




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[Mason91]

Thanks for the follow up and congrats on doing so well and taking a calculated risk.

I will have to learn more about the practice broker trade as I don't know too much. Is it similar to real estate where a buying agent and selling agent get a certain % of the sales price of the practice? What incentives are there for the broker to get you a lower price on the practice if it is a percentage of sales price?

I always felt like in real estate it comes down to trust and relationship with the agents as there really is no incentive for them to advise you to walk away from a bad deal beyond building relationships and having a good reputation.

Thanks!




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If he doesn't get it within your price range (or lower), you won't be able to buy, thus no incentives at all for him?

 

[Maybe.a.dentist]

I just wanted to post an update to my original post from a little over 3 years ago. In 2015, I purchased a practice from a retiring doc within 2 months of graduating. Best decision I ever made! We transitioned for about a month or so whereby the retiring doc would come in once per week to finish up a few cases that he was in the middle of, then he was done. It's been a whole year since taking over and I could not be happier. I had zero experience running a business coming out of dental school, but the beauty about buying an existing one is that it's already running. You would have to really try to fail. In just 1 year, I was able to increase the production of my practice by over $100,000. While trying to obtain financing is definitely difficult, it's not impossible. Do not let anybody tell you it is! Local banks who know the area and the history of the practice will be your best friend if you decide to take this route. The biggest hurdle most people will have in going this route is a psychological one... confidence. The earlier you can conquer this hurdle, the more successful you will be. There will always be something that you don't know as dentistry is a career of lifelong learning, but if you have confidence in your abilities, the possibilities are truly endless. I would highly recommend taking this route to anyone who is considering it.

Just for clarification, you mean you purchased the practice after graduating dental school, not after having gone through an AEGD or a GPR? Do you feel those would have been of significant help in your case or in the cases of the majority of recent graduates?