Next up I’ll talk about the “non-traditional” general dentistry practice and how you need to approach those situations.
What do I mean by “a non-traditional general dentistry practice”? I’m referring to general dentistry practices that have developed somewhat of a specialty niche that they focus on within their general dentistry practice. This could be services like short-term ortho, TMJ, sleep dentistry, dentures, maybe mostly pedo, holistic or they cater to a particular sector of the local population like home for the disabled or elderly.
Many of these practices are listed as general dentistry practices without any mention of these niches and many times they’ve been priced using typical general dentistry valuation methods, models or rules of thumb. Unfortunately, these typical methods, models, rules of thumb used to develop an asking price simply aren’t accurate in these situations UNLESS you apply them properly.
Going beyond the price though, what do you need to consider when looking at these practices compared to the typical general dentistry practice?
- What percentage of the revenue is driven by these unique services?
- How is the practice attracting these patients? Referrals, marketing, reputation, seminars?
- Does the practice have a contractual relationship with an institution? If so, is it a state or federally funded program, maybe a private company contract?If you buy this practice, what will you need to consider regarding continuing those services?
- Do you provide those same services, and can you replicate the way in which these patients get to the practice?
- Are you going to have to learn how to do medical billing, will you have to accept Medicaid and\or Medicare
- If the revenue stream is tied to a contract are you able to step into the seller’s shoes with that contract? Even so, how long will the contract be available?
- What’s the future hold for this demographic of patients? What’s the future demand?
All these issues are going to impact the method in which the practice is priced and generally in a negative way, meaning generally lower than a comparable general dentistry practice generating the same profits.
Of course, there are other areas you need to dive into. Why is the seller selling ? are these patients coming from primarily one source? What about financing, will a lender approach this practice the same way they would approach a typical general dentistry practice?
As you can see, while price is important you really need to dig deep into these practices and learn as much about them as possible before making an offer. Be prepared and educate yourself!
Our next blog will get into the larger general dentistry practice options that generally offer a buyin opportunity.
About Tim Lott
Tim Lott, CPA, CVA has decades of experience working with dentists at all stages of their careers. He is a regular speaker at study clubs, societies, and dental schools. Tim is a frequent participant and a moderator on Dentaltown.com. You can reach Tim at firstname.lastname@example.org or any of the other dental partners/principals at (800) 772-1065 or email@example.com.