Does anyone have experience acquiring dental practices?

May 31, 2023

by a searcher from New York University in New York, NY, USA

I'm reviewing a deal dental practice with about $1.3 million revenue and $900k before dentist/owner compensation. The owner is retiring and does not want to remain longer than 6 months. I figure I can hire a dentist to service patients at around $200k a year plus give him/her a profits interest as an incentive so that the net business cash-flow would be about $700k before additional profit incentives. Any pitfalls that I should be aware of? Does anyone here have experiences with similar acquisitions who would be willing to connect? Thanks in advance!

3 Likes

18 Replies

152 Views

Replies

Reply by an intermediary
from The University of Michigan in Bonita Springs, FL, USA

Very familiar with the dental space as it is one of my specialties. First, you aren't likely to hire a dentist for a salary of $200K unless it is their base salary with a collections bonus. A dentist will command a total compensation between 25% and 35% of collections based on their experience and skill set. You will need a corresponding 12-month collections by provider report to estimate the cost of the clinician. Second, as others have mentioned, not all dentists are equal. You will need a dentist capable of performing the same set of procedures as the outgoing dentist to achieve the same revenues. Of course, you may find a dentist with a broader skillset; however, they will likely cost you more. Third, finding dentists and hygienists right now is very difficult. Many of my past buyers are struggling mightily to find talent. It is likely you will as well. Fourth and final thought, the dental space has seen significant sums of private equity money enter the space. My impression is the largest (PEG backed) DSOs lack employee commitment and it shows up in customer service. I believe there is great opportunity in rolling up smaller practices with equity participation from the dentists. This would solve both the employee commitment and customer service problems I see with the larger DSOs. Message me if you would like to discuss more.

Reply by a searcher
from The University of Chicago in Chicago, IL, USA

Arun and others have brought excellent and important points. first you need to see what type of procedures are being done. A dentist producing 1.3M may not agree with 200K in salary. a 200K dentist may not be able to do some high producing procedures.. salary with ownership incentive may work but these days it is becoming difficult to find dentists. Check hygiene production. 6 months of current dentist can be very useful only if you have a good dentist to work with him for some time. Look in to patient acquisition and retention. Check lab bills and staffing costs. Staffing cost has gone up in last couple of years. Vincent is very experienced in this. He certainly will be able to help you. If you want to discuss details, feel free to contact me as well redacted

+16 more replies.

Join the discussion