Compare Two Dental Practices for Sale

I am about to finish a GPR and was hoping you could give me a little input on whether either of these options sound good.

Option 1 is a brand new, state of the art practice in a growing rural area. The practice grossed around 800k last year and has about 45 NP a month. The senior doctor wants me to work as an associate for 6 months to a year and then go into a buy in phase. He has been hesitant to establish the buy in price up front, but did give me a ball park price that seemed pretty fair. There is also a 15 mile non -compete radius.

How many days is the owner working now? How many days do they want you to work? How many days will they work once you are there? With a base of $800k that’s about a 4-5 day per week practice (i.e. 32-40 doctor hours) so make sure you’re not looking at a situation where you’ll go in and sit around.

As others have said, nail a price down now. If he gave you a “range” asks that you agree to a number so you can move forward with the other issues.

You’ll need to see the financials (or returns) to make sure you’re not getting sucked into something that SOUNDS great and winds up looking like crap.

The associate agreement is for 35% of collections and I would have to pay my whole lab bill.

35% of collections is good, again, agree with others, you should only pay at most 35% of lab, OR ask to keep it simple, 33% of collections period.

What about malpractice insurance, heath insurance, dues, licenses, CE? Who’s paying those?

There is a 5k minimum salary but I would have to pay the difference back to the doctor for months I under produced once I am making enough on my commission. For example, if I only made 3k the first month, I would get paid the 5k. But, if I made 8k on my commission the second month, I would have to pay the doctor 2k back for the first month and I’d take home 6k. Hope that makes sense.

You have no minimum then, you’re working on straight percentage. If it’s truly a minimum you wouldn’t “owe” any shortfall back or have it offset future excess. Straight percentage isn’t necessarily bad, just understand there is no minimum. Ask what happens if he pays you $5k for 3 months and you decide to split ways after producing only $30k. If it’s a true minimum you’ll owe nothing to him, just make sure you’re talking apples and apples.

A percentage might be an issue if the practice doesn’t grow fast enough to support both of you OR the owner doesn’t reduce their days.

There is also a 15 mile non- compete radius.

NOT for the first 6 months to a year….

Option 2 would be a very small practice that is only open 2-2.5 days a week, 3 ops and is a little dated on equipment. The gross last year was about 250k and overhead just over 50%. I am still waiting on some more details, but will post more once I get them. This practice is also in a growing rural community and I suppose I could open it up 5 days a week and take Medicaid or more insurance plans to bring the production up.

Do either of these situations sound like good deals? How do the numbers in option 1 stack up to what the rest of you have been offered, and what aspects need to be negotiated before proceeding?

Depends on the price, many more specifics and what you’re looking to do….

and what aspects need to be negotiated before proceeding?

On option #1, all aspects of your employment and buy-in.

On option #2, the purchase details….

Thanks for the reply. Here’s the deal, doctor is not that old and is not planning on cutting his hours at all (4 days). I would probably be working 5 days a wk.

Can the practice support 2 full time doctors? Does it have 2 full time doctors now? If not, how is it that a one doctor practice can jump to two full time doctors immediately?

You suggest looking at the financials but what specifically should I ask him for? The transition company has done a full run down on this practice but I haven’t seen any of it.

Ask for that, it may already have the practice financial information in it.

As far as benefits, I’ll be responsible for everything in the 3 month probationary period and if we continue beyond that, I’ll be reimbursed for malpractice and my license fees. No health insurance benefits though and I don’t like that.

Then ask for it! Just because it’s not offered doesn’t mean you can’t ask for it and maybe even get it.

You mentioned that the non-compete won’t hold until after a 6 months to a year period.

What I meant is make sure that ANY non-compete they want you to agree to doesn’t kick in until 6 months or a year. It can kick in immediately if you agree to it, however, the last thing you’d want to do is agree to NOT compete and leave an area you’d like to stay after 3 months because you agreed to do so.

Is this true everywhere because the contract doesn’t make any distinctions on time period? I wish I could give more specifics about where I am and who the company is but I don’t want to violate my confidentiality agreement.

Most if not all confidentiality agreements allow you to share the info with your advisors…so that means you’d have to hire me to tell me…

On option 2- I met the doctor yesterday and got some more specifics. Practice has grossed an average of 220k for the last 3 years and doctor has worked 3 days a week and taken an average of 2 months of vacation a year. Extremely low overhead and the doctor has netted a little over 50% of that. He is entirely fee-for-service and has pretty high fees for the area (8-900 per crown). He refers out all endo, extractions, implants, dentures, partials, perio other than scaling, and ortho. Basically, he only does fillings and crown/bridge. He is willing to stay on for 6 months to a year but no longer. The building is shared between him and another dentist and they have a common waiting room and lab/sterilization. It’s 3 ops, 2 hygiene and 1 doctor. I would have the option of buying half ownership in the building or renting from him. Should also mention that the town has 12 dentists and only 2 are under 50 years old.

The buy out price is still in the process of being set but from what the rep said, they generally place practices at about 70% of gross which would be about 154k. I am sure I can’t do a startup for that and at least this would give me a little bit of a patient base. It would seem that if most of them stuck around, and I did all the procedures that he’s referring out, that this could be a good deal.

Any advice on this one?

I don’t like the office sharing arrangement and even if you wanted to own it’s 50% at best. What was their relationship with the other doctor in the space? Did they cover for each other? Do the patients know the other doctor? I know it’s a small amount to pay, still at $150k I just don’t like the setting….

I’ll continue to update as I get more info.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at

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