Dental Practice Purchase Evaluation


I’m new to this and have no clue as to which way to go. I’m currently interested in this practice and spoke with the owner of the practice. Some guidance with this would be appreciated!

Collection for 2008 will be about 400k, 2007 was 410k, 2006 was 390k. Production is about 600-700k per year but not FFS practice, only collecting what HMO insurance pays.Accounts Receivable and collection averages around 30-40k per month.

Owner works 3.5 days a week. 1 day a week goes to anesthesiologist for consults (does not contribute to collections, also was previous owner of practice 4 years ago). Periodontist comes in when implant are scheduled to be placed (collects 50%).

Patient lists – 2500. About 200-300 pts not active either moved, scheduled but didn’t show, or not seen for 2 years. Anesthesiologist about 200 active patients, 500 nonactive (but does not contribute to practice). Existing dentist grew practice from 500-600 pts 4 years ago to 2500 pts. No advertising only word of mouth. 20-25 new patients schedule per month. 120-150 recalls completed per month. 15 patient no shows or cancellations a month. Implants, 3rd molar ext, S/RP, Ortho referred out.

6 years left on lease with annual increase 4%. Owner of lease is previous owner of practice whom also plans to sell building (currently out on market).

Owner of practice 2-4 year ago upgraded office. Gendex 765, kept sieman xray, 3 ops (really just uses 1 op majority of time), electric handpiece, intraoral cam, fiber optic handpiece, nitrous, networked.

Overhead is 12000 per month. Owner will pick up existing matsco and patterson loan.

Asking price 400k.What do you think?? What’s the next step?? Walk away or talk?? Thanks for your input!!

Can’t get my hands around those numbers. $650k gross producing office with only $144k in overhead ??? That’s 22% and certainly an award winning practice manager keeping overhead that low.

Lab and supplies alone on $650k gross production is at least $60k, if not $75k, which is nearly half the $144k. One full time employee at an average of $17/hr is approximately $25k-$30k BEFORE payroll taxes, now we’re up to $85k-$105k in overhead. What’s the monthly rent? See where I’m going with this? $12k month in overhead just doesn’t seem right.

$650k gross production is less than 1,000 active patients, based on comment about 120-150 recalls/month it’s about 800 active patients.

Write off 40% for insurance.

How many ops, what’s the square footage, what is the rent per month, what is rent per square foot? What does rent include? Do they have a hygienist, assistant or a front desk person?

Seller ALWAYS assumes debt, that’s not unusual.

So many questions……

Sorry, it was PPO. Actually looking at the papers he gave me, it’s a mix of PPO and some HMO. I want to get away from insurance all together, but I think it’s very difficult being in NYC. Maybe I should move out??!!

There’s actually only one dentist working there about 25 hours a week. There is a dental anesthesiologist who does consults to take patients to the operating room. He’s there only 1 day a week but does not contribute at all to the practice. There’s 1 front desk/office manager and 1 assistant. No hygienist.

The owner knows he’s asking for too much, but he said that’s b/c he recently upgraded the equipment. It was not professionally appraised.

I thought of acquiring the building, but being a new grad with no income, I can’t afford it. Additionally, the asking price for the building, IMO is not worth it at all.

Square Footage is 2508. 3 Operatory.

List of OH: Rent 2340

Wow, that’s approximately $10/square foot in NYC, isn’t that really LOW? Here north of Baltimore city we pay $24 plus per square foot.

Electric/Gas/RE Tax 350, Phone and Internet 150, Dental and Office Supplies 400,

Dental supplies generally run 4-7% of gross production, so even at 4% of $650k production that’s at least $25k and it’s only $4,800? WOW, this doctor must really know how to stretch their supplies.

Workers Comp and Small Business Ins 150, Lab Fee 1500,

Labs usually run 5-8%, so even at 5% that’s at least $30k and only $18k spent? Is this basically a hygiene only with an occasional crown practice?

Malpractice Ins 380, DEA and NYS License Fee 20, Acct 320, Stamps 100, Credit Card Merchant Fee 50, ADP Payroll 70, Waste Management 50, Staff including Bonuses 5500,

So that’s $66k per year, approx. 2 to 2.5 employees, are they assistants or front desk helpers? $66k is about 10% of production, about 15% of collections, again, WOW.

IRA Employee 120, Health Ins 440.

After the excitement phase… I agree, a lot of things doesn’t make sense!!

Very unusual practice indeed…..

This post first appeared on DentalTown.

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