Should You Buy A Second Dental Practice? 4 Steps to Take Before You Do

You’re a dentist who owns and manages a successful practice. Your business is profitable, AND it provides you with a suitable and sustainable income. It’s thriving. But perhaps, you’re too busy. Your schedule is so full that you’re considering opening up another dental practice to handle your primary practice’s overflow. Or, you’ve developed an acumen for business over the years and want to invest in an additional dental practice. As you’re analyzing your options, there are certain steps you can take to determine whether or not you’re making a good decision. 

When it comes to opening or purchasing a second dental practice, you should approach the process wisely. You need to be knowledgeable and prepared. But how do you do that? Can you do anything to guarantee the success of the second practice? Well, nothing you do can guarantee your success. However, you can take certain steps that will set you on the path to success.

#1 – Put Your Financial House in Order

First, you need to do some personal financial housekeeping. Before you invest a significant amount of money in a new business, you need to make sure you’re financially stable.

• Eliminate unsecured debt like credit card debt.
• Pay down or pay off car loans or other significant notes you owe.
• Build up your cash reserves.
• Make your current dental practice scalable so that you can duplicate its success in the 2nd office.
• Wait to purchase another dental practice until your first is mature enough to yield the results you need.

CASE STUDY: “What debt should I pay off first?” – Justin’s Recommendations for a Dentist’s Debt Reduction Strategy

#2 – Have an Advisory Team in Place

Next, lean on your professional advisors for business, tax, insurance, and lending guidance during the purchasing process. Gather together:

• Certified Public Accountants (CPAs)
• CERTIFIED FINANCIAL PLANNERS™ (CFP^®)
• Tax and/or business attorneys
• Insurance agents
• Bankers/Lenders
• Business Coaches

ADVANCED READING: Professional Advisory Team – What they Do and How to Choose the Best

#3 – Make Sure Your Location is Suitable for Growth and Profitability

After you gather your advisory team members, take a look at the location of your potential 2nd dental practice. Analyze the market there. Is it over-saturated with dental offices? Is there a practice on every corner or three on every street? Are there enough individuals in need of a dentist there? Can you break into the market without breaking the bank?

#4 – Negotiate All Terms

Finally, in order to realize a profit from your investment, you need to fight for terms that protect you from loss as a business owner and buyer.

• Have your attorney review and negotiate all terms in the Purchase Agreement.
• Negotiate fair loan interest rates and terms with your banker.
• Assuming you’ll be bringing on an associate, put protective employee agreements or partnership agreements into place.

Buying a business is complicated, but it can be a great investment opportunity, especially in the niche area of dentistry. If you need more information about buying a business, you can reach out to me.