Are you a dentist deciding whether to buy or build from scratch a dental practice? If so, there are many factors to consider when deciding which route is best for you. Lets run some numbers together and see which is best.
Advantages of Buying a Dental Practice
Buying an existing dental practice can have several advantages, such as a pre-existing patient base and lower start-up costs. Immediately upon purchase, you will have access to the current patients and all of their records as well as active income. You also won’t need to put up money for construction or training staff, since these things are already in place. Additionally, you may be able to avoid certain regulations and stress related to building from scratch since you’re taking over a previously existing business. If the current office setup is close to what you desire, in many ways taking over an existing office has a lot of benefits.
- Thinking with a 10 year time horizon if you purchase a practice for 1 million, that is producing 1.4 million and as an owner doctor can have a gross of around 550K/year after debt service for the loan, that equals 5,500,000 in income in 10 years plus you now own a 1 million dollar practice outright, for easy math assuming zero growth. Congrats your gross total is 6,500,000
- Conversely say you buy the same practice brand new, designed to your exact spec for 800K . You start with zero active patients and with some luck and heavy advertising costs, around 4-5 years to get to a healthy active patient base where you are also producing that same 1.4 as in the example above. Congrats you have 200k less in debt and you’ve built a practice now worth 1 million so gained 200K! However your income over the first 5 years (generously) would likely be around half the guy who just bought a producing office so (275K times 5) plus (550K times 5) plus (200K + 800K in practice gained equity) = 5,125,000
- That’s 1.375 million dollars left on the table in just 10 years.
However, there are some drawbacks to buying an existing practice that should be considered. Depending on the age and condition of the practice, you may need to invest substantial amounts of money in renovations or equipment upgrades. You may also inherit staff members who don’t fit in with your vision for the practice.
Building a Dental Office
Building a dental office from scratch involves investing more time and energy into setting up the entire business structure. However, it can also give you greater control over the finished product—allowing you decide on everything from décor to staff members. It does require more funds upfront for construction costs and equipment purchases but can pay off in the long term if done right. Some benefits include having full autonomy in running and managing your practice without having potential legal issues associated with a prior owner’s activities that could come back to haunt you if you had bought an existing one instead. Plus, being able to shape and mold your own unique dental office experience can make it easier to attract new patients who might prefer a newer feel as compared to an older one that was once owned by someone else. With build-out costs ranging from 400K-1 million plus the need for operating expenses that’s a pretty big debt burden to overtake with no active patients.
Conversely, building from scratch provides the opportunity to create your dream office with custom features tailored to your needs. The benefit however is that if you can accelerate your practice growth utilizing media advertising, great patient experience and an amazing doctor, there is opportunity for an equity gain that could offset the build out costs over time. Deciding between these two options is no easy task — that’s why it’s important to evaluate both options carefully and weigh their pros and cons before making a decision.
How to List Your Practice for Sale / Find Dental Practices that are for Sale
Fortunately, PracticeLister makes it easier than ever to find the perfect dental office for sale. Keep reading to learn more about what buying versus building entails and how PracticeLister can help make this complex process simpler! Starting a dental practice is no easy task. Whether you are looking to buy an existing practice or build one from scratch, there are numerous factors to consider in order to ensure that your business is successful. Buying an established office can provide benefits such as a ready-made patient base and lower start-up costs, while building anew gives the freedom to create a custom space tailored specifically for your needs. With PracticeLister, finding the perfect dental office or practice for sale has never been easier!