First time dental practice buyer? Make sure you think ahead!

Originally posted by MediHoldings - learn more about practice valuations or buying and selling here.

All too often first-time buyers choose not to proceed with a great acquisition opportunity because they have been thinking about the practice price only.

When the team at MediEstates are talking with Dentists that are starting to consider buying their own dental practice we often explain to them that it is of paramount importance to think ahead.
 

It’s safe to assume that your dental career will cover a span of 15 years minimum, and for each of those years you will generate a set amount of income. With a simple sum you can calculate the total that you are capable of earning during the 15-year period. Got that figure calculated in your head? Ok, keep that in mind.
 

Now think ahead to when you purchase your own dental practice, you will be acquiring the assets i.e., the goodwill of the business, the equipment, the fixtures, and fittings etc. but you will also be acquiring the historical income streams which is just as, if not more important. If you should have to pay an additional £20,000 to £40,000 more than what you feel a practice is worth, then considering the calculation you have just made this additional amount is meaningless over your career especially if the practice in question has a strong income history and a healthy profit margin.
 

Lets now look at an example to help illustrate this point
 

Assume you are interested in purchasing a dental practice that has total revenue of £534,041:
 

- The practice overheads are £350,030, leaving you with total earnings of £183,727 per year.

- The sale price of this practice is £563,764.

- Assume that you qualify for a bank loan (based on this example you would require £56,367 deposit and the monthly repayments would be £3,390 on a 15 year term) leaving you with earnings of £142,597

- Without even factoring any annual income growth over this 15 year period, the total net income you will generate over your career will be in excess of £2.1 million.

- Remember also that once the term of the practice loan comes to an end your income will be topped up again by another £40,000.

- If you manage the practice well, keep overheads low and take proper action to grow turnover, this career income total could be even larger still.
 

So, ask yourself the critical question: is borrowing £507,388 to generate over £2.1 million in career earnings a prudent business decision?
 

As a dental business owner and as long as you manage your practice well, you’ll never lose your employment, and this level of income is yours to enjoy. You’ll be reaping the rewards of being an entrepreneur, elevating you towards multi-million earnings over your dental career!
 

Remember earlier when you calculated that figure? Is it close to these numbers?
 

Now add to that £2.1 million figure the potential yearly business income growth of approx. 3% and your total career income now stands to exceed £2.85 million. Better still you can then also add the value of the sale of the business at end of your practice ownership career!
 

If what you have just read has caught your interest and you would like to learn more, please contact our professional and experienced team. We are the market leader in dental practices sales and acquisitions and are available to talk with you personally about becoming a practice owner and regarding suitable opportunities that we have available on the market.
 

By Lorraine Hunt