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What should office rent be as a percentage of gross collections for a general dental practice?

Ideally, office rent should account for 4% - 5% of the gross revenues for a general dental practice (+ or - 1%). If the rent is less than 4% then the current owner either (i) owns the building and has not kept the rent up with other rents in the same area, or (ii) it is a sub-prime location that may require moving the practice to another location if this practice is under consideration for acquisition, or (iii) this is a rural practice where rents tend to be much lower than in metro areas.

On the other hand, if the office rent percentage is more than 8% of gross collections, then (i) this office is either too large for this practice, or (ii) this office is over improved and the leasehold improvement costs are included in the rent, or (iii) the building is owned by the practice owner and this owner is charging an artificially high rent in order to justify paying off this expensive property.

If you are considering purchasing a practice whereby the current rent is high, then it is possible that only a practice merger (where an existing practice in the same area would be merged into this office) should be the primary consideration since it would not work well for a new purchaser (unless this practice is greatly underproducing).
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"My AFTCO Analyst's professional and genuine interest in my practice transition made the process very easy. I felt very fortunate to have his guidance throughout the entire process. I would recommend my AFTCO Analyst highly."

John S. Taylor, D.D.S.
Henderson, TX

"I found my AFTCO Analyst to be a wealth of information that made the transition seamless."

Anthony R. Bielkie, D.D.S.
Shelby Township, MI

"My experience with AFTCO was excellent from start to finish. My AFTCO Analyst was very easy to get along with and communication was always open. I would recommend the services of AFTCO for selling your practice."

Robert D. Ruiz, D.D.S.
El Paso, TX

"My AFTCO Analyst was very professional and excellent at explaining everything. The contracts were well written which caused much less involvement to be required from the dentists' attorneys. The transaction went smoothly because of my AFTCO Analyst."

Peter K. Pang, D.D.S.
Asheville, NC