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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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Client Testimonials

"My AFTCO Analyst is a true professional!"

Anthony J. Parker, D.D.S.
Chicago, IL

"I had a great experience with AFTCO and my analyst. She walked me through each step and was very helpful in explaining the whole process. I highly recommend AFTCO, especially for first time owners."

Mohammadreza Nabavi, D.D.S.
Columbia, MD

"My AFTCO Analysts asked about, understood, and showed a caring attitude about the professional and personal needs that were involved in my search for the right practice. They displayed this compassion during every step of the process."

Andrew J. Krantz, D.D.S.
New Castle, PA

"Under very difficult circumstances, AFTCO was able to help guide the seller to assemble the required documentation that was basically non-existent. His patience, compassion, professionalism and coordination of a very difficult process are to be highly commended. I do not believe most dental brokers would have been as diligent and persistent while maintaining a fair and equitable relationship representing both the seller and buyer. It is obvious that my analyst's interest was to create a "Win-Win" result for all parties. In fact, he accomplished his goal and objective in the most professional manner possible. Thank you!"

Edward H. Hobbs, D.D.S.
Garland, TX