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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 has always been professional and courteous. He is straight forward and very helpful. I would recommend AFTCO to any buyer or seller."

Bridget Reilly Sheahan, D.D.S.
Spokane, WA

"My AFTCO Analyst worked as fast as he could to fairly evaluate my practice. All of my questions were always answered. My AFTCO Analyst followed up on details until the sale was completed. I would recommend him to any seller of a practice without hesitation."

Richard Cauley, D.D.S.
Big Spring, TX

"My AFTCO analyst was a consummate professional throughout our transaction. I appreciate his knowledge and insight with dental practice sale. Buying this practice has been a great decision for my professional career. The transition has gone very smoothly."

Nathan F. Thompson, D.M.D.
Louisville, KY

"My AFTCO Analyst was available, attentive and professional from the first contact to the close of the sale. Everything went very smoothly and my AFTCO Analyst made it happen for us!"

Guy C. Rosser, D.D.S.
Abilene, TX