Ask a recent dental graduate to describe the practice they would like to purchase. You will hear, "I want a high-quality crown and bridge practice, in the best area of town, where I can work on my type of patients." For that matter, it would be amazing if a purchaser ever had a different response. Vanity is usually why they want to purchase this kind of practice, but is it the best opportunity?

Well, therein lies the question. Just what is an opportunity? It could be that an opportunity is something that satisfies the ego; a practice in the best area of town and meeting high-income patients can provide ego satisfaction. It looks like a beautiful opportunity, but will this "ideal practice" produce the most economic rewards? Is it the best opportunity? Over the years, we have received feedback from dentists who acquired "ideal practices." They told us the ideal practice had an excellent patient recall system. Like a well-oiled machine, those patients were accustomed to coming in every 6 months for cleaning and check-up. The problem was that the former owner had seen those patients every 6 months and had completed most or all of the crown and bridge treatment that those patients would ever need.

These patients have a high dental IQ, and they take care of their teeth and gums. If they need dental work, they have it done. By the time the purchaser takes over the practice, he will wait years before finding a substantial need for comprehensive dental services for those patients. In the meantime, the overhead and loan payments have to be paid. This results in lean months and even lean years. It often proves not to be the best opportunity, after all.

Now, suppose you have the chance to purchase a "maintenance" practice from a dentist who has been trying to slow down and practice fewer days a week for fewer weeks a year. As a result, this dentist is less inclined to do the more time-consuming, comprehensive services unless necessary. Even though it may not be what the purchaser perceives as the "ideal practice" in the best part of town, it usually provides the most significant financial opportunity. The gross production of the maintenance practice is lower than that of the "ideal practice." Remember, patients don't leave the practice because their dentist did not tell them they needed a 6-unit bridge! Indeed, they feel they have been given a reprieve after every office visit. These patients have the same high dental IQ as those in the "ideal practice;" it's just that they have not yet been presented with the work needed. This practice will cost a lot less to purchase and will have an abundance of patients who need work!

Another way of determining practice value is to look at the current fee-for-service patient count for the practice. The ideal, high-end practice will have a high gross income and a small active patient count (example: $1,500,000 gross income, 80% valuation, $1,200,000 selling price, 1,000 active patients equals $1200 per active patient). A "maintenance" practice will have a high active patient count and a comparatively low gross income (example: $800,000 gross income, 80% valuation, $640,000 selling price, 1,600 active patients equals $400 per active patient). You are paying for a patient base when you buy a dental practice, and the more patients, the better.

As a result, the sales price for the ideal, high-end practice will reflect an average cost of $1,200 per active patient; the selling price for a "maintenance" practice will have an average value of $400 or less per active patient. The lower your active patient cost, the better the transaction. The purchase price as a percentage of gross revenues is less an indicator of practice value than is the cost per active patient. Any practice that sells for $400 or less per active patient is a good deal. Less than $300 per active patient is a great deal, and less than $200 per active patient is a once-in-a-lifetime opportunity.

The purchaser can implement a recall system and begin presenting more comprehensive services after acquiring the maintenance practice. Patient acceptance of treatment will be just as good as the "ideal practice." These patients know they need dental treatment, and if the purchaser presents things correctly, they will accept the treatment. Usually, the average dentist who buys a maintenance practice doubles or triples the gross revenues of that practice the first couple of years, and it never goes back down! The maintenance practice is a "Diamond in the Rough." It is a no-brainer; you only need to know the general area where the practice is located and the cost per active patient to decide to buy or not to buy. As long as the cost per active patient is low, everything else is superfluous.

AFTCO is the oldest and largest practice transition consulting firm in the nation. With our experience and reputation for fairness, we can locate these "Diamond" practices and offer them to our clients. These are tremendous opportunities for astute practice investors. It's time to call AFTCO at 800.232.3826 or visit our website at!

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