Can a New Dentist Buy a Dental Practice?
Yes, a new dentist can potentially purchase an established dental practice. However, becoming an owner shortly after completing dental school can involve unique financial and business considerations.
For dentists considering dental practice financing, understanding what lenders and buyers may evaluate can help a newer dentist prepare for an acquisition.
Clinical Experience Is Only Part of the Equation
A new dentist may have limited ownership experience but still have the professional qualifications necessary to operate a dental practice.
Lenders may consider the dentist’s education, licensing, clinical background, and overall professional experience when evaluating the transaction.
Student Loan Debt Does Not Automatically Prevent an Acquisition
Many newer dentists have significant student loan obligations.
Existing student debt can affect the overall financial analysis, but it does not necessarily prevent a dentist from purchasing a practice.
The lender may evaluate the dentist’s complete debt obligations along with income, credit history, liquidity, and the financial performance of the practice being purchased.
An Established Practice Can Provide a Financial History
One potential advantage for a new owner is purchasing an established practice with existing financial records.
The buyer may be able to review historical revenue, expenses, profitability, cash flow, patient volume, and other information before completing the acquisition.
This can provide more financial information than starting a completely new practice.
Credit History Matters
A new dentist should understand their personal credit profile before pursuing financing.
Lenders may review payment history, outstanding balances, existing obligations, and other aspects of the dentist’s credit history.
A strong overall financial profile can help when evaluating an acquisition.
Personal Liquidity Can Be Important
A dentist may need available cash or other liquid assets as part of the overall transaction.
Liquidity can also provide a financial cushion after closing for unexpected expenses, equipment needs, or changes in cash flow.
New dentists should avoid assuming that every dollar of available cash should be committed to the purchase.
Choosing the Right Practice Matters
A new dentist should carefully consider the practice being purchased.
Important factors can include:
- Revenue
- Profitability
- Patient volume
- Location
- Staffing
- Equipment
- Lease terms
- Growth opportunities
A practice that fits the dentist’s clinical interests and business capabilities may provide a stronger foundation for ownership.
Consider the Transition From Employee to Owner
Owning a practice involves responsibilities beyond treating patients.
The new owner may need to manage employees, payroll, vendors, scheduling, marketing, finances, compliance, and other administrative responsibilities.
New dentists should consider whether they are prepared for these responsibilities or whether they will need experienced management or professional support.
Understand the Practice’s Cash Flow
A buyer should understand how much cash the practice generates after normal operating expenses.
The practice’s cash flow can help determine whether the business can support its ongoing expenses and proposed acquisition financing.
Build a Realistic Acquisition Budget
The purchase price is not necessarily the only expense associated with becoming an owner.
A new dentist may also need capital for working capital, equipment upgrades, renovations, technology, professional fees, and other costs.
Creating a complete acquisition budget can help prevent underestimating the amount of capital required.
Consider Financing Before Making an Offer
New dentists may benefit from understanding their potential financing capacity before committing to a particular practice.
Reviewing personal finances, existing debt, credit, liquidity, and the target practice’s financial performance can help establish a more realistic acquisition budget.
Final Thought
A new dentist can potentially purchase an established dental practice even without years of previous ownership experience. However, the dentist’s financial position, professional background, credit history, existing debt, liquidity, and the financial strength of the practice can all influence the financing process.
Careful due diligence and early financing preparation can help a new dentist determine whether a particular practice is an appropriate opportunity and whether the acquisition can be structured realistically.
