What to look for when purchasing a dental practice

“Do it afraid.”

This is the advice Nicholas Riccio, D.M.D., repeated to himself when he and his wife made the decision to purchase a dental practice back in 2018.

Dr. Riccio, an orthodontist in Hinsdale, Illinois, knew he was technically ready to make the jump into practice ownership since he had taken all the essential steps such as meeting with a mentor and ensuring his financials were in order, but he still felt some anxiety. 

This is natural, and it doesn’t necessarily mean prospective buyers should back out — especially if they’ve adequately prepared. The earlier dentists enter the ownership world, the earlier they can learn from potential mistakes or even just scrap the idea and start over. 

“You approach all the people you need — an accountant, a lawyer, a practice transition consultant — get your whole team in place, and then you start working on the deal. You don’t know what you’re doing there, but you just give it your best shot,” Dr. Riccio said. “You’ll live and you’ll learn. And if it doesn’t work out, guess what? Five, 10 years later, you can do it all again.”

 

Once a dentist is looking at a practice to purchase, there are several factors to consider. One of Dr. Riccio’s priorities when buying in 2018 was the location of the practice, as he didn’t want to work too far from where he lived. Several years into practice ownership, he emphasized the significance of thinking about life plans when looking at practices. This could mean looking at places near family for extra support with kids, or at smaller towns with loyal patient bases and little competition. 

Dr. Riccio also highlighted the significance of matching your offering to what the community wants and can afford, as well as committing to wherever you choose to practice. It’s helpful to already be familiar with the town, but if not, take time to get to know the area. 

“[People] want to make small talk, but in a way that makes them feel good. It’s not just like, ‘How’s the weather?’ It’s like, ‘Oh, have you tried that new bakery?’ Be in a town that you want to be in, that you want to spend time in. The more you can get to know the community, the better,” he said. 

Certain aspects of a dental practice may not be presented to the buyer unless specifically inquired about, according to Dr. Riccio, such as the number of active patients, accounts receivable/payable, overhead and the types of cases. 

Another factor to consider is what values are most important to you. When Abigail Mitchell, D.D.S., was looking to purchase her practice in Avon, Indiana, several years ago, she knew that her top priority was finding a place that aligned with her ethics and values. After having an unpleasant experience where her treatment philosophy wasn’t shared, Dr. Mitchell desired to find somewhere that matched her code of ethics so that the transition of ownership was easy for the patients, staff, selling doctor and herself.

“I value ethics very strongly, and I’m not going to do anything that I don’t think the patient needs. I wasn’t looking for a practice that was all about the money. I wanted a practice that was all about the patients — taking good, comprehensive care of them, making them feel really comfortable, and offering services that I also did,” said Dr. Mitchell, who is a general dentist who also offers some cosmetic services.  

 

It’s important to investigate possible competition, which isn’t always something the seller or accountant is familiar with. Dentists can research existing practices in the area and reviews to get an idea of demographics. 

“Really try to get a good idea of why the practice costs what it does. They’re going to list a number for goodwill, so try to really figure out how they derived that number. Did they derive it from a percentage, did they derive it from the accounts receivable?” Dr. Riccio said. “Every time you’re given an answer, ask two more questions.”

Some of the most difficult aspects of buying a practice are the constant juggling and learning the small business side since much of it happens along the way, he said. Dental practice owners take on many roles, from managerial to marketing to clinical, which might deter some potential buyers from taking the plunge. 

Practice ownership among private practice dentists has been declining over the past few decades, dropping from 84.7% in 2005 to 72.5% in 2023, according to the ADA Health Policy Institute. This change is especially apparent among younger dentists. 

For example, 25.4% of dentists under 30 in private practices were owners in 2005, compared with 8.8% in 2023. Fifty-five percent of dentists aged 30-34 in private practices were owners in 2005, compared with 32.5% in 2023. 

Dr. Mitchell encouraged dentists looking to purchase a practice to keep values, ethics and treatment philosophies centered when making decisions. She also recommended hiring an attorney and accounting team with experience in practice transitions, as well as reading books, listening to podcasts and taking continuing education courses about any aspects of business that they don’t know much about.  

“Basically, just learn as much as you can about what it takes to buy a practice and manage it after. And if you can, find a practice with a selling doctor who wants to see you succeed and wants to make sure that their patients are taken care of,” she said. 

Despite the challenges, in Dr. Riccio’s experience, practice ownership has offered many rewards. As an orthodontist, he coaches patients how to take care of themselves to achieve the desired result. As a practice owner, he coaches his team and their different departments. This act of teaching and inspiring is especially meaningful, he said, because it provides an opportunity to deeply invest in the success of his patients, staff and business. 

“Practice ownership is a great thing. You’ll likely financially benefit from it, and whatever you get a reward out of, you’ll probably get it better out of practice ownership because it’s something you did yourself,” he said.