<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=478314022862749&amp;ev=PageView&amp;noscript=1">

What Went Wrong: I Bought a Million-Dollar Practice — and Wound Up with Million-Dollar Problems

Consider-Options-Mulit-Practice

Dr. Albert has expensive tastes. He always has the latest gadgets, eats at the best restaurants, and drives a shiny new car.

So when it came time to buy a practice, Dr. Albert sought out the best practice money could buy. He borrowed the maximum amount his bank would lend to buy a beautifully outfitted 8-op practice with brand-new, top-of-the-line equipment. Located in a fashionable district of a major city, the seller had built a great reputation by treating many celebrities, including actors and TV personalities.  

A year in, Dr. Albert felt like he was failing miserably. The seller had built the practice on highly complex procedures. With his three years of experience, Dr. Albert had the desire to perform these procedures, yet lacked the education and speed that come with decades of experience. Also, since he had never managed a staff before, he ended up micromanaging his auxiliaries who were used to more autonomy. Two of them quit to take positions with his biggest competitor while a third demanded a significant raise.   

A long-time associate had stayed with the practice, but she was busy with her own patients and did not want to add any more. To keep up, Dr. Albert felt he needed a second associate, but he couldn’t find someone with the right skills willing to work part time. He rarely took days off. Even when the practice was closed, he was busy preparing for his next patients or trying to solve staffing issues. 

His patients — who were also used to the very best in life — weren’t happy. Appointments constantly ran late and took longer than they had under the seller. When the long-term hygienists left, several patients followed and left negative reviews online. And he noticed that referrals were down.

Dr. Albert had gotten his million-dollar practice, but learned too late it came with million-dollar problems beyond his skills or comfort level. The steep loan payment and declining collections made him feel trapped, and the burnout was building. 

He began to regret buying the practice.

How to buy the right practice for your skills, comfort, and long-term dreams

I see similar scenarios too often: ambitious dentists with big plans jump into a practice that’s beyond their current skill and comfort level. Then, the resulting debt limits their options to scale back to a more comfortable, manageable pace or procedure set that matches their preferences.

Many buyers say their priority is financial success. However, as Dr. Albert learned, buying a million-dollar practice does not automatically confer that success — especially if the practice is in a highly competitive environment and has been built on procedures that are outside the dentist's current skill set. 

While some dentists believe financial success only comes from a high-end practice, located in a highly desirable area, there’s a much better way of looking at this: purchase a solid, well-run practice with “good bones” and make it into your dream practice. Especially if you are financing the entire practice, buying a lower-cost practice gives you some financial breathing room while providing a foundation for you to customize the practice to your talents and vision as your career evolves.

This path can be very lucrative and enables faster loan repayment while you improve your skills, learn how to run a business, and figure out the practice’s kinks. Over time, you can expand and adapt the practice exactly as you like — while maintaining a manageable, sustainable pace that doesn’t lead to burnout.  

See: More than Meets the Eye: Looking Beyond Million-Dollar Collections for a detailed look at how to compare two practices. 

So how can you go about finding this just-right practice and avoid Dr. Albert’s mistakes?

Sketch out a plan

Think about your dream practice. Who do you serve, doing which treatments? What equipment are you using? Is it just you, or do you have associates you can consult with — or mentor? How many operatories? Sleek and modern, spa-like, or more traditional? Do you spend lots of time getting to know each patient personally, or do your auxiliaries do most of the ‘touchy feely’ stuff while you focus on the dentistry?

Even if you’re just starting out, reflect on all the places you’ve worked, in any capacity, to start establishing this vision. Revisit this exercise periodically. Time and experience will help you refine your vision.

Find a right-sized practice

Look for three or four operatories that you can manage comfortably on your own, or more if the practice has an associate who will stay. If you want to grow over time, make sure you have the space to do so! Think creatively. Are there underused storage spaces that could become operatories? Perhaps an adjacent unit that you could lease or buy, when the time is right? If you’re looking at a standalone building, would you have room to build an addition? You could even consider moving to nearby space down the road.

Talk to the seller about the space situation. They’ve worked in the space for years and probably thought about how it could be expanded. They may have even gotten some rough estimates that you can use as a starting point. 

Choose the right location

Since location is the one thing that’s very hard to change, think long and hard about where you’re buying! 

Look for an area with less competition. You’ll pay less for a practice and naturally attract more patients. Think about buying where people live, rather than in more-expensive central business districts. (This is especially true as more people work from home.) 

Think about how accessible the practice is: parking, public transit, freeway access, etc. Being near healthcare facilities, everyday shopping needs, a school, or a major intersection makes for great visibility and referrals.  

Small-town and rural practices can be especially lucrative, with less competition that gives you more leverage with insurers. Plus, you will  be able to afford a practice AND a house, possibly even on a part-time schedule. (See more on why rural practices are so lucrative.)

Examine the financials & processes

Look for a practice with strong financials, plus policies and processes that ensure strong collections. A well-run practice will provide the best foundation for future growth, as the systems are already there. Work with a CPA to make sure you really understand the financials. Pay close attention to the overhead and look for items that stray from industry norms. (Again, Looking Beyond Million-Dollar Collections has a great table that demonstrates this.)

That said, if you have a passion for the business side of dentistry, you can also look for a practice that lacks strong processes/policies. Bringing your business acumen to such a practice can unlock significant growth, if you have the patience and know-how to do so. 

 See: 5 Financial Must-Dos Before Buying a Practice

Make sure you can support — or add to — the treatment mix

Aside from looking at the annual production report, review a few weeks’ sample schedules to see the typical treatment mix and how much time is allotted for each. Be honest with yourself: do you have the skills and experience to maintain this schedule? If not, are you willing to bring in more staff, work more hours, or accept a dip in production while you improve your speed?  

For example, if IV sedation accounts for 35% of the practice’s production, make sure you have the skills to continue offering this service! Otherwise, calculate how this might affect the overall production (and whether you can take the hit). If there’s a skill you’re interested in learning, ask if the seller is willing to stay on in some capacity to provide mentorship. 

Look for opportunity

The best way to create value is to add something to a practice, whether that’s time or skills. Begin by evaluating the services you can add that are currently being referred out. For example, endo and oral surgery are low overhead, highly productive procedures that will immediately add to the bottom line. Consider practices that are producing nicely on a part-time schedule, especially if there is an opportunity to grow. Look for new homes being built in the area or extended waits for treatment appointments. 

As always, make sure you account for the costs of growth, especially (expensive) equipment or additional staff time. Consider marketing costs, lab fees, salaries, and so on.  

Find the practice where you can thrive

Overall, most dentists don’t really want or need to start with a million-dollar practice. Rather, they are better off buying the $400,000 practice that they can grow into a million-dollar practice. 

Take your time to find the right practice for your plans. Then enjoy the process of growing it into something you can be proud of — without the stress or burnout of jumping into too much, too fast. 

See additional stories in our "What Went Wrong" series to learn how to avoid common practice transition mistakes!

Topics: purchase a practice, what went wrong, Real Talk


Comments

Search All Posts

    Popular Posts

    Subscribe Here!