What Factors Impact the Price of an Existing Dental Practice?

On average, purchasing an existing dental practice can cost anywhere between 60% and 100% percent of the practice’s collections for the prior year, depending on the practice quality, age, location, and other factors. The type of equipment currently being used in the practice is also an important factor when determining price. Some practices may have updated equipment such as cone beams and sensors, while others many have minimal technology and outdated equipment.

In addition to these, there are other important factors to know when considering purchasing an existing dental practice. Below, our dental practice purchase attorney explains what these are.

The Location of the Practice 

Location is a critical factor when determining the success of a dental practice because it also directly impacts patient flow. A practice established in an area with low economic activity and a declining population will likely have lower revenues and not as much potential for growth compared to one in a larger city.

The location of a practice also affects its accessibility. Practices in larger cities likely have better access to public transportation, while patients in smaller towns may depend on their own vehicles to get them to the practice. Still, practices in smaller areas do not have as much competition, which can also mean greater potential for growth.

Patient Demographics

The demographics of an area will also greatly impact the success, and therefore the price, of a dental practice. In marketing terms, demographics refers to the characteristics of customers. For dentists, the age of patients and their income level are the most important demographics.

For example, if the average patient in a certain area is 60 years old, there may not be enough younger patients to sustain revenue growth. On the other hand, if you specialize in implants and geriatric dentistry, an older population may be the right demographic for you.

Income level is another important demographic that affects the average price of existing dental practices. This is particularly true for dentists who want to specialize in costly procedures, such as dental implants and cosmetic dentistry.

Financial Stability 

Of course, the stability of a dental practice’s finances is one of the most important factors that will determine price when purchasing an existing dental practice. Many people focus on the gross revenue alone when determining a practice’s financial stability, but this is not always recommended. A dental practice can bring in substantial gross revenue. However, if the practice also has many high expenses, a high gross revenue does not necessarily mean it is profitable.

Our Dental Practice Purchase Attorney Can Help 

If you are considering purchasing an existing dental practice, it is critical to work with a dental practice purchase attorney. At AGS Law, our experienced attorney can review a practice’s financial paperwork, location, patient demographics, and more to help you determine if a specific practice is listed at a fair price. We can then walk you through the purchase process to ensure your rights are upheld and your practice gets off to a good start. Call us now at 801-477-6144 or contact us online to schedule a consultation and to learn more about how we can help.