**Be aware, the low billing practice**
There will be a tsunami of practices coming up for sale or are already on sale, that are billing less than $500,000 a year. These practices have no profit and many are making a significant business loss.
Many of them were started up in the last 4-5 years. Some may have had a good year or two post covid, but now billings have fallen.
Some might be turning over $100,000-$200,000 and being run as a “branch” practice, some distance away from the seller’s main practice.
The main thing sellers will be using as a marketing pitch will be “building costs are so high, this is selling under what it would cost you start a practice and do a fitout from scratch! And there is a little bit of bonus goodwill!”
Or in the case of the branch practice, the seller will likely state, “hasn’t been run to its full potential, only open 1-2 days a week, etc etc”
In both cases, sellers will often try to say the practice is worth $400,000-$500,000 (what it cost to fit-out and equip the surgery).
Firstly, it’s important to understand that a brand new start-up that hasn’t opened for trading yet, is often a much better option than a practice that has been open for a number of years, and making a significant loss (despite the fact it has revenue).
In the case of the start-up, you don’t yet know the outcome. In the case of the practice that is making a loss, the outcome is very well known. It’s the worst possible outcome. That’s already locked in.
Where sellers are talking about the fact a practice hasn’t been run to it’s full potential, one must be sceptical. Yes, it’s true that there are many hidden gems which DO have great potential and with the right marketing etc, can yield a great outcome for the purchaser. However, in the current economy and with costs rising, this is by no means guaranteed or even likely. It’s far more likely that the seller attempted or wanted to open the practice for more days but despite marketing, the demand just did not exist.
Unless the buyer has some great niche that they can successfully exploit, it’s extremely unlikely that the result will be any different.
There are many young dentists out there looking at practice ownership. It would suit them well to undertake proper due diligence and analyse a practice and the surrounding demographics and competition before jumping into what may prove to be a catastrophic financial and career decision.
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Our next start-up and buying seminar is coming up in Melbourne on Friday November 3rd and Saturday November 4th 2023. We’ll teach you this due diligence process at this seminar. Please register asap to avoid missing out.
We also offer expert guidance in various areas of practice ownership and can also do this due diligence for you through a practice purchase assessment. Please see the below link for more information.
We’re holding our 3rd Dental Practice Owners Conference (#DPOC2023) next week. This is the premier event for practice owners and not to be missed. We have an amazing line up of speakers as well as spectacular events planned. There will also be a trade show with exhibitors from the major dental companies present providing conference only specials. The learning and networking opportunities will be immense. Please see the link below for more information.