**Client Case Studies: The Successful Practice Purchase**
Success in dental practice ownership can be defined in many ways. For some, success is building up your own business and creating a practice that you’re proud off. For others, success may be building an excellent working environment for staff or providing an important service to the community. While for others, success in ownership may be defined as achieving complete job autonomy.
While we appreciate the intangible aspects of practice ownership and they definitely should not be undervalued, our post today will concentrate mainly on financial success.
We did a practice purchase assessment for one of our clients back in 2021. We’ve kept in touch over the years and he’s openly discussed the financial aspects of the practice with us.
The practice for sale was a 2-chair practice (~80SQM tenancy) in an outer metro area. The practice was not preferred provider. There was some nearby competition present. There was also some residential development in the area and projected population growth. The practice was turning over ~600K with a single owner operator dentist who was approaching retirement age. He’d been working in the clinic for the past 25 years.
The items fee report of this practice perhaps presented the biggest opportunity for us (the items fee report shows how much of a particular item number is done over a certain time period). Our client was in his mid 20s and a few years out of dental school. He was a solid all-around clinician with an interest in orthodontics. 50% of the 600K billings came from examination and hygiene item numbers (011/012, 114, 121). The remaining billings was mainly made up of 53X and radiograph item numbers with some simple extractions. The current dentist did only 2 crowns (and they were gold) in that financial year and no endo. As an aside, we’ve seen many of these reports of the years and this presentation is common of dentists approaching retirement – they refer endo, surgicals and anything complex. There’s also probably a higher proportion of 534/535s done in comparison to a typical dental surgery where they would be crowns instead.
The vendor moved into this current premises 7 years before and bought all new equipment at that time. The fitout and equipment were acceptable. If the vendors market wage as a dentist was considered then the practice was breaking even at the time. The vendor also wanted to stay on for a few days post sale. The vendor would typically be booked out for weeks in advance and only worked 10AM to 4PM Monday to Thursday. The eventual sale price negotiated for the practice was 490K.
Our client 100% financed the purchase at 6% interest over 5 years paid down to 0. The repayments were ~113K/year.
Year 1 (first full financial year): The practice billed about 920K in this first full year post-sale. The client didn’t have any associates and he and the previous dentist working part-time did these billings. He took home 260K from his clinical work which was his market earnings. The business also made a profit of about 108K (does not include loan repayments). There was a shortfall of 5K that our client had to put back into the business to pay down the loan. The client effectively took home 255K (but the loan was also getting paid down). The client put this increase in billings down to simply increasing opening hours. He opened Fridays 9AM to 5PM and increased the other days to 9AM to 5PM and increased Thursdays further till 8PM.
Year 2: The practice billed about 1.43 Million with a ‘business’ profit of 271K. The client’s earnings from his clinical work was 412K for a total take home of 683K. If loan repayments were included then this decreased to 570K. The client put this increase down to offering more treatments. He was more confident in his orthodontic skills and started taking on more cases. He also developed an interest in full mouth rehabilitation cases and started undertaking further study in this area. He purchased a scanner and onsite milling towards the end of this year as well (there was some excellent tax incentives available) at a cost of 230K which was financed at 6.5% interest over 5 years paid down to 0. The repayments were ~51K/year giving total loan repayments of ~164K/year.
Year 3: The practice billed about 1.76 Million with a ‘business’ profit of 371K. The client’s earnings from his clinical work was 435K for a total take home of 806K. If total loan repayments were included then this decreased to 642K. The client got on another associate as the previous owner wanted to cut down some hours. Towards the end of this financial year the neighbouring tenancy became available (70SQM). The client was able to expand into this and add had the provision for 3 more surgeries. The total cost of the fitout (after incentives) and equipment (2 more chairs) was 270K which was financed at 7% interest over 5 years paid down to 0. The repayments were 64K/year giving total loan repayments of 228K/year.
Year 4: The practice billed about 2.37 Million with a ‘business’ profit of 545K. The client’s earnings from his clinical work was 390K for a total take home of 935K. If total loan repayments were included then this decreased to 707K. The client got several associates on and decreased hours himself. One of the associates did implants to a high level.
The clinic is projected to bill over 3 Million in the current financial year. With ‘business’ profit over 700K. The client is down to working 2 clinical days and reports his clinical earnings are still projected to be above 300K.
The client’s initial loan for the practice is about to be paid off. Nonetheless, the total spend on the initial practice purchase, major capital equipment and additional fitout over the years was 990K. The practice will sell for greater then 2.5 Million on the open market (potentially significantly more to a corporate). The practice was always profitable from when the client took over and there was only the initial year were this profit didn’t cover the loan repayments. All the years following were considerably cashflow positive.
This client has obviously done extremely well in a small space of time and shows what can be achieved by identifying opportunities at the initial practice purchase stage. There was a lack of major dentistry being done. The area was growing. There was a lack of opening hours. Our client was also clinically driven and the growth of the practice mirrored his own growth as a clinician.
For balance, our next post will be a case study on a not so successful practice purchase (this will be fascinating!).
If you have enjoyed this post, please like, share or comment below.
Our next start-up and buying seminars are coming up in Brisbane on Thursday 11th and Friday 12th of September 2025 and Melbourne on Thursday 16th and Friday 17th of October 2025. Please register asap using the link below.
We also offer expert guidance in various areas of practice ownership. Please see the below link for more information.