A Guide to Buying a Dental Practice

Buying an established dental practice represents one of the most significant professional and financial decisions you'll make as a dentist. While the prospect of practice ownership offers exceptional opportunities for career growth and financial success, the complexity of the acquisition process can feel overwhelming. 

The good news? With proper planning and the right support team, you can navigate this journey confidently. Let's explore the essential considerations that will help you make an informed decision and set your practice up for long-term success. 

1. Know exactly what you're buying 

Due diligence is your best friend 
When investing hundreds of thousands of dollars in a dental practice, thorough research isn't optional – it's essential. This investigation extends far beyond the practice's marketing materials or initial walk-through. 

Legal and compliance foundation  
Your due diligence should include comprehensive legal and compliance checks, reviewing all existing contracts and agreements within the practice. This covers the lease or other occupancy agreement, equipment leases, staff contracts, and supplier agreements. These documents can reveal hidden costs and obligations that could significantly impact your future profitability. 

Professional support advantage 
Given the stakes involved, attempting due diligence without expert help is risky and inefficient. The Avant Law team provides specialist guidance to assist clients identify if the relevant commercial and legal risks have been appropriately considered. 

Operational performance assessment 
Review the operations of the practice – in particular, ask to review documents that set out formal procedures and workflows. Consider the risk of one or more key staff members leaving, who could take much of the practice’s intellectual property with them.  
 
Beyond the numbers and legal documents, you need to evaluate whether the practice culture aligns with your vision and values. Schedule visits during peak hours to observe patient flow and staff interactions. Speak with team members about their experience – high staff turnover often signals underlying management issues that could affect your transition. 

Growth potential analysis  
Use this research phase to identify improvement opportunities. Are there underutilised treatment rooms? Could extended hours capture more patients? Are the practice missing revenue streams like cosmetic dentistry or orthodontics? These insights will inform your business plan and financing needs. 

2. Evaluate the practice's financial health thoroughly 

Look beyond surface-level success 
A practice might appear modern and busy, but financial statements tell the real story. Request at least three years of financial accounts to identify trends and potential red flags. 

Revenue trend analysis  
You're looking for consistent upward revenue growth over multiple years. Declining or volatile revenue patterns warrant deeper investigation. Seasonal fluctuations are normal, but significant year-over-year drops could indicate patient attrition, increased competition, or operational issues. 

Expense scrutiny  
Does the practice work towards a budget – and what sort of variation from budget is observed across major expense categories (and what are the reasons for this?). Examine all leading expense categories carefully. Unusually high costs in areas like marketing, repairs, or professional services might indicate underlying problems. Equipment lease payments, insurance premiums, and staff costs should align with industry benchmarks for similar-sized practices. This can also be a cue to review contracts for key services such as IT and/or vehicle leases. 

Profitability assessment  
Revenue alone doesn't determine success – focus on profit margins and cash flow patterns. A practice generating high revenue, but low profits might have operational inefficiencies you'll need to address immediately. 

Working with experienced accountants and the Avant Finance team during this analysis can help you understand exactly what the numbers mean for your investment. 

3. Assess dental equipment value and condition 

Balance current worth with future investment needs 
Equipment often represents a substantial portion of the purchase price, making accurate valuation crucial for your investment decision. 

Current condition evaluation  
Conduct a thorough equipment inspection with a qualified technician. Check service records, warranty status, and remaining useful life for major items like dental chairs, X-ray machines, and sterilisation equipment. Equipment that appears functional might need expensive repairs or replacement soon after purchase. 

Technology gap analysis  
Identify where equipment upgrades could enhance patient care and practice efficiency. Modern patients expect up-to-date technology, and newer equipment often provides better treatment outcomes while reducing chair time. It’s important to factor the cost of any potential equipment upgrades into your buying budget.  

Strategic upgrade planning  
If significant equipment replacement is needed, factor these costs into your acquisition planning. Avant Finance offers specialised equipment financing options that can help you modernise your practice without straining your initial cash flow. Investing in current technology often pays dividends through improved patient satisfaction and treatment efficiency. 

4. Structure your business for success from day one 

Choose the right foundation for growth 
Your business structure affects everything from tax obligations to legal liability and future expansion options. This decision impacts your practice for years to come, making upfront planning essential. 

Structure options and implications  
Dental practices can operate under various business structures – sole trader, partnership, company, or trust arrangements. Each option carries different tax implications, liability exposures, and operational requirements. Some practices use multiple structures for different functions, optimising their overall setup. 

Tax efficiency considerations  
Your business structure significantly impacts your tax position. While sole trader setups offer simplicity, company structures might provide better tax planning opportunities as your practice grows. Consider your long-term goals when making this decision. 

Future flexibility  
Choose a structure that accommodates your growth plans. If you're considering multiple locations, associate dentists, or eventual practice sale, ensure your initial structure supports these objectives without costly restructuring later. 

Avant Law can work closely with your accountant to advise on the most appropriate structure for your specific situation and long-term goals. 

5. Ensure comprehensive compliance coverage 

Navigate accreditation with confidence 
Compliance with accreditation standards protects your practice, your patients, and your professional reputation. Given the complexity of healthcare regulations, professional guidance is essential. 

Meet dental practice standards  
Dental practices must meet stringent standards covering patient safety, infection control, record keeping, and staff qualifications. Non-compliance can result in penalties, license suspension, or patient safety issues that damage your reputation and profitability. 

Ongoing compliance management  
Accreditation isn't a one-time event – it requires ongoing attention and regular updates as regulations evolve. Understanding these requirements upfront helps you budget for compliance costs and establish proper systems from day one. 

6. Plan for seamless patient transition

Protect the goodwill you're purchasing 
Patient relationships often represent the most valuable component of your practice acquisition. Protecting and nurturing these relationships during ownership transition is crucial for maintaining revenue and growth. 

Transition period planning  
Ideally, arrange for the selling dentist to maintain a presence during your transition period. This allows patients to meet you gradually and builds confidence in the practice's continuity. A structured handover period reduces patient anxiety and supports revenue stability. 

Revenue protection strategies  
Include a non-compete clause in your purchase agreement to prevent the selling dentist from establishing a competing practice nearby. This protects your investment by ensuring patients remain with your practice rather than following the previous owner. 

Building on existing relationships  
Use the transition period to understand patient preferences, treatment histories, and communication styles. This knowledge helps you maintain the personal relationships that drive patient loyalty and referrals. 

Ready to take the next step? 

Buying a dental practice requires careful planning, thorough analysis, and expert support across multiple disciplines. From financial structuring to legal compliance and equipment financing, success depends on making informed decisions at every stage. 

Your comprehensive solution 
At Avant, we understand that practice acquisition involves more than just financing. That's why we offer integrated support through Avant Finance, Avant Law, and Avant Practice Solutions. Our team has guided hundreds of dentists through successful practice acquisitions, and we're here to support your journey. 

Take action today 
Don't navigate this complex process alone. Contact the Avant Finance team today to discuss your practice acquisition goals and discover how our comprehensive services can help you achieve practice ownership success.