The costs of buying a dental practice in Ontario have practically doubled over the past decade
With dentists across the province working much later into retirement, foreign professionals immigrating into the country and the establishment of a dental investor market – the supply of practices available for sale are significantly lower than the corresponding demand.
As a result, Canada has become a primary seller’s market for dental practices.
Ranging from a few thousand dollars to potentially millions, purchasing an existing dental practice is reliant on a variety of factors.
Generally speaking, the expected cost of a dental practice falls around 60% of the adjusted gross annual income. However, spending an obscene amount of money on buying a practice does not guarantee a future of success.
Instead, be sure to consider the following 3 questions:
WHAT IS THE EXISTING CASH FLOW?
There are major differences between a new start-up practice and buying an established practice from a discontinuing dentist. Those are the existence of a patient base and active cash flow.
With the opportunity to instantly support your salary, practice debt and personal expenses right off the bat, finding a practice available for purchase is a great way to jump start your career.
Unfortunately, finding this for a low price does not guarantee a high value of cash flow.
Look to the past few years of income documentation to get a better idea of what to expect.
DOES IT INCLUDE SUPPLIES?
Although it is often standard for dentists to sell their practice along with their inventory and supplies, this is not always the case.
Be sure to understand the full extent of what you will be receiving as the cost of tech equipment and repair can be quite expensive on their own.
To avoid any financial surprises, prepare a list of included tech and inventory before closing the deal.
This will give you an opportunity to identify any missing necessities and calculate projected expenses in advance.
WHAT ARE THE TERMS OF THE LEASE?
Finding great value for a great price is the ultimate goal in buying a dental practice in Ontario.
Unfortunately, overall quality and price aren’t the only expenses you have to worry about.
Lease/property fees can sometimes conceal hidden expenses that cause problems in the long run.
Be sure to confirm how rent expenses may have increased over the past few years. Similarly, keep track of any tax/insurance totals that come along with it.
In the case where the selling dentist is also the property owner (which is the case in approximately 60% of private practices), the sale of property would include a separate transaction and set of paperwork.
With such a low rate of failure in the dental industry, the ability of purchasing an existing client base may seem like icing on the cake.
However, it is very important to acknowledge that the transition in dental practitioners do not always guarantee the loyalty of patients.
Each dentist will practice with their own unique philosophy, training and process flow. Consequently, patient retention may be a gamble depending on the level of trust initiated.
That being said, make a point to reach out to your new patients and introduce yourself. Establishing communication as early as possible may help potential patients feel more comfortable with the change in dental professionals.
If applied with caution and strategy, the cost of buying a dental practice in Ontario can equate to a very comfortable life of future success.