Dental Practice Purchase Case Study: Buying Future Revenue Streams
Below is an except from the Where to Begin section of our Guide to Purchasing a Dental Practice: A Step-by-Step Guide to Buying & Growing a Dental Practice, which can be purchased here.
[alertbox color=”yellow” icon=”warning” icon_size=”32″]Case Study: A client of ours recently bought a high-end cosmetic practice from another dentist. The practice was doing very well and was very profitable. The purchasing doctor was very interested in doing big scale cosmetic work, and was therefore attracted to this practice because the previous doctor had performed around 20 full mouth reconstructions the previous year. The challenge the purchasing dentist soon discovered, was that the previous dentist had “tapped the patient base” for that level of treatment. In other words, most of the eligible patients for full-mouth reconstruction had been given discounts or incentives to complete that treatment last year. The opportunity for those types of procedures had been diminished significantly.[/alertbox]
Future Revenue Streams are the most important factor for you to consider when buying a dental practice. A common mistake that doctors make when evaluating a practice to purchase is evaluating last year’s revenue instead of future revenue. The “big cases” performed by the previous dentist do not really represent future revenue, as the work has already been done. However, a steady stream of new patients into hygiene does represent future revenue streams, as they will be your opportunity for future treatment planning. One area to analyze is the percentage of production that is hygiene currently. If the number is high, there is a great opportunity for doctor production growth. In fact, maybe the current owner is referring out procedures that you can keep in house to increase doctor production. Just adding some new services could greatly increase the production from existing patients. Sometimes it is best to find a practice that is not doing the services today what you intend to do, versus a practice that is offering the exact same services that you will offer.
For more insight into the right way to buy a dental practice, buy our Guide to Purchasing a Dental Practice: A Step-by-Step Guide to Buying & Growing a Dental Practice.