Dental Practice Purchase Case Study: Buying Future Revenue Streams

Below is an excerpt from the Where to Begin section of our Guide to Purchasing a Dental Practice: A Step-by-Step Guide to Buying & Growing a Dental Practicewhich can be purchased here.

Case Study

Our client 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 attracted to this practice because the previous doctor had performed around 20 full-mouth reconstructions in the last 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 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.

Future Revenue Streams are the most essential factor when buying a dental practice. A familiar mistake doctors make when evaluating a practice to purchase is evaluating last year’s revenue instead of future income. The “big cases” performed by the previous dentist do not 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 current production of hygiene products. If the number is high, doctor production growth is a great opportunity. Maybe the current owner refers to procedures you can keep in-house to increase doctor production. Just adding some new services could significantly increase the output of existing patients. Sometimes, it is best to find a practice that is not doing the services today that you intend to do versus a practice that is offering the 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.