Buying a dental practice

What does a dental practice cost?

In the dental practice purchases we've worked on over the last three years, prices have typically come in at 70% to 120% of annual revenue. Valuers also talk in profit multiples; as a rule of thumb, that's around 3 to 3.5 times EBITDA.

Where a practice lands in that range depends on:

• Potential. Room to grow, unused chairs, services not yet offered.
• The practitioners. Where the current dentists will be after the sale. If the patients follow the dentist out the door, you're paying for goodwill that leaves.
• Demographic. Who lives nearby and what treatment they need.
• Fit-out and equipment condition. Old chairs and imaging mean spending soon after you buy.
• Location and rent. The lease terms can matter as much as the address.

Price is only part of it. Budget for equipment upgrades, working capital and the first few months of running costs. For how value is worked out, see how much a dental practice is worth.

How we approach due diligence

For many of our clients we start with the numbers. We get the last two to three years of financials and work our way down into the detail, depending on what the client needs. A practical checklist:

1. Financials: two to three years of profit and loss, balance sheets and BAS. Are they reliable, and do they reconcile?
2. Income split: how much revenue comes from the selling dentist personally, and how much the clinic earns from other practitioners.
3. The dentists: who's staying, on what terms, and under what agreements.
4. Payroll tax: how associates are engaged, because past exposure can come with the business. See payroll tax for dental practices.
5. Cost ratios: compare wages, lab, consumables, rent and marketing with our benchmarks.
6. Patients: where new patients come from, and how much is spent to get them.
7. Lease: rent, term, options and make-good obligations.
8. Equipment: age, condition and what needs replacing in the next few years.
9. Structure: decide the buying entity before you sign, not after.

Can a non-dentist buy a dental practice?

Yes. Since national registration started on 1 July 2010, non-dentists and companies can own dental practices in every state, Victoria and Queensland included. The Dental Board doesn't regulate who owns a practice. The ADA's own policy acknowledges this, while saying it would prefer practices to be owned or effectively controlled by dentists.

What a non-dentist owner can't do is treat patients or direct clinical decisions. Two parts of the National Law also apply to owners, not just dentists:

• It's an offence for anyone, including an owner or employer, to direct or incite a practitioner into unprofessional conduct. Commercial targets must never start dictating treatment.
• The rules on advertising a health service apply to whoever advertises it, so the owner's Google and Meta ads have to comply too.

When should you buy?

Early practice ownership is good, but the ownership landscape is changing. What we can say from our client base is that there's a strong link between owning a practice, how long you've owned it, and how much wealth you build.

A diligent dentist who's serious about wealth creation can build wealth without owning a practice too. Ownership just forces you into it. If you're not ready to buy outright, look for a clinic where buying in is a real option.

Location vs goodwill

Both play a big role. Location is still very important, but with Google and paid advertising it's slipping down the list, because patients find clinics online. Goodwill is very important too, but it can be expensive to buy into and hard to find.

Buy in or start from scratch?

Be very cautious about starting from scratch. The early years can be very difficult, especially if you don't have a strong support system around you. Our order of preference for clients:

1. Buy in to an existing practice.
2. If that's not possible on your terms, work somewhere where buying in is a realistic future option.
3. Start from scratch only if you've costed it properly and can wait while the patient base builds.

For a sense of what a start-up costs today, from recent dental fit-outs we've been involved in:

Per-chair cost falls as you add chairs, but a multi-chair clinic is hard to build from scratch. Construction costs rose sharply after COVID and haven't settled, and equipment prices vary with the brands you choose. A new clinic can also spend 20% to 25% of revenue on marketing while it builds a patient base.

Whatever you decide, talk your plans through thoroughly with your accountant and use their input to re-check each stage before you commit.