You can look at seven numbers to get a sense of whether a practice you’re considering buying is worth your time. I’ll outline exactly what to look for in a practice you’re considering purchasing.
Key Number #1 – Collections – The foundation of whether to purchase any practice must be collections. There simply must be enough money coming into the practice to justify the time, stress, and incredible expense you’re going to take on as the owner of a practice.
I recommend clients look at practices that have a minimum collections level of $800,000 a year. Over $1 Million is even better. I’ve found, while not an iron-clad rule, practices collecting above that level tend to have good systems, solid staff, good locations, and all the foundational pieces you want as a business owner.
On top of being well run, the projected cash flow numbers in practices that size tend to provide enough income to cover the practice loans, student loans and the desired lifestyle of newer dentists.
Could you find a turnaround practice that has been mismanaged for years, buy it at a cheap price and turn it around? Possibly, but unlikely.
More likely, the cheap practice you’re looking at is struggling for a reason, and the reason isn’t that the owner isn’t as smart as you.