The Online Marketplace For Selling Your Medical Or Dental Practice

Purchase vs. Startup

'Should I purchase an existing practice, or spend less money to start my own' - A commonly asked question of doctors fresh out of residency programs, and rightfully so. The first thing to keep in mind is which option gives you the best likely hood for success in both your career and financially.

Many new doctors shy away from buying existing practices because of the big price tag and fail to realize all the benefits they forgo. When you purchase a medical or dental practice you are not just buying the equipment - which honestly could be outdated - but you are purchasing an entire business model. You can think of it much like buying a franchise as opposed to creating your own business from scratch. How often does the little start up burrito shop go out of business as opposed to a Chipotle? Why is this, because Chipotle has put together a business model and process that just works. The same concept applies to an existing doctor who has already tested the local market and found what works and what does not. They have done the leg work of associating with other doctors for referrals, or found the advertising venues that give them the best return on their investment. Often times the existing doctor stays on staff during the transition period and will teach you the accounting, staff management, and daily flow that makes a business work - which to a doctor who likely has little to no business experience could be priceless.

Typically medical and dental practices are sold for between one to two years worth of net income of the practice -let's take the following listing for a dentist's office for example:

  • Asking Price: 300,000
  • Gross Income: 580,000
  • Cash Flow: 188,000
Assuming a ten year loan, your monthly payments will be around $4000 per month, or just under $50,000 per year. If you are able to keep the same level of cash flows that the existing business has enjoyed, then you will be able to put $130,000 in your pocket starting on day one with all the benefits listed above.

Obviously, the doctor must ultimately choose where they would like to practice and look closely at what the local market scenario is. But as I have shown, buying a medical practice can not only make monetary sense, but also enable the doctor with a working business model to help ensure their success.

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