Evaluating a practice for acquisition

bpdp-001_blog_cover2I’ve evaluated DOZENS of practices for acquisition. I tell my friends I was not gifted in real estate, or the stock market. I like to “stay in my lane” with my investment. Dentistry – when done correctly – can have a GREAT ROI. Acquisitions can be done for a number of reasons:

  • Associate looking to have their own practice
  • Dental student wanting a practice RIGHT out of school
  • Group / Large practice looking for expansion
  • Corporate model like Heartland

There are SO many variables to look at when doing a practice acquisition. The first and only thing I care about is if the practice is under-performing (i.e. I’ve got upside) or over-performing (i.e. might be at a plateau).  After I get the P&L’s, I request they send me a screenshot from the PMS (practice management software) of the ACTIVE patients. It’s imperative that you get a 12 month count of actives. Don’t get a 18 – 24 month number – obviously this skews the number incorrectly to the seller’s favor.

It’s REAL simple. Take the TOTAL COLLECTIONS for last calendar year and DIVIDE that by the TOTAL # of active patients. This will give you an Average Annual Collections Per Patient (AACPP).

This will give you a number —-?—-  (anywhere from $200 to $2000).

Think about what insurance typically gives a patient. Would it be fair to state around $1500 per year?

Ok, now take your AACPP number. If that number is way below $1500, maybe like $400, you can rest assured there is a lot of dentistry left to be done. You can go in there and apply your systems, marketing, culture, etc and raise that AACPP number!

Now if it’s over $1000 per patient per year – you need to pump the brakes! There might not be any dentistry left to be done in the patients who you’re spending copious $ acquiring.

So ironically, as the owner of a practice, you want to INCREASE your AACPP, doing more with your opportunity. But as the BUYER, you’re looking for upside VALUE and a deal, quite frankly.


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