If you’re looking for a location to buy a dental practice, you’re feeling excited, perplexed and a bit overwhelmed all at the same time. Starting a dental practice from scratch or buying an existing dental practice is a large business transaction, with an astounding amount of time and energy required. You might be feeling way in over your head, especially when you don’t know where to start or can’t find the type of practice or location you are looking for.
At JPA, we want to make this complex transaction as smooth as possible for you. After 9 years of providing dental brokerage services for our clients, helping dentists and associate find, grow, or sell their practice, we’ve compiled a list of factors to help you determine the best location for you to own a dental practice.
Before you start or buy a dental practice, consider these 4 things for your ideal practice location:
1. Consider other dentists in the area
What is the ratio of residents to dentists? There is no perfect number for this ratio, although we like a 2,000:1 ratio, but doing preliminary research is important to understand what you are up against. Calculate the number of practice locations within a one, three, and five-mile radius and then do your research on the number of residents and demographics within the area. Here’s a great article we found on Dental Startup Academy around calculating your own ratio. While the numbers will give you a basic understanding of your competitors, the demographics will greatly impact the location you choose. For example, a population in a particular location could have more disposable income to spend on cosmetic dentistry. (See below)
Therefore, don’t just rely on the dentist to resident ratio to understand which dental practice to buy or where to start up. Take into consideration multiple factors to help inform your decision. Also know, that if you choose to work with JPA, we look into the demographics for you, and we can help guide you towards the area that will be the best fit for your skill set.
2. Consider non-competes
Where did you work prior to your venture into ownership? You most likely have a non-compete and/or restrictive covenant in your previous employment agreement. Although each non-compete is different, this probably means you are restricted from owning a dental practice within a predetermined number of miles from your previous place of employment.
If you’re a dental student or associate, consider associateship placement ten plus miles away from your ideal location so that you can prevent running into an issue with your restrictive covenant when it’s time to buy a dental practice.
In other words, who is your ideal patient? Here are three reasons why you should care about your demographics when purchasing a dental practice:
- First, the average household income will impact which forms of payment your practice will receive. In an area with high income levels you can expect a practice with a higher Fee-For-Service percentage. If you are a specialist looking to cold-start or purchase a cosmetic dentistry practice, these areas will likely contain more opportunities.
- Second, a growing city is a better market opportunity. If people are moving away from the area, your business will be affected over time - a growing population means more growth opportunity.
- Third, the average age of the population. This will determine whether you will be treating growing families (with lots of kids), which would be the perfect place for you if you will own a pediatric dental office.
4. Location off a busy road
Is the practice tucked away where no one can find it? Or is it on the edge of a busy street? When a practice is in a high traffic area, you can expect to consistently grow your patient base just from exposure. (You can’t say no to free advertising!) A good, high traffic, location could help cut down on your advertising budget. If your practice is tucked away then it's likely that you will need to rely more on outdoor signage and digital marketing to attract new dental patients. However, remember that you will also likely be paying more up front for the practice with a more visible location, and less for one that may not be so visible. Either scenario can be shaped into a thriving, growing practice, you may simply need to adjust the way you delegate budgets to monthly payments, or advertising. When creating outdoor signage, remember to include both your website and telephone number. Don’t rely on people remembering your name. Give them the tools they need to instantly call or check out your website as soon as possible.
Buying a dental practice in the right location
When you are choosing a dental practice location, research and professional help (i.e. a dental broker) will make choosing your ideal location less risky, more efficient, and give you a better experience. Always make sure to consider the local competition, legal constraints, target market/services, and the visibility of the particular office. While buying a dental practice is challenging, JPA Transitions can help make it easier. Let us know if you need any help.