Deciding when to buy a dental practice is a significant decision. The right timing is more than just a financial question – it’s about strategic thinking, assessing the market and identifying the right business for your personal and professional goals.

So, when is the right time? And is there ever a wrong time to buy?

First, understanding why a seller is putting their dental practice on the market can help you decide whether it’s a sound investment. So, what typically drives a dentist to sell their practice?

If retirement is on the horizon, then selling their practice could be part of their exit strategy. Others may be tempted by the attraction of paying off debt, or experience a change in life circumstances, or want to focus on other ventures. And some may have simply grown tired of running a business, leading them to sell before entirely losing interest.

Some motivations for selling may adversely affect the condition of the practice. For instance, a dentist who has lost their passion or is feeling burned out might not have adequately maintained the business’s day-to-day operations. If a seller has neglected the business side of things, you could end up with a practice that looks like a good deal on paper but comes with hidden costs – such as outdated technology, undertrained staff, or even regulatory issues. This could mean you’re overpaying for what you get, or that you’ll need to invest significantly to bring the practice up to standard.

Sellers will not usually adjust the price to account for these issues – it’s up to you to spot them and amend your offer accordingly, or at least have a sound awareness of the risks.

What are the features of a good practice for sale?

The most common way to value a dental practice is by using EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation). There are other costs to be excluded relating to haoe the seller runs the business, whether they pay a salary to their spouse, contribution to a pension, run an expensive car, and so on.

Often, sellers will attempt to also overly exclude some routine expenses – such as bank charges, advertising, accountancy fees or other operational costs – to inflate the EBITDA figure. However some of these costs can not be avoided, and there is a clear distinction to be made between costs which are made purely at the choice of the owner, and those which have an element of choice of cost, but underneath are crucial to be able to operate the business.

While exclusion of these costs may increase EBITDA on paper, you need to account for these when calculating the actual maintainable profitability of the practice. Make sure you carry out a thorough and realistic analysis of the practice’s valuation to avoid overpaying.

Beyond financial metrics, it's also essential to look at the physical and operational aspects of the practice. Does the practice have the necessary number of surgeries for yourself and any associates? Look for practices with the potential for growth, whether that’s adding more surgeries or expanding services.

Finding a good bargain

The market for dental practices can be competitive, with some practices selling quickly and others lingering unsold. If a practice has been on the market for a while, dig deeper to understand why.

Not all unsold practices remain on the market due to financial reasons. Sometimes, the issue may be geographic. Dental practices in metro areas tend to be more attractive to buyers than those in rural areas, due to lifestyle preferences.

However, this doesn’t always mean they are more profitable. If you're able to consider locations outside of major metro areas, rural practices can often offer better financial prospects with lower overhead costs and similar patient demand. For many, the lifestyle is also attractive! There is also talk of future financial assistance for those looking to provide healthcare services in rural areas – watch this space!

There is also a noticeable feeling of negativity across the market since the COVID-19 pandemic. Practice owners may be selling earlier than they planned, driven by career fatigue or a desire to move on from the stress of running a business in an environment which seems to have to process one change after another.

For buyers, this presents a potential advantage. Practices may come to market at more reasonable prices due to owners looking for a swift exit. Keep an eye out for opportunities, but don't rush into the first option you find.

Ultimately, there is no universal answer to whether now is the right time to buy a dental practice. The decision depends on market conditions, your readiness as a buyer, and whether the opportunities align with your goals.

Keep an open mind, stay patient, and remember that a successful purchase hinges on identifying the right practice at the right price – not just on broader market trends. By keeping your priorities clear and staying diligent in your search, you can position yourself to make a smart, well-timed investment in your future.