“I found my dream dental practice in the perfect location, but it has outdated equipment. Now what?”
Well, if it’s a dream practice, buy it. Don’t worry about slightly sub-par equipment.
In fact, the age or quality of the equipment almost never greatly affects the value of the practice (i.e. the price you’ll pay for it). That’s because a dental practice is not a car or a home. Here’s what I mean.
Dentists sometimes get confused because looking for a dental practice to buy feels a bit like buying a house. When you buy a house, you talk to an agent, schedule an appointment, and walk through the home. You’re judging the granite countertops, the garden path, whatever—you’re looking at the features.
You do the same thing when touring a potential practice to buy. You’ll notice the things you can see: the carpets, the furniture, the signage out front, and yes, the equipment.
The features, the stuff, in a dental practice is called “tangible assets.” It’s all the stuff you can see and touch and use. And when you, a dentist, walk into a practice, you’re naturally going to judge the equipment. It’s understandable because this is stuff you understand and know how to judge. And it’s what you’ll be using all day every day, after all.
But tangible assets don’t have nearly the effect on the value of a practice as intangible assets—the things you can’t touch. Relationships with active patients, reputation of the practice, referral sources nurtured over the years, as well as relationships with office personnel. It’s the hard-to-define magic that keeps the office running smoothly, and the revenue flowing.
Or, put it this way: you’re not buying a building, or chairs, or drills—you’re buying a revenue stream. The question is how effectively and efficiently the practice will put money in your pocket, not how good it looks doing it.
And who drives the revenue for the practice? The patients. So when you see the equipment in an office you’re looking at, consider this: the patients coming into that office don’t know or care how nice the equipment is. Do my teeth look good? Do they feel good? Is it going to hurt when you stick something in my mouth? That’s it. That’s what they care about.
So don’t get caught up on the equipment issue. Again, don’t make the mistake of thinking that buying a dental practice is like buying a house—it isn’t.
All this being said, there are two exceptions to this rule. They’re rare, but they do happen occasionally.
If the equipment is so old you literally can’t do the dentistry—we’re talking plush-carpeted operatories and dark rooms for processing X-rays—that will affect the practice value. And on the other end of the curve, if the equipment is all state-of-the-art, brand-new, right off the truck—that will also affect the practice value.
Bottom line, focus on what you’re buying this practice for in the first place: a source of income for years to come. There will be plenty of opportunities down the road to make the practice your own, to upgrade equipment and other tangible assets (and enjoy the tax benefits). For now, focus on the solid financial foundation that the practice can give you.
If you think you’ve found that great practice, let me know! I’d love to help you dig into the numbers and make the purchase process as smooth as possible.
