A dental practice isn’t cheap. But it’s a lot more affordable than you might think. Let’s break down some numbers so you know what to expect when you buy a practice.

What it costs

The average dental practice in the U.S. costs about $520K. But I don’t like national averages here, because it’s misleading for your specific situation and practice. There are just too many other factors in the mix. How many operatories does it have? How many doctors? Is it a specialty practice? What city is it in? Which neighborhood? And so on. You get the idea.

So let’s look at it a different way. A dental practice sells, on average, for 76.8% of annual collections. That’s the number for general practices, and they’ll look slightly different if it’s a specialty practice. But it’s a good place to start. Some nice round-number examples:

PRACTICE A

Annual collections: $500K

Average selling price: $384K

PRACTICE B

Annual collections: $800K

Average selling price: $614K

PRACTICE C

Annual collections: $1.2M

Average selling price: $922K

How you’ll pay it

If you’ve got that kind of cash, great! But for the other 99.9% of us, we need a loan for that type of purchase. Lucky for you, you’re a dentist, which means that banks aren’t just willing to loan you the money, they’re eager to. Dental practice loans are among the safest out there, so the banks love them—and by extension, you.

Elsewhere I’ve gone into how many banks you should talk to, and how to decide between them. So I’ll just say this. If you’ve ever bought a house or a car, then you know about the dreaded down payment. Want a loan? Gotta pay some cash upfront. A dental practice loan, though, is so safe, the banks are usually willing to lend 100% of the purchase price. (Sometimes even more, so the doctor has some working capital at the start.) That means no down payment. (More on that in a moment.)

Your monthly payment

Okay, so you’ve got a loan…but what does that mean in real terms? How tough will it be to pay that loan off? Good news, it’s totally manageable.

Let’s say you buy a large practice, with a purchase price of $1M. You secure a 10-year loan for that amount, with a 6% interest rate. Your monthly payment would be just north of $11K. Yikes! Sounds like a lot.

But if you’re paying a million bucks, then that practice is probably collecting about $1.3M annually. Factor in the average monthly overhead of $800K, and that means you’re taking home $500K a year in income, which comes out to about $43K a month. Now you can easily cover your practice loan payment, plus pay off huge amounts of your student loans, and have plenty left over for a comfortable lifestyle.

If you buy a smaller practice, your income won’t be as huge, but then neither will your loan payment. Whatever size of practice you buy, making your monthly payments will be easily in reach.

What you’ll need for a dental practice loan

Just because you don’t need a down payment, doesn’t mean you don’t need some cash. As I mentioned in last week’s post, you’ll need a few things to secure a loan: a clean credit history and a credit score over 680; at least one year of experience with strong production history; and some cash. In recent years, banks have wanted to see that the dentist has at least $50K in liquid, accessible accounts (i.e. checking or savings accounts). These days it’s often a bit more than that.

Again, that $50K is not a down payment. You won’t actually hand it over to the bank. Instead, they’re looking for a signal that you’re disciplined, financially responsible, and have some rainy-day funds at hand in case you run into some hard months.

How much does a dental practice cost?

The bottom line here is: a dental practice will not cost more than you can comfortably afford. You, your accountant, and especially the bank will see to that. I hope the numbers and examples above help paint a clearer picture than you had before. Find the right practice and you’ll not only be able to afford it, it could be a fantastic source of income for your entire career.

If you think you’ve found that practice, let me know. The purchase process is tough for a working dentist, and you need an advocate in your corner to keep it going smoothly. I’d be honored to help you.