Magnifying glass: dental practice valuation

Should You Buy an Urban or a Rural Practice?

Is it better to buy a dental practice in a rural or an urban area? Let’s look at the benefits and disadvantages of both.

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“Should I buy an urban or rural dental practice?” I get this one a lot.

I wish the answer was as easy as typing that phrase into Google. There are resources out there that try to tell you that there is one “right” answer. If that were the case though, do you think you’d ever see a dental practice outside a large metropolitan area?

The most accurate, no-nonsense answer is this one: It just depends. (Sorry, I wish there was a better one.)

Since there is no “right” or “wrong” answer, my goal is to simply help you think through the options and implications rationally. It’s always nice to have an unbiased, third party help you sort through the emotions of purchasing a practice.

Rural Considerations

Common Concerns

There are many people who think rural practices are out-dated, both in technology and treatment philosophy, and dingy in appearance with 1980s wallpaper still clinging to the walls for dear life.

Potential buyers have also expressed concerns regarding how they’ll be received. I have heard multiple times concerns about “What if they don’t accept me as the new doctor?”

I think it’s important to go into a situation with one eye open so you can be open to the fact that something may not be perfect, but humans have a tendency to find every little flaw or reason to not do something. Often that leads to regret.

Just remember: These concerns may be true for some rural offices out there, but that can be equally true for an office in the heart of any given city.

Potential Pros:

One thing I’ve noticed with many rural practices I’ve valued is that they often have high profitability.

If you’ve read our real estate post, you know that the location of the practice is what determines how much you pay, not necessarily how well you manage those expenses, like staff and supply costs.

Rural offices tend to have cheaper real estate than their metropolitan counterparts, even for larger facilities with better roadside visibility.

The cost of living in these areas is also lower than in the big city 40 miles away; therefore, your staff wages are likely going to reflect that as well.

These lower expenses mean lower overhead and higher profitability.

Some of the most profitable practices I have ever assessed have been rural offices.

Keep in mind that because of the higher profitability, they can sometimes come with a higher price tag. Don’t just assume “Nobody wants to live in Podunk, Texas so I can offer less.”

Another common praise I hear from buyers is the appeal of being the big fish in the pond. Many people find being the main doctor to a community a huge appeal. Great! That might work great for you. Just be sure you consider whether being a big fish in a rural pond really will make you happy, because you’ll be in that pond for a long time.

Urban Considerations

Much of what has been said about rural offices can just be the inverse for urban practices: likely higher cost of living but hey — the Costco is right there!

One main consideration here though is the competition.

In urban practices, you’re more likely to be another fish swimming around. You can get bigger than the others if you make sure to be the first to eat whatever pond fish eat, but that will require more effort than just having food thrown your way by a toddler on the bank. (Okay, the metaphor has been stretched far enough now, sorry.)

But maybe you don’t mind putting that effort in because you can have the nightlife you’re looking for or the accessibility to One-Day Prime delivery.

And the verdict is…

Some decisions can be life-altering, and you are on the cusp of making one of those decisions.

Wouldn’t it be nice if someone told us what to do like when we were kids? My kids hate it when I do this, but there will come a day that they will wish I still did!

You could try shaking a Magic 8 Ball, but I don’t recommend basing big life decisions on that.

Bottom line is that there are successful practices in both rural and urban areas. You just need to decide what suits your lifestyle and your clinical goals.