The Naive Dental Practice Buyer

More articles in the ‘Buying a Dental Practice’ section:

In these changing dental times, it actually amazes me to see dentists paying over the odds for an over-priced dental practice. Yes, there is a significant demand for dental practices and yes, we receive inquiries daily from first-time buyers to expanding groups and existing principals. 

But what really amazes me is just how naive some buyers really are. 

Now, if you are a potential buyer the first question you must ask yourself is, who is the selling broker?

You may be wondering, why am I asking this?

To make it abundantly clear, some of the established groups don’t buy from certain dental brokers. To put it simply, these corporates believe such brokers have over-priced such practices and they are happy to leave them alone and wait for a naive buyer to come along and buy the practice themselves. Sadly, this is a regular occurrence where many such corporates have turned down dental practices because they are overpriced, waiting for someone less experienced to come and buy.

Let’s get this straight, just because some individual or broker is trying to get the best price for a particular practice, does not mean you have to buy it at that price.

In the last month, I’ve seen individuals willing to pay over 10 times EBITDA for very average practices, in very average locations, in the hope that they can grow the business further.

The current market is only 6 times EBITDA.

But what really gets my goat is a manufactured EBITDA figure which has been inflated significantly under the guise of what the future potential may look like.

Let me make this clear; do not believe anything the broker tells you. Calculate your own EBITDA, or get some professional help to do this for you. It’s the selling broker’s job to justify as high a number as possible. 

Finally, has anyone actually told the naive buyer that, when it comes to selling the practice that they have worked hard and added value to, the return on investment they were hoping for may not actually manifest itself.

Unless, I guess, they have another naive buyer come along.

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