Expanding your dental practice through acquisition can be a smart move—if you choose the right practice. But how do you determine whether an opportunity is worth pursuing? A thorough assessment ensures that your investment aligns with your long-term goals and financial expectations.
At Aligned Dental, we help practice owners evaluate potential acquisitions with a strategic, data-driven approach. Here’s what to consider before making your next move.
- Evaluate Financial Performance
The financial health of a practice is the first indicator of its viability. Key financial metrics to review include:
✔ Revenue trends over the past three years
✔ Collection percentage versus net production
✔ Overhead expenses and profit margins
✔ Accounts receivable aging and outstanding debts
A profitable practice with stable cash flow is more likely to offer long-term sustainability. Be cautious of practices with declining revenue or unusually high overhead costs.
- Assess Patient Base and Demographics
A strong patient base is essential for a smooth transition. Review:
✔ Active patient count and attrition rate
✔ Insurance participation and fee-for-service ratio
✔ New patient acquisition rate
✔ Patient demographics and potential for growth
A practice with a loyal patient base and a steady influx of new patients is more likely to sustain profitability after acquisition.
- Review Operational Efficiency
Operational structure and workflow play a big role in a practice’s success. Key areas to evaluate:
✔ Team retention and experience levels
✔ Scheduling efficiency and patient flow
✔ Technology and equipment conditions
✔ Opportunities for diversification of treatment offered and what is being referred out of the practice
✔ Compliance with industry regulations
If a practice has high staff turnover or outdated systems, you may face additional costs and challenges post-acquisition.
- Analyze Facility and Location
A well-located practice with a modern facility can increase your chances of long-term success. Consider:
✔ Location visibility and accessibility
✔ Lease terms or real estate ownership
✔ Facility condition and potential renovation costs
✔ Competition in the area
A practice in a high-traffic area with room for growth is more likely to yield a positive return on investment.
- Understand the Seller’s Motivation
Knowing why a seller is exiting can give you insight into potential risks. Ask:
✔ Are they retiring, relocating, or facing financial difficulties?
✔ Are they willing to stay on for a transition period?
✔ Have there been previous failed sale attempts?
A transparent seller with a clear exit strategy is preferable to one who seems eager to offload a struggling practice.
- Plan for Transition and Integration
A successful acquisition goes beyond financials—it requires a smooth transition plan. Consider:
✔ How the transition will be communicated to staff and patients
✔ Branding and marketing integration
✔ Technology and system conversions
✔ Training and onboarding processes
A well-structured integration plan ensures patient retention and operational stability post-acquisition.
Find the Right Acquisition for Your Growth Strategy
Assessing potential acquisitions requires a comprehensive approach that considers financial health, patient retention, operational efficiency, and long-term growth potential. If you’re exploring acquisition opportunities, Aligned Dental can help you make informed decisions that align with your business goals.
