The decision between buying an established dental practice versus starting a new one is one of the most fundamental choices a practice owner makes. Both paths lead to practice ownership, but they have vastly different financial profiles, timelines, challenges, and outcomes. Over 30 years of dental consulting, I’ve worked with dentists pursuing both paths, and I’ve observed that success requires choosing the path that aligns with your resources, personality, risk tolerance, and timeline.
There’s no single right answer for every dentist. The right choice depends on your financial situation, your market, your personality, your network, and your long-term vision. This guide walks you through the advantages and disadvantages of each path so you can make an informed decision.
The Case for Buying an Established Practice
Buying an established practice means purchasing a practice with an existing patient base, team, reputation, and revenue stream. This path offers several significant advantages.
Financial Advantages of Buying
Immediate revenue and profitability. A well-run established practice generates revenue from day one. You don’t have a ramp-up period where you’re building a patient base with minimal income. You can achieve profitability much faster than with a startup.
Predictable financial performance. An established practice has financial history. You can see what the practice has generated in the past, which helps you project future revenue and profitability. Starting a practice requires projections based on assumptions that may not materialize.
Shorter path to positive cash flow. With existing patients and revenue, you reach positive cash flow much more quickly than with a startup. This matters if you have limited personal capital or need the practice to support you financially soon after taking over.
Asset stability provides financing options. Because an established practice has hard assets (patient base, equipment, furniture) and revenue history, it’s easier to finance. Lenders are more willing to finance an established practice with demonstrated revenue than a startup.
Operational Advantages of Buying
Existing team and workflow. You inherit team members who understand operations, patients, and systems. You don’t need to hire and train everyone from scratch. A stable team is valuable, even if you eventually make changes.
Established patient relationships. Patients come with their own expectations, recall patterns, and treatment histories. You don’t need to build relationships from zero. Patients already trust that they can get quality care.
Established systems and protocols. The practice has systems for scheduling, billing, sterilization, clinical protocols, and patient communication. You might change some systems, but you don’t build them all from scratch.
Immediate credibility in the market. An established practice has reputation and presence in the community. You immediately inherit that market presence and patient confidence.
Time Advantages of Buying
Buying takes you to ownership much faster than starting from scratch. You can see financial return on your investment faster because revenue isn’t starting from zero.
The Challenges of Buying
Higher initial capital requirement. Buying an established practice requires more upfront capital for the purchase price plus closing costs. You’re financing 70 to 80 percent of a significant purchase.
Integration and transition challenges. Taking over another person’s practice creates integration challenges. Team dynamics change. Patients adjust to a new owner. Systems need transition or integration.
Limited control over existing decisions. You inherit the practice as the previous owner left it. Some decisions are already made. You might want to change things but are bound by existing contracts or team expectations.
Risk of patient loss during transition. If patients came specifically to see the previous owner, some will leave when you take over. Patient retention during transition requires deliberate planning.
Risk of overpaying. If you don’t evaluate the practice thoroughly, you might overpay. You’re committed to loan payments on a potentially overpriced asset.
The Case for Starting a Practice
Starting a new practice from scratch means building everything yourself. This path offers distinct advantages if you’re willing to weather the startup period.
Financial Advantages of Starting
Lower initial capital requirements. While startup costs are substantial, you don’t pay a purchase price for patient goodwill. Your startup capital goes to equipment, facility setup, and operating expenses, not to buying someone else’s practice.
You control pricing and fee schedules. You set your own fees and insurance participation from day one. You’re not locked into the previous owner’s fee schedules or insurance contracts.
You avoid overpaying for a practice. You’re not betting on the valuation of someone else’s practice. Your financial success depends on how well you build the practice, not on whether you paid a fair price.
You can design your ideal practice. You build your practice according to your vision: your schedule, your clinical philosophy, your team structure, your services, your patient communication approach. Nothing is already determined.
Operational Advantages of Starting
Clean systems and protocols. You build systems to match your preferences and needs. You don’t inherit someone else’s legacy systems or need to integrate different approaches.
You hire your ideal team. You recruit and hire team members who fit your culture and approach. You don’t inherit staff you may not have chosen.
You establish your reputation. Your practice’s reputation is built on what you do, not on what the previous owner did. You’re not managing expectations based on what patients expect from the previous owner.
You can specialize or differentiate. You can develop specific service offerings, patient populations, or clinical approaches that differentiate your practice. You’re not locked into what the previous practice was doing.
The Challenges of Starting
Long path to profitability. Starting a practice typically requires 2 to 3 years to reach profitability (where your income exceeds operating expenses plus loan service). This is a significant investment period where you’re likely earning less than you would as an associate.
Slow patient acquisition. Building a patient base takes time. You’ll see fewer patients in year one than in years two and three. Your revenue will grow gradually as your patient base builds.
Uncertain financial projections. Your revenue is based on assumptions about how many new patients you’ll acquire and how they’ll accept treatment. These assumptions may or may not prove accurate. Some startup practices exceed projections; others underperform.
Higher personal financial risk. With less predictable revenue, you’re taking on more financial risk. You need substantial personal capital reserves to weather the lean startup years.
Significant personal time investment. Building a practice from scratch requires you to do everything. You’re the clinician, the marketer, the manager, the person who handles administrative tasks. This is exhausting in the startup years.
Financing challenges. Lenders are less willing to finance startups than established practices because there’s no revenue history or patient base as collateral. You might need a larger down payment or might not qualify for financing.
Facility and equipment challenges. You need to secure a facility and equip it. This requires capital and takes time. Finding the right location and designing the right operatory setup takes effort.
Financial Comparison: Buying Versus Starting
Let’s compare the financial realities of each path with illustrative numbers.
Buying an Established Practice Example
Initial capital:
- Purchase price: $500,000 (65 percent of $770,000 annual revenue)
- Down payment (25 percent): $125,000
- Closing costs (2 percent): $10,000
- Working capital: $30,000
- Total capital required: $165,000
Financing:
- Loan amount: $375,000
- Loan term: 7 years at 7 percent interest
- Monthly payment: approximately $5,600
Year one revenue and profitability:
- Projected annual revenue: $750,000 (accounting for 3 percent transition loss)
- Projected expenses (including loan payment): $580,000
- Projected net income available to you: $170,000
Timeline to break-even: Already cash positive in year one
Starting a New Practice Example
Initial capital:
- Facility lease deposit and setup: $20,000
- Equipment and furniture: $120,000
- Initial supplies: $10,000
- Marketing and patient acquisition: $20,000
- Working capital: $30,000
- Total capital required: $200,000
Financing:
- Loan amount: $150,000 (if you can get it; many startups require more down payment)
- Loan term: 5 years at 7 percent interest
- Monthly payment: approximately $2,850
Year one revenue and profitability:
- Projected annual revenue: $150,000 (building from zero)
- Projected expenses (including loan payment): $200,000
- Projected net loss: $(50,000)
Year three revenue and profitability:
- Projected annual revenue: $600,000 (assuming successful growth)
- Projected expenses (including loan payment): $450,000
- Projected net income available to you: $150,000
Timeline to break-even: Year two or three, depending on patient acquisition success
Financial Summary Comparison
In the buying scenario, you have higher initial capital requirements and higher loan payments, but you reach profitability much faster. In the starting scenario, you have lower loan payments but operate at losses or low profitability for the first two years.
Over a 10-year period, the buying scenario might provide better financial returns because profitability begins earlier. However, if your startup succeeds and you reach profitability by year three, the long-term financial outcomes could be comparable.
Market and Location Considerations
Your market affects the viability of each path.
In well-served markets, buying an established practice might be preferable to starting because building new patient volume is difficult when existing practices already serve patient demand. Existing practices have established patient bases and referral relationships.
In growing or underserved markets, starting a practice can be viable because patient demand supports new practices. You can build market share because population growth creates demand.
In competitive markets, buying might be safer because you inherit an established position. Starting requires you to compete immediately with established practices.
The Personality Dimension
Your personality and preferences matter significantly.
Choose buying if you:
- Prefer established systems and structure
- Want to reach profitability quickly
- Are not comfortable with extended periods of lower income
- Prefer managing an existing team to building one from scratch
- Like to inherit some decisions already made
- Prefer less personal time investment in building infrastructure
- Want more predictable revenue
Choose starting if you:
- Prefer building everything according to your vision
- Are comfortable with extended startup periods
- Can weather 2 to 3 years of lower income or losses
- Enjoy building and training a team
- Want complete control over clinical approach and practice culture
- Prefer making all strategic decisions
- Are willing to invest significant personal time in startup
The Timeline Dimension
If you need income to support your lifestyle soon after ownership, buying is more likely to work. If you can live off savings or spouse’s income for a few years, starting is more viable.
The Risk Dimension
Buying concentrates your risk on paying a fair price for an existing practice. If you overpay, you’re burdened with excessive loan payments. The main risk is overpayment.
Starting concentrates your risk on patient acquisition and building practice volume. If you can’t attract patients or they don’t accept treatment, your revenue suffers. The main risk is not reaching projected growth.
The Hybrid Path: Partnership or Percentage Ownership
Some dentists find a middle path: buying a percentage of an existing practice with a path to future full ownership. This reduces upfront capital, allows you to learn the practice, and provides more stability than starting from scratch, while still offering less risk than buying a full practice.
Making Your Decision
Evaluate each path honestly based on your financial situation, your personality, your market, and your timeline. The right choice for you depends on these factors aligning appropriately.
If you choose buying, work with professionals to ensure you evaluate the practice thoroughly and don’t overpay. If you choose starting, work with professionals to develop realistic growth projections and ensure adequate financial reserves.
Whichever path you choose, approach it with clear eyes about the advantages and challenges. The dentists who succeed are those who chose their path deliberately and prepared accordingly.
Contact JoAnne to discuss which path aligns with your situation. With MBA expertise in practice acquisition and 30+ years of helping dentists navigate practice ownership, JoAnne can help you analyze your specific circumstances and choose the path most likely to lead to your success and satisfaction.