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Buyer Trends in Dentistry: Understanding the Current Market Dynamics

Buyer Trends in Dentistry: Understanding the Current Market Dynamics

As the industry evolves, certain types of practices and locations have become more desirable, while others face greater challenges in attracting buyers.

Manjit Jutla

09/07/2024

Buyer Trends in Dentistry: Understanding the Current Market Dynamics
The dental practice market has seen significant shifts in buyer preferences and trends over the past few years. As the industry evolves, certain types of practices and locations have become more desirable, while others face greater challenges in attracting buyers. This article looks into the current buyer trends in dentistry, highlighting key factors that influence purchase decisions.

Popular Practice Types: Private and Mixed Practices
Private practices, or those mixed with a small NHS component, are increasingly popular among buyers. The appeal lies in the greater scope for growth and development that these practices offer. Buyers are attracted to the potential for expanding services, increasing patient numbers, and enhancing profitability. Unlike fully NHS-dependent practices, private and mixed practices provide more flexibility and higher revenue potential, making them the preferred choice for investment.

Room for Expansion: A Key Attraction
Another critical factor in buyer decisions is the potential for expansion. Practices that have the physical space and capacity to grow are highly sought after. This includes additional rooms for more treatment chairs, potential for extended hours, or even the addition of new services. Buyers are keen to invest in practices where they can envision substantial growth and increased revenue streams.

Capitation Plans: A Stable Revenue Source
Capitation plans are another attractive feature for dental practice buyers. These plans provide a steady and predictable income, reducing the financial risks associated with fluctuating patient visits and treatment costs. Practices with established capitation plans are particularly appealing as they offer a solid revenue base and financial stability, which is a crucial consideration for both individual and group buyers.

Group Buyers: Structured Offers and Risk Mitigation
Group buyers are a significant force in the dental practice market, often looking to tie in for three to five years. Their offers are typically structured with deferred elements, commonly in a 70/30 split. This means that 70% of the purchase price is paid upfront, while the remaining 30% is deferred and tied to performance targets or other conditions. This structure aligns interests and mitigates risks, ensuring that the practice continues to perform well post-sale.

Practices with multiple partners are particularly attractive to group buyers. Having several partners helps spread the responsibility and support for the practice after the sale, reducing the risk associated with the transition period. This collaborative approach ensures that the practice maintains stability and continues to thrive, making it a less risky investment.

Location Preferences: Urban, Suburban, and Rural Areas
Location plays a crucial role in the desirability of a dental practice. Affluent urban and suburban areas, especially those close to major cities, are the most popular. These locations offer a higher patient base, better recruitment opportunities, and greater visibility. Practices in these areas can command higher prices and attract more interest from buyers.

Conversely, rural areas are less popular and often take longer to find buyers. The difficulty in recruiting staff in these regions mirrors the challenges in selling practices. However, there is a buyer for every practice, and with the right marketing and positioning, even rural dental practices can find suitable buyers.

Ground Floor Presence: Accessibility and Visibility
Historically, many dental practices were located on the first floor of buildings. However, ground floor practices are now far more sought after. The reasons are twofold: accessibility and visibility. Ground floor practices are easier for all patients to access, including those with mobility issues, and they offer better shop window frontage, which can attract passing trade. This enhanced visibility and accessibility make ground floor locations a premium feature in the eyes of buyers.

Key Takeaways
Understanding these buyer trends is crucial for both sellers and prospective buyers in the dental practice market.

Most attractive features:

  • Private or mixed practices
  • Room for growth
  • Stable revenue sources
  • Prime locations

Beyond this, we have seen that group buyers favour structured deals and practices with multiple partners to ensure a smooth transition. While urban and suburban locations are preferred, with the right strategy, practices in all areas can find interested buyers.

Stay informed as the market continues to evolve, so that you can make better, more informed decisions for your business.

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Frequently Asked Questions

How long will it take to sell my dental practice?

The length of time can vary depending on the practice type and buyer type. Typically a practice sale completes within 4-10 months. For a more detailed discussion about your own circumstances please contact us.

When is the right time to sell my dental practice?

What are the current dental market trends?

What do buyers look for in a dental practice purchase?

What documentation will I have to prepare to sell my dental practice?

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