During the last nineteen years, I have had the pleasure to list some of Australia’s best dental practices, both major city and regional. The difference between them is chalk and cheese.
Let me explain.
Example One
Practice in Northern Queensland town population 25,000 two dental practices in town, our practice 12 years old, in own premises (converted house 220 sq. mtr valued at 350K) two dentists, three chairs, OPG, Ceric, five support staff (all been there at least eight years) active patient base over last two years 5,800, last year’s fees $1,377,500 = $475.00 per patient average.
- Dentist fees 40% $551,000
- Wages bill $175,000
- Rent premise paid off but rental allocation $40,000
- Running cost inc lab fees approx. 250,000
- Subtotal $1,016,000
- Profit / EBIT of $361,500
- Partners income before tax inc dental commission $456,250 each
*Practice value based on EBIT $1,084,500 (discount applied for regional practice)
Example Two
Practice in South Sydney Cronulla population 18,000 seven dental practices in the suburb our practice 14 years old rented premises (125 sq. mtr) One full-time principal, three part-time dentists three chairs, OPG, three full time, four part-time support staff active patients last two years 6,200 last year’s fees $1,162,500 = $375.00 per patient average
- Dentist fees 40% $465,000 owner creates 45% of fees $209,250
- Wages bill $189,000
- Rent + Outgoings $85,000
- Running cost inc labs fees approx. $265,000
- Subtotal $1,004,000
- Profit / EBIT of $158,500
- Principal income before tax inc dental commission $367,750
*Practice value based on Profit / EBIT $554,750
**These figures are EBIT not EBITDA profit with add-backs included.
Looking at the difference, it’s easy to see why a dentist would be better off in regional practice. Understandably not everyone wants to live in regional Australia. Still, for a young, smart dentist, this is the way to pay off education debt, accumulate experience, and build a solid future even if for only five years.
Pros of buying a regional Practice.
- Less competition is a major factor considering there is now a dentist on every corner in major cities, new shopping strips or centres have at least three corporates and private dentists popping up.
- Lower running costs especially premises outgoings
- More secure staff, less recruitment issue.
- More loyal patients for regional practices, especially if you engage in some of the local community and school activities.
- Lower purchase value based around EBIT
- less stress
Cons of buying a regional Practice
- Distance to a major city if required
- The family may not want to travel to visit
- Possibly longer selling time
- Possibly less variety in shopping
- Schooling in later years may become an issue
I am sure there are many more Pros and Cons. Still, for the best part, a regional or country practice is the perfect start for any dentist wishing to purchase their first practice or move to a more peaceful lifestyle without losing income potential.
It’s interesting to note two of Australia’s most successful corporates 1300 Smiles, and Pacific Smiles started their roots in the country and are both still extremely strong in that environment.
If you may be looking to sell your practice or purchase one Please contact me personally for more information on how we can help
