Merger Ahead

Merging two dental practices into one can lead to higher profits and better service for patients. How can you make a merger successful?

By Drs. Bill and Christina Blatchford

Merging two dental practices is a great way for any professional to increase their market presence and profits without starting a new office from scratch. Could a merger be right for you? Below, we discuss the reasons this type of transaction makes sense for many dentists. After that, we share some steps for finding a practice interested in merging with yours and ensuring the transaction goes smoothly.

Why do mergers make sense?

Sometimes dentists find themselves frustrated by high overhead and disappointing net returns. Many practices have more capacity (chairs and team members) than they have demand (new and returning patients). Thus, they’re forced to dump more money into marketing.

Merging two practices allows dentists to lower their overhead while increasing the demand for their services. For example, when a practice valued at $800,000 merges with one valued at the same amount, the cost of rent and utilities at both properties should remain the same. However, the number of patients served by the dentist will increase. When good systems are in place, including excellent scheduling and efficiencies in the ordering of supplies, a dentist can expect to see an increase in their profits.

There are benefits to patients as well. Oftentimes a dentist will purchase a practice that’s larger and has more modern equipment. That gives them an opportunity to affordably upgrade their technology and systems and provide a better overall patient experience. It’s also common for a dentist to buy a practice that provides complementary but different services. If the dentist can bring new services to their patients, it will cut down on the volume of outside referrals, which people appreciate.

A merger is an extraordinary opportunity to renew a practice. The vast majority of patients are habitual dental users. Thorough diagnoses and good sales skills can easily result in doubling a practice’s net profit within 12 to 15 months. Compare this to the cost of drawing new patients by traditional methods, and you can see why a merger is a win.

Making mergers successful

The first step in acquiring a new practice is sending a letter to dentists in your area to see if they’re interested in selling. Cast a wide net when you do. Sometimes people assume only older dentists are looking to transition out of a practice, but someone younger may be looking to move out of the area or change careers. A few weeks after sending the letter, follow up with a phone call or email.

When you begin evaluating practices, the No. 1 factor to look at is location. Make sure there are no physical or mental barriers that would keep people from traveling to the new area. Even something as simple as going to a different town or crossing a river can be a problem for some patients.

Make sure the dental practice has a similar financial setup to yours. Is the accounting system similar? Is it a fee-for-service practice or does it work with PPOs? If the dentist accepts insurance, what carriers do they work with and do these fit with your practice?

Consider the mix of services provided at the current practice.  Can you add value by providing services that the current dentist refers out? If yes, you can capture income that’s currently flowing to a specialist.

If you’re having trouble finding a dentist interested in a merger, consider working with a practice broker. One of the most important things you can do is find a seller who is a good “match” for you.

Once we’ve found that practice, we can share next steps and best practices for making a secure transition, including where to seek proper legal counsel. We’ll also help you through the initial process of messaging the sale to the community, and provide regular follow-ups to make sure all aspects of your purchase are going well. Our goal is to make sure the transaction is a win for everyone.

Drs. Bill and Christina Blatchford of Oregon are co-CEOs of Blatchford Solutions, a dental business coaching program that has worked successfully with over 3,000 offices nationwide in the last 40 years. They are also excited to have added Blatchford Transitions, a dental practice brokerage, offering the same level of customer service and results that Blatchford Solutions is known for—aiding sellers and buyers to make transitions profitable and smooth.    

Learn more about how Blatchford can help your practice at www.blatchford.com. Contact them at info@blatchford.com or (866) 495-7080.