Justin Reed (CPA, CFO advisor) presents a methodical approach to finding a dental practice location. He cites two core statistics—an ADA-derived average of ~1 dentist per 1,650 patients and a Health Policy Institute average collection of ~$600 per patient—to estimate mean annual collections (~$990,000). He emphasizes geographic disparities (example: San Diego ~1:400 vs some Midwest areas ~1:4,000), recommends using third-party market-data vendors (example: realscore.com) to research locations, and outlines a narrowing process (identify 10–20 viable areas, then rate down to 3–5 serious options).
Chapters
Welcome, associates. Today we are in FuelCell 2. I'm Justin Reed, CPA, CFO advisor here at practice. CFO. Today we're going to talk about something that's probably been on your mind for a while, maybe even since the day you started your dental program. We are talking about where to find your ideal practice to buy or to start up. Okay. And I'm sure that over time, maybe this has changed, but we feel that there's a method to go about this practice hunt. And today we're going to get into just a few steps that you can look at and utilize to really save time and efficiency as you go through this process. It's very much like buying real estate. So much of it is about location, location, location. So before we even start looking at very specific locations, it's important for us to understand a few key facts and fact number one, we got from the Dental American Dental association, and they produced a statistic that says on average in the US for every one dentist, there's about 1650 patients.
As an opportunity within a one certain geographic locations. So there's an opportunity for every one dentist on average to serve 1650 patients per year. Okay? Now fact number two, this was the Health Policy Institute that produced this statistic, and it says that for every patient that served within a year, the doctor collects on average, $600 per year. Okay? So if we use those two facts and do a little bit of quick math, we take our 1650 potential patients per year multiplied by our average collections of $600 per patient, and we arrive at about $990,000 in annual collections per year on average. And this is all throughout the U.S. okay? And this calculation is going to be essential to us because really we don't want to spend time focusing on areas where we just won't be able to meet our financial needs and the debt that we've taken on to buy and start up our practice. So we definitely want to save time here. And understanding this math is so essential that.
You know, we, we recommend that there are certain statistical resources that we use. But first, let's talk a little bit about geography. Why is geography so critical? And, and what have we seen? Well, we've seen that here in San Diego area, for instance, that patient to doctor opportunity ratio, I'll call it, that can be about one to every 400 patients, where, as if you look in the Midwest, in certain areas, that ratio is going to be somewhere around 1 to 4,000. So there's a wide disparity throughout the US.
That produces, you know vastly different statistics when it comes to opportunity to produce. And so back to statistical resources. There are companies out there that specialize in gathering this data. Not only the, the average patients that are in each location, but also the average collections per patient in each area. So we unfortunately are not affiliated with any of these statistical research type of companies. But a simple Google search will produce some companies like that. I know there's one that we've seen and used, it's called realscore.com out there. But I'm sure there's many others that you can look at to gather this information. And that's the homework portion, really, that starts off our practice hunt from there. Once we have that homework, we want to go ahead and narrow these options. We don't want to waste our time again on areas where the numbers just don't work out for us. That doesn't make any sense to us. We want to use this data to hone in on at this stage. Let's say maybe it's somewhere between 10 to 20 locations where the numbers make sense. Okay. And it's important that we don't limit ourselves during this process. What do I mean by that? Well, unless we're dead set on a specific area because our family lives there and we need to be very close to them, or really any other reasons that we might have emotionally driving our decision on location, it's important to remember that we don't really have control over the opportunities that exist in any specific area. So we want to keep our options open and we definitely, we want to keep.
Our ability to find the right practice as wide as possible throughout the process. Okay, so next, once we have once, once we've considered not limiting ourselves, and once we've kind of narrowed our options, then we're going to go ahead and rate our locations. And when we're done with rating our locations, we want to have a list of about three to five locations that we're really, really serious about. And at this point, I recommend actually.
Taking and writing down on pen and paper. Or you can type it out, but I feel like writing it down is even more beneficial at this point. But we want to get with our spouse or our significant other at this point. And we want to list out the pros and cons about each of these different locations that we're looking at. And we need to ask ourselves very personal questions at this point. You know, what matters most to my spouse and my kids? How long do I plan on living in this area? How does the cost of living in this area compare to the other, the other locations that are on my list at this point. You know, what are the opportunities for hobbies and recreation? So really we want to consider any factor that's going to be a benefit or a disadvantage to that particular location. When we're done again with this exercise, we'll have about three to five locations, potential locations ranked in order from one to five. And now we're really ready to start hunting in those locations. And we can really start by. A simple Google search these days would produce a lot more information than you think. There's a lot of brokers out there that have practice listings that we can look at in those locations. There's companies that match buyers and sellers. Practice CFO right now is actually working on a platform that will match buyers and sellers. And so you'll be able to find that information as you go ahead and start hunting for your practice. Finally, as much as we can find on the Internet, so much of dental practice sales is still very much word of mouth type of information. So it's important for us at this point to really tap into the geographic network within those three to five locations, really reach out to our suppliers, our dental CPAs, our bankers, our attorneys, the local dental society, the AGD, any local study groups or clubs, and even potential practice owners in the area to gather that insider information that you just won't be able to get on the Internet. Okay, so these are some things to keep in mind when you're searching for your practice. Hope it helps. Hope to see you soon. Remember, associates are on fire. See you next time.
