Should You Use a Dental Broker When Buying a Practice?

If you want to buy a dental practice, unfortunately, there aren’t real estate agents for dentists who solely provide buyer representation. Therefore, you might end up working with a dental broker to connect you with available practices and guide you through the process.

But a dental broker might not be in your best interest since they represent the seller and earn large commissions. Here’s what you need to know about using a broker when buying a dental practice.

What is a dental practice broker?

A dental practice brokerage facilitates the selling and buying of dental offices. This might include practice assessments and valuations, negotiations and contracts, securing financing for the sale, and assisting with the dental practice transition from one owner to another.

Dental practice brokers can streamline the buying and selling process since they act as a pseudo mentor. But their primary purpose is to sell dental practices.

So, unlike when you buy a home and hire a real estate agent to act on your behalf, a dental practice broker will manage both sides of the transaction — buying and selling. Therefore, your interests aren’t going to be their sole focus.

How do dental practice brokers get paid?

Dental practice brokers typically charge, on average, 10% of the selling price for their transaction services. However, the commission rate might vary depending on the broker and listing agreement.

Consider that real estate commissions are generally 6% of the sales price (split amongst the buyer’s and seller’s agents). It’s understandable why critics say dental practice brokers have an easier path but reap bigger rewards than real estate agents.

They aren’t hustling to compete in a saturated market like real estate agents. Nor are they playing hardball during negotiations. Instead, they’re matching qualified buyers with sellers and buffering the transaction and transition processes.

But the dental practice market is very fragmented, so it’s more of an old-school approach of getting listings and building a network of qualified buyers. After all, there’s no Zillow for dental practices. So, higher fees are generally expected for this type of niche service.

How to find a dental practice without using a broker

If you can find a dentist looking to sell their practice without a broker, you can save a lot of money for both you and the seller. But there aren’t a lot of people who represent buyers for dental practices, which is why many dentists end up using a dental practice broker.

That said, some dentists choose to build an advisory team to help them navigate the many decisions that come with a dental practice sale. This team might include certified public accountants (CPA), attorneys, and practice management advisors or consultants who have dental-specialty expertise.

A good advisory team can help you:

• Scope out existing locations and provide independent practice appraisals.
• Work through legal requirements and ensure all paperwork is in order.
• Understand the financial aspects of the purchase (e.g., tax implications, structuring to maximize revenue, etc.)
• Secure practice financing with a dental-friendly lender.
• Provide guidance on day-to-day operations once the purchase is finalized.

How do you find these services with someone who has experience buying dental practices? The simple answer: Tap into your dental network.

Be active with your state or local dental association

Get involved with your state dental association and local dental societies. Attend events, lend your expertise and network with other dental professionals regularly. Ask who they recommend and do not recommend for dental practice acquisition services.

Join Facebook groups for the dental profession

There are a ton of online resources and networking opportunities for the dental community. 

Facebook groups are a free and convenient way to tap into a large network of dentists. Here are several Facebook groups to get you started:

• Dental Nachos
• Dental Success Institute
• The Business of Dentistry
• For Dentists, By Dentists
• Dental Entrepreneurs

You can even find masterminds geared toward dentists if you’re willing to throw down some cash.

Check online dental practice classifieds

Use the power of the internet to find potential dental practices for sale on your own. Here are a few sites to explore:

• American Dental Association (ADA) Marketplace
• Dentaltown Classifieds
• Provide Practice Listings
• Dental Post Classified Listings

You can also find dental practice listings on various broker sites.

Use word of mouth

Don’t overlook the importance of in-person networking. If you’re aiming to move to a new area, reach out to local dentists. Take them out to lunch, play a round of golf, buy them a drink… whatever you’re comfortable with.

Basic networking can unlock dental industry opportunities you wouldn’t have known about otherwise.

Alternatives to buying an existing dental practice with a broker

Dental brokerage firms have a strong interest in pushing you to buy an existing practice rather than pursuing other ways of owning a practice. It makes sense, considering they represent the seller and make a large commission from the transaction. But buying an existing practice isn’t your only option.

Depending on your situation, you might be better off buying in at your current office as a partner. Maybe there’s a retiring partner or practice owner who’s ready for the next phase of their life. 

Alternatively, a start-up practice might make sense, depending on the area and your financial situation.

Why you should consider dental practice broker incentives before buying

Dental practice buying and selling is a relationship-focused business. There isn’t a huge market, so it can be challenging to find viable dental practice options when your expertise is in dentistry, not necessarily real estate.

Using a broker can seem like the most obvious solution. But you must be aware of their commission structure. More importantly, you need to recognize that they’re representing the seller even if they’re marketing makes it sound like they’re primarily in your corner.

If you decide to use a dental broker, you should, at minimum, get a dental practice valuation from an independent source. Since brokers ultimately represent the seller and collect a hefty commission, there's more of an incentive to increase the price. Plus, you might not be getting the whole picture when it comes to the financial state of the practice.

Networking can provide a solid foundation for dental practice leads. But it can also give you trusted sources for recommendations for dental-specific CPAs, attorneys, and other professionals who will do their due diligence on your behalf.

If practice ownership is on your mind, get preapproved for a dental practice loan using the SLP Marketplace. Fill out the quote form below to see what you might qualify for.