Buying or building a dental practice is one of the biggest choices new dentists face.
Many assume building from scratch is more expensive and complicated, while buying seems like the easier route since everything is already in place. But that’s not always true.
A pre-existing practice might come with hidden problems—outdated equipment, high overhead, or a weak patient base—that could make starting fresh the better option.
Let’s break down starting a dental practice costs of both approaches so you can decide which path makes the most sense for you.
Cost To Buy
When buying a dental practice, the purchase price is just the starting point. There are several other costs—some obvious, some hidden—that you need to budget for. Overlooking these can turn what seems like a great deal into an expensive mistake.
Here’s what you need to prepare for.
Purchase Price
The cost of a dental practice typically falls between 60% and 90% of annual collections. If the practice generates $1 million a year, expect to pay somewhere between $600,000 and $900,000. The final price depends on factors like location, patient base, equipment, and profitability. While the purchase price is the biggest cost upfront, it’s not the only one that matters.
Practice Loan Fees and Interest
Most buyers take out a loan to finance the purchase, and lenders don’t just hand out money without fees. If you’re taking a loan to buy a practice, expect to pay origination fees, closing costs, and interest on the loan. Interest rates vary based on your credit and the lender, but even a small difference can add up over time. Be sure to factor loan repayment into your monthly budget.
Working Capital
You’ll need cash on hand to keep the practice running smoothly, especially in the first few months. Working capital covers payments for employee salaries, supplies, rent, and other expenses before you start generating steady revenue. Lenders often require a set amount of working capital in your loan, but if they don’t, it’s still a smart idea to have at least three months’ worth of expenses saved up.
Equipment and Technology Upgrades
Not all practices come with modern, fully functional equipment. Even if everything is in working order, older technology might not meet your standards. Upgrading dental chairs, imaging systems, or software can easily cost tens of thousands of dollars. Before signing the deal, get a thorough equipment evaluation so you’re not caught off guard.
Legal and Accounting Fees
Included in the cost of buying is the cost of professional fees needed to comply with state laws and regulations. Hiring a dental-specific attorney and accountant is essential to avoid costly mistakes. Legal fees can range from $5,000 to $15,000, depending on the deal’s complexity, and accountants charge for reviewing financials and structuring the purchase properly.
Supply and Inventory Costs
Not everything in the practice transfer is included in the sale. Some sellers keep leftover supplies or have agreements with vendors that you’ll need to renegotiate. Stocking up on gloves, masks, composites, impression materials, and other essentials can add up fast, so check what’s included before closing the deal.
Cost To Build
Building a dental practice from the ground up gives you full control over the design, equipment, and patient experience, but it comes with significant costs beyond just construction. Here’s what you need to budget for.
Construction and Build-Out
The biggest upfront cost is the physical space itself. Whether you’re constructing a standalone building or leasing a space and doing a build-out, costs typically range from $150 to $300 per square foot. This includes plumbing for dental chairs, electrical work for high-powered equipment, cabinetry, flooring, and HVAC systems to maintain air quality. Construction timelines can also impact costs and further delays will add up to the costs of construction. That’s why getting a reliable contractor is also important if you want to be right on schedule.
Dental Equipment and Technology
Once the space is ready, you’ll need to fully equip your clinic with a dental chair, X-ray machine, handpieces, lighting, and sterilization unit. Advanced imaging systems, 3D scanners, and electronic health record (EHR) software add to the total investment but can improve efficiency and patient experience.
Office Furniture and Interior Design
Patients expect a modern, comfortable environment. Reception desks, waiting room seating, treatment room storage, and décor add up quickly. You need to prepare at least $30,000 to $50,000 for furniture and fixtures but this may differ depending on the size of your dental practice.
Permits and Licensing
Before you open your dental clinic, you’ll need to secure permits and approvals from state authorities to ensure you’re not violating state laws. You may also need to secure OSHA, HIPAA, and radiation safety certifications on top of the regular business permits. Some states also require environmental permits if you use certain chemicals or dispose of medical waste.
Staffing and Payroll
Hiring a front desk team, dental assistants, and hygienists means paying salaries before revenue comes in. Payroll for a small practice can start at $200,000 per year. Many dentists also offer hiring bonuses to experienced dental hygienists and staff to get a good team right from the start.
Start-Up Marketing
Marketing for a startup can easily reach $60,000 the first year due to the lack of awareness and patient base. This is also an area we see practice owners under budget and therefore their practices start up slower then it ideally should which then takes longer for them to ramp up!
Opportunity Costs
This is a cost that is often overlooked when doing a buy vs build analysis. The fact is that it will typically take a practice 18 months to 24 months to get to a point where the owner can take a reasonable distribution of profits to pay themselves for the production they are doing for the office.
This means for this time period the doctor is not being compensated or being under-compensated. This figure can easily reach $300,000 when compared to what they would earn if they were working at another office. This number is much lower when the doctor is buying an office because typically there will already be a patient base there for the doctor to work with from day 1, and their goal will be to expand that patient base and add on additional services.
Opening Your Own Dental Practice? We’re Here to Help—Year-Round
Whether you’re buying an existing practice or building one from the ground up, there’s a lot to consider—due diligence, bank financing, financial projections, and more.
At Virjee Consulting, we help dental practice owners and associates navigate these decisions with confidence. Our team of dental CPAs and industry experts will work with you to evaluate costs, profitability, and long-term growth potential, so you can move forward with clarity.
Have questions? Fill out our contact form, and we’ll get back to you within 24 hours.
In the meantime, you can learn more about how we help when buying a dental practice here.
Until next time!
