The Seller Refers Out a Lot of Dentistry. Is That a Problem—or an Opportunity?

The Seller Refers Out a Lot of Dentistry. Is That a Problem—or an Opportunity?

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When reviewing a dental practice for sale, buyers naturally focus on what the practice is currently producing.

But sometimes an equally important question is:

What isn’t the practice producing?

A general dentist may routinely refer procedures such as endodontics, oral surgery, implant placement, periodontal treatment or orthodontics to specialists.

A buyer who performs some of those procedures may immediately see an opportunity:

“If I keep those cases in-house, I can grow the practice.”

That may be absolutely correct.

But referred dentistry needs to be evaluated carefully. It can represent meaningful upside for a buyer, but potential production isn’t the same thing as existing production.


Why Dentists Refer Procedures

Every dentist has a different clinical comfort level and philosophy.

One owner may perform:

  • Molar endodontics
  • Surgical extractions
  • Implant placement
  • Clear aligner therapy

while another dentist refers virtually all of those procedures.

Neither approach is inherently right or wrong.

The important point when evaluating a practice is understanding which services the existing patient base needs but the seller currently sends elsewhere.

That can tell us something important about the practice’s growth potential.


Referred Procedures Can Be a Significant Buyer Opportunity

Consider a well-established general practice with a loyal patient base and a strong hygiene program.

The seller provides excellent general dentistry but routinely refers:

  • Endodontics
  • Implant placement
  • Complex extractions
  • Periodontal procedures

A buyer who already performs those procedures isn’t necessarily starting from scratch.

The patients are already coming through the practice.

The opportunity is to provide a broader range of their treatment in-house.

That potentially allows the buyer to increase production without relying entirely on attracting additional new patients.


But Don’t Count the Revenue Before You Earn It

This is where buyers need to remain realistic.

Suppose a seller tells you:

“I refer out $200,000 worth of dentistry every year.”

That doesn’t mean you should simply add $200,000 to your projected first-year production.

There are several reasons.

First, how was that number determined?

There may be a significant difference between a seller saying, “I refer a lot of endo,” and having practice reports that demonstrate how many procedures or cases are actually being referred.

Second, not every referred patient will automatically accept treatment from the new owner.

Some patients may:

  • Prefer a specialist
  • Already have an established relationship with the referral office
  • Require treatment beyond the buyer’s clinical comfort level

And finally, the buyer needs to be genuinely capable of performing the procedures.

Growth potential should be based on the buyer’s actual clinical abilities—not what they hope to learn someday.


Look at the Practice Data

When possible, buyers should look beyond anecdotal descriptions.

Useful information may include:

  • Production by procedure
  • Procedure-code reports
  • Referral patterns
  • Treatment plans
  • Current service mix

These reports can help identify what the practice currently does—and, by comparison, what it doesn’t.

For example, a practice with a large active patient base but very little endodontic or oral surgery production may warrant further investigation.

That doesn’t prove the opportunity exists.

But it gives the buyer a better question to ask.


Referred Dentistry Shouldn’t Increase the Price Dollar-for-Dollar

This distinction is particularly important for sellers.

A seller may understandably think:

“The buyer can make much more money than I do because I refer everything out, so my practice should be worth more.”

The growth opportunity can certainly make the practice more attractive.

But buyers generally aren’t purchasing income that hasn’t yet been generated.

The practice’s historical financial performance remains an important part of determining value.

The opportunity to retain referred procedures is better viewed as:

Upside available to the buyer after the acquisition.

That’s valuable—but it’s different from existing cash flow.


The Same Principle Applies to Other Growth Opportunities

Referred procedures are just one example.

Similar opportunities can exist when a seller:

  • Works limited days
  • Doesn’t offer certain elective services
  • Has unused operatories
  • Does little marketing
  • Doesn’t participate in certain procedures the buyer enjoys performing

A buyer shouldn’t automatically assume every opportunity will materialize.

But these factors can help distinguish a practice that has reached its ceiling from one that has room to grow.


What Sellers Should Do

If you’re preparing your practice for sale and refer significant treatment, don’t try to suddenly change your clinical philosophy simply to increase production before selling.

Instead, be prepared to clearly explain:

  • Which procedures you perform
  • Which procedures you routinely refer
  • Why you refer them
  • Whether you believe there is meaningful demand within the patient base

If reports are available to help demonstrate those patterns, even better.

A buyer with the right skill set may view what you don’t do as one of the practice’s biggest advantages.


What Buyers Should Do

For buyers, referred procedures should be part of the overall opportunity analysis.

Ask yourself:

  • Which procedures does the seller refer?
  • Which of those procedures can I confidently perform?
  • Is there evidence of sufficient patient demand?
  • What additional equipment, staff or training would I need?
  • How much of the opportunity can I realistically capture?

The goal isn’t to create the most optimistic projection possible.

It’s to identify realistic upside that fits your clinical abilities.


The Bottom Line

A practice shouldn’t necessarily be viewed negatively because the seller refers a significant amount of dentistry.

For the right buyer, the opposite may be true.

A strong patient base combined with a limited existing procedure mix can create an opportunity to increase production by keeping more treatment within the practice.

But the distinction matters:

Existing production helps support practice value. Referred procedures help demonstrate future potential.

Understanding the difference allows sellers to present the opportunity appropriately—and helps buyers make realistic decisions about what the practice could become under their ownership.


Looking for the Right Dental Practice?

American Practice Consultants works with dentists looking to purchase practices throughout New Jersey and Eastern Pennsylvania. We help buyers look beyond the headline numbers to better understand a practice’s strengths, risks and potential opportunities.

Contact us to join our active buyer list and learn about available practices.

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