Startup vs Acquisition, Which Path Actually Wins?

Gary Takacs: Welcome to another episode of The Thriving Dentist Show. The title is Startup Versus Acquisition: Which Path Actually Wins? First announcement: a one-hour webinar on August 27th, 6PM Eastern. The webinar is titled The $500,000 Question: What Your Dental Practice Is Really Worth In 2026.

Gary Takacs: Come join us. You will get an hour of CE with no tuition cost. Register at thrivingdentist.com/events. Second announcement: a top clinical tip from Dr. Darryl Burke on three essential CBCT views for every implant case.

Dr. Darryl Burke: When planning an implant placement on a CBCT, there are three essential views. First is the sagittal view. The most important cross-sectional image. It shows you bone height, ridge width, implant angulation, and the relationship to critical anatomy like the sinus or inferior alveolar nerve. This is where implant length and diameter are primarily determined. Second is the axial view. This top-down view tells you where the implant is positioned in the arch. It evaluates mesiodistal spacing, buccolingual positioning, root proximity, and the path of the mandibular canal or mental foramen. This view prevents implants from being placed too facially, too lingually, or too close to adjacent teeth. Third is the coronal view. This shows the ridge and sinus in the frontal plane and confirms whether the implant is centered within the bone and follows the proper trajectory. In simple terms, sagittal tells you how big, axial tells you where, and coronal confirms that you are centered and safe.

Naren Arulrajah: Welcome back to The Thriving Dentist Show. Today is Startup Versus Acquisition: Which Path Actually Wins? Both have pros and cons. Startups are appealing because you can do anything you want. The downside is you start in a big financial hole. When you first open, expenses are real and revenue is close to zero. You keep paying bills until you break even.

Naren Arulrajah: An acquisition is like buying a used home. Not all the features you want, but maybe 80 percent. The benefit is it is move-in ready. You do not have to go through the pain of building up a patient base while losing money. Most people are good at acquisitions because the bottom is sealed for you. On day one you have patients. In month one you have revenue. But you can still mess up an acquisition. It is not a slam dunk.

Naren Arulrajah: Who better to talk to than Gary? I know one practice that became a Gary client before even buying the practice. Gary helped him get a good deal. In the first year, this doctor grew profit by 50 percent. He was making around 400,000, and by year-end was making 600,000. So Gary, startup or acquisition? What is your initial thought?

Gary Takacs: Either choice could be good depending on circumstances. But I have sadly experienced a number of clients who did startups and said, Knowing what I know now, I would not have done a startup. One main reason is they get sidetracked by how the office looks. It is dated, old equipment. But they get fixated on that. The practice that Dr. Paul and I bought in 2007 was the epitome of a practice fixer upper physically. Naren, when you look at all the components of buying a practice, what is the most important, most valuable part?

Naren Arulrajah: If I were to buy a practice, I would look at the machinery of the practice. How many new patients are they getting? How many active patients do they have, meaning patients who have been there in the last 18 months? How is the team? What is the track record? Am I getting my money worth? I would look at what is beneath the aesthetics. What is the machine I am buying? I can change carpet. It will not cost me a half million.

Gary Takacs: I will answer it more bluntly. The patients are the most important asset within the practice. And when you are doing a startup, what is your patient base? Zero. Nothing. Nada.

Naren Arulrajah: From experience, a lot of people who start a practice do not realize they have expenses from day one. Even though their revenue is zero, they have to pay rent, capital investments, fixtures, upgrades, and technology. Usually a few hundred thousand dollars, maybe even a half a million or 700,000. So you have a bill on day one, but revenue is zero, and they do not allocate for the losses.

Gary Takacs: Using simple round numbers, they are looking at buying a practice listed at a million dollars. And yet they look at it, and it is kind of dated. So they say I could borrow a million dollars and build my ideal practice with brand new equipment and brand new everything. But there are no patients. They make the mistake of getting fixated on the physical plant, not the operational aspect. Now, when do startups make sense? One: going into an area that is underserved. Two: you have the cash or can borrow resources to fund marketing until you have a big enough patient base. Three: you do not need to take a paycheck out of your practice for the first 18 months, perhaps because of family money or spousal income, and you can plow it all back into growing your practice. Those are three scenarios where a startup makes sense. If your situation does not match any of those three, do not do a startup.

Gary Takacs: In most cases, when doctors are really honest with themselves, none of those three situations apply. Maybe they have enough to go a month or two without income. Would you advise them to do a startup?

Naren Arulrajah: No. Most dentists are not finance people. You do not understand the math of how much money you are going to lose for how long. The stress of not making enough money to pay your bills will kill the practice. You have to really think it through and have your numbers in order.

Gary Takacs: There is a consulting company in the US that specializes in startups. One thing they recommend is to sign up for every PPO plan you can find. I do not disagree with that strategy necessarily. But beware of what you ask for. If your plan is to sign up for every PPO plan and then resign once you get a big enough patient base, that can be a very tough stream to cross. The ones in your practice are there because you take their plan. If a young dentist committed to doing a startup asks, "Should I sign up for plans?" I would say yes. But also plan on backing back out of those as quickly as you can.

Naren Arulrajah: The million-dollar question is, because PPOs keep a lot of the money and only pay you the rest in the form of a write-off, the PPO tax, as Gary calls it, is the juice worth the squeeze? A lot of times it is not. You are trapped. You have a loan and obligations, and you feel like you cannot get out, so you end up doing something you hate.

Gary Takacs: The real advantage of buying an existing practice is you are also buying cash flow. You want to look for a practice with untapped potential. You do not want to pay for potential, and the bank will not loan money on potential. Maybe it is an office with a very limited range of clinical services, and you are going to add other services right off the bat. Historically, acquisitions have a very high success rate. The failures are minuscule by percentage compared to startup failures. The real advantage is you have cash flow and you are statistically set up for success. You can add services that were not being done, and maybe the practice has never done any external marketing, and now you can do a brilliant external marketing plan.

Gary Takacs: One doctor had a good sense of humor when I asked if he could go 18 months without taking a paycheck. He said he might be good for about 18 minutes. So if that is your situation, do not do a startup.

Gary Takacs: We have a client that joined Thriving Dentist Coaching after a relatively new acquisition, owning the practice for less than a year. This practice was producing around a million in full fees. However, collections were slightly less than 700,000. The difference was insurance write-offs. The valuation was based on the 700,000 in annual collections. So: million in production, collecting 700, 300,000 in write-offs. He was spending 25,000 a month through those PPO write-offs.

Gary Takacs: We spent time strengthening the practice from a relationship-driven aspect and started resigning from plans early in his acquisition. He became an Ekwa client. So now he is spending 15,000 a year on marketing instead of 300,000 in write-offs. In his first full year of owning the practice, he went to producing 1.2 million and collecting a million. That is 20 percent growth. It had to do with adding services that were not being done before and becoming more effective at case acceptance.

Gary Takacs: We are now in the second year, looking at reducing that 200,000 write-off from insurance. Look at the economics. He was nervous buying a practice and said, Gary, if I would have known this could be the economics, I would have become a practice owner sooner. The goal: that practice producing a million and collecting 700 could become a practice producing 2 million and collecting 1.9 million within two to three years. The economics work really well.

Naren Arulrajah: When you are buying a practice, you are buying patients. People who will keep coming to you as long as you do not mess it up. You have steady cash flow. A practice collecting 100,000 a month with 60 percent overhead, the Thriving Dentist coaching standard, leaves 40,000 after expenses. After paying 8,000 a month on the practice loan, the doctor keeps 32,000 a month. Not stressed. The only focus is adding new patients to replace those being lost and investing in marketing to grow further. If you are in a startup with no patients, you might have 30,000 in expenses and zero revenue. You are losing money.

Naren Arulrajah: If you want to acquire patients quickly in a startup, you have to depend on ads. Ads are five to ten times more expensive than SEO. A patient through an ad costs 300 to 400 dollars. The same patient through an SEO machine costs 60 dollars. You have to invest five times as much in upfront marketing before you get to break even. Except for a few practices that have done the math and put 300,000 in marketing funds in the bank, the others tend to struggle.

Gary Takacs: Most bankers are not fond of loaning money for a marketing budget because they loan on tangible assets, equipment, and build-out costs. For marketing, they say just sign up for insurance.

Naren Arulrajah: Unless you have your own money out of pocket, you do not have the funds to buy the patients you would have gotten with an acquisition. From a marketing perspective, if you are conservative and want the safer route, buy a good practice for the right price. Do your diligence. Then use marketing to grow it further. With Ekwa, organic SEO-based marketing is 1,250 a month, or 15,000 a year. Very affordable, especially when you already have cash flow coming in. Your cost of acquiring a new patient would be 60 to 70 dollars versus 300 to 400 with ads.

Gary Takacs: Or the ongoing PPO tax, paying forever if you are in network. I have a story as we wrap up. I had a client I worked with from the very first day he became a practice owner in 1990 until he retired at the end of 2025. 35 years. He bought a practice in California that was dated. He said, The first thing I am going to do is remodel everything. I advised against it. I said, Connect with patients first for a year, then do your remodel. Make the first year about getting them to know, like, and trust you. People do not like change.

Gary Takacs: He listened to me but still did the big remodel. About six months in he said, Gary, I should have waited. You would not believe how many conversations I have with patients about which fabric to choose and which color to use. Everyone wanted to be a cook in the kitchen. Completely distracting from getting to know his patients.

Gary Takacs: It ended up working out fine. It was a 35-year run. He did extremely well. About two years in he reduced insurance dependence and, shortly thereafter, went completely fee-for-service. He said, One of the few things I would do differently is not do that remodel right away. Connect with patients first. A great example of a client who made the right decision acquiring a practice, did very well financially, loved his career choice, and truly enjoyed his 35-year career.

Gary Takacs: As we wrap up, if you are thinking about a startup, run, do not walk, and set up a marketing strategy meeting with Ekwa. You want a website before you open, phones answered before you open, and branding started before you open. And if you are acquiring a practice where marketing has been limited to PPO plans, set up a marketing strategy meeting with Ekwa. Naren, what is the URL?

Naren Arulrajah: The link is ekwa.com/td . We spend six hours researching you. If you are a startup, we look at your area. If you are buying an existing practice, we look at the practice plus all competitors and come up with a plan. Our goal is to help you dominate so your cost of acquiring a new patient is less than a hundred dollars versus three to four hundred with other alternatives.

Gary Takacs: Do that now. And if you are in the middle of making this decision yourself, reach out to me and schedule a coaching strategy meeting. Naren and I are both huge fans of entrepreneurship in dentistry. From my vantage point, I think the best thing any dentist can do is to become a practice owner. It is the best career path if you are suited for it.

Naren Arulrajah: Absolutely agree. Both of us own businesses. You call the shots. You decide who you want to take care of, who you want on your team. There is no price for that freedom. Business ownership is one of those key ways to pursue happiness and pursue your dreams.

Gary Takacs: Every career path in dentistry can be rewarding. But of all the different paths, I think becoming a practice owner, if you are suited for that, is the best. If you would like to talk to me about that, go to thrivingdentist.com/csm. It stands for Coaching Strategy Meeting. Love to share what I have learned over the last 46 years. If you know a doctor trying to decide between startup and acquisition, share this episode with them. Thanks for the privilege of your time, and we look forward to connecting with you on the next Thriving Dentist Show.