Being a dentist, small business owner, and having your family life, is a delicate balance. Your work days are filled with the day-to-day tasks of seeing patients, and doing paperwork. If you are looking at selling or buying a practice, that goes on top of what you're already doing. A big purchase requires time and patience. It also requires research, a team of specialists, checklists, and timelines. That's why we are going to dive into the buying side of a dental practice transition.
Who are you as a buyer?
As the buyer, who are you? Are you a new dental graduate? Have you been working under a dentist and wish to purchase your own practice? Are you moving from out of town? Are you looking to add a practice to your network?
Regardless of which of these you are, the first thing you need to figure out is the area where you want to purchase a practice. This initial decision will dictate your next steps in the buying process.
Location, Location, Location
More rural areas with fewer practices might not be ready to sell right away, and you'll need to wait. Whereas a larger city with more practices will have greater availability and turnover.
Once you've selected the area it's time to hire the first member of your team: a dental specific broker. Your broker will help you find a practice that's looking to sell and will perform any sale negotiations necessary.
Budgets: What can you afford?
Next, you'll want to speak to your accountant. You're ready to buy and you know where. Financially, you'll want to be ready when something becomes available. Your accountant can create a budget for your purchase. A budget should also be made for after you've purchased your practice. This is so that you can: 1) not only afford to purchase it, but 2) ensure that you can keep it a thriving business.
Knowing what you can afford will also narrow your search. As a buyer, if there is a practice you are interested in, you should conduct what's called a valuation in order to find its total worth. A valuation should include reviewing the practices KPI's, so that you can understand the history of the practice and what's projected for the next year. The goodwill of a practice is another large consideration when valuing.
Know what you are getting into: Visit
Visiting a practice before purchasing it is an important step. You want to ensure you know what you are getting yourself into before all the paperwork is signed.
The things you want to look for when you visit are:
- How the team interacts with each other
- Interactions between the front desk and the patients
- The relationship the doctor has with those around them
- Efficiency in processes
Essentially, when you go to visit you are doing your own evaluation to see if this work environment is something you want to take on and eventually make your own. Take notes and make a strategy after your visit of how you are going to transition this practice. Be realistic! Are you able to achieve the goals you have for this dental practice? Are you able to live with the current state of the practice? A transition takes time and can't happen right away. It's recommended to spend almost an entire year learning the practice and patients, mimicking the selling doctor, and earning trust and while building relationships.
Practice Lease Agreements:
Practice lease agreement negotiations have many variations. For example, do you know if your lease is a Single Net Lease or a Double Net Lease? What's the difference between the two? What kind of lease is already established? Is it long-term or open for negotiation? These are just 2 of the many variations in dental practice leases. To learn more, please see Odgers Law Group's article: Dental Office Lease-10 Mandatory Negotiation Points.
Other practicals are things like the setup of the building and proper equipment. You'll want to make sure everything is up to code. The facility must have proper building codes, which can be covered in an inspection. Then, you'll need to do an additional inspection. You can work with dental transition specialists for this part of the purchase process. Practice equipment should be looked over as well and found in proper working order.
If any of the above needs to be replaced or updated, it should be part of your negotiations.
Who's on your team?
A broker is a needed asset for buying a practice. They will negotiate on your behalf, making the transition less emotional. They will help valuate the practice you're interested in and tailor a transitional strategy to you. Finding a practice in the area you're interested in can be difficult. A broker will work with the network in the area to find what's currently or going to be available in the area. When it comes to the actual purchase they will review and write contracts for you, allowing your focus to be on your new patients and team.
Your consultant/coach should be in the picture prior to wanting to buy a practice. They should understand your goals for your purchase and keep you focused toward them. They are brought in to help you meet your goals. Once you've made a purchase, they'll work with you and your new team to make improvements in every area possible...ensuring a smooth transition into practice ownership. Note: There are some differences between a coach's style and a consultant's style.
As we mentioned above an accountant will help make it possible to afford the purchase and continued expenses of running a new practice. Often, your accountant will also be your CPA. Your CPA will handle all of your financials for you and do your tax paperwork. During a practice purchase, a CPA will look over all financial documents, and assist with all the tax work involved in a practice transition.
Your attorney is your legal representation through your buying process. Contracts and legal paperwork are things they will take care of for you. With all the team members listed above, there should be one thing in common: All of them must be dental specific in their field, and show success from their experience with past dental clients.
Transitioning into a new practice is an exciting time, and we want to make sure that excitement doesn't get exchanged for stress. The biggest thing to keep in mind is to take your time and have patience. It can take only 3 months or even up to 3 years to sell a practice. This means for you as a buyer, this could be a very long process just to complete the purchase. Then, you'll have your 6 months to a year of transition. Buying a practice is a long-term goal. Take the necessary steps to reach it with success!