Whether you’re a recent graduate, in the middle of your career or simply looking for more information about what it takes to own a practice, there are important details to consider. We’ve pulled together a few things for you to keep in mind when considering purchasing an existing dental practice.
Buying a practice has great advantages!
- Established patient base and cash flow – An established practice has an existing patient base – and an existing cash flow to support your new practice debt load (new loan payment, salary, personal expenses, etc.)
- Established insurance relationships – You’ll want to be credentialed with all of the insurance providers the sellers’ patients currently use. That’s a big process, but it’s essential to being able to bill and start collecting as soon as possible.
- Staff retention – Staff members are the face of the practice and have a good rapport with the patients you’ll be looking to keep.
But…buying a practice is not risk free.
A dental practice can be a good business bet, but it’s not entirely without risk. It’s important to understand the following:
- Not everyone embraces change. It’s normal to lose some patients or staff, but you can minimize this by working with the seller on an appropriate announcement/introduction strategy.
- You’re buying a business that was set up by someone who isn’t you. In other words, you’re buying the seller’s philosophy of care, treatment planning, work flow, software, etc. You’ll likely need or want to make adjustments or changes.
- An owner who has been planning to sell may have curtailed investment in the office and equipment – renovation and remodeling may be part of your future (and budget).
- Take change slow. Resist the urge to make significant changes for a bit, especially if the selling dentist exits immediately after the sale is complete. Your patients and staff will be more comfortable with the transition if you take time to understand the practice’s workload, existing systems and tried and true processes before putting your own stamp on the practice.
- If you see potential in a practice or know your level of ambition will exceed production, be sure you have the room to expand. Taking your practice to the next level may not be an option if the existing space is holding you back from further growth.
- Full purchase or buyout – This means you purchase 100% of the practice from the seller. The seller may retire immediately after the sale is final, or you may make arrangements with him or her to continue seeing patients on a part-time basis for an agreed-upon period of time to ensure a smooth transition.
- Partial buy-in – This type of sale entails partial ownership of 25% to 50% with plans to purchase the remainder of the practice when the seller is ready to fully retire.
- Associateship with future buy-in option – A practice owner may be interested in hiring an associate as he or she cuts back on hours and offer a future option to purchase.
Creating a network of trusted advisers
Depending on what stage you are in your dental career, there’s a chance you’ve already started building a trusted team of professional advisers, industry experts and leaders. Have a few gaps in your team? Visit the WDA’s Practice Transitions Resource Toolbox to start making those important connections.
Here are the kind of advisers you’ll need in your corner.
Accounting (CPA/CVA): Having a CPA or CVA (certified value analyst) with a vast understanding of the dental industry will provide not only valuable perspective, but also advice on tax strategy, best practices, expense averages, and a cost analysis on hiring and equipment acquisitions. A strong dental CPA/CVA can become a lifelong adviser.
Legal: Reliable representation by an attorney well-versed in industry specifics is critical for a buyer during a dental practice transition and transaction. Your attorney should review the terms of the buy/sell agreement, office lease negotiations, non-compete covenants, incorporation papers, and lender requirements.
Bank/Lending: Select a bank that understands the intricacies a dental-specific transaction and recognizes the importance of the goodwill aspect of the sale. Be sure your loan leaves you with flexibility to grow the practice, enhance office technology and make necessary remodeling updates.