Purchasing a Practice

Purchasing a Practice

Although purchasing an existing dental practice eliminates some of the risks and disadvantages of starting a new dental practice, it is not without its own unique set of challenges.

Advantages

  • The practice has an existing patient base. As part of the purchase negotiation, you must address transitioning from the current dentist to the purchasing dentist. The more willing the existing dentist is to make introductions and talk with his patients about you, the more value you will find in the current patient list.
  • The physical office is established. You do not need to make decisions on every piece of equipment, furnishings, software, etc. Although you will undoubtedly like to make changes after the purchase, the doors to the practice are ready to open under your new ownership.
  • Office staff is in place. You will not have to hire and train new people. When evaluating the practice, it will be important to look at longevity of the staff, salaries and benefits to get a clear picture of the value that current staff members add to the practice.
  • The practice has a proven, verifiable track record. As a purchaser, you should have access to the books for the practice, which you can have evaluated by your accountant. If the seller is not willing to share the books with you, your level of caution should be elevated. The level of success of the practice is the main tool to gauge the practice’s value.
  • Because of the practice’s proven track record, lenders are more comfortable dealing with these transactions as opposed to start up financing. Again, the selling dentist is going to play a key role with the lenders by providing access to the financial information of the practice.

Disadvantages

  • While transitioning from the previous dentist’s management, pride of ownership often becomes an obstacle to a successful transition. The selling dentist may be reluctant to “let go” of the practice he or she has spent a career building.
  • Be clear on the timeline for transition. If this is a situation where the selling dentist stays for a period of time to help with the transition, be clear on the expectations for both you and the selling dentist.
  • Management during the transition must be addressed. Who is in charge? The selling dentist again may be reluctant to let go of the decision-making authority to which he/she is accustomed. However, if the selling dentist has decision-making authority during the transition, the purchasing dentist may not agree with decisions impacting the long-term value of the practice.
  • The value of the practice is difficult to determine. During the negotiation, there should be an appraisal conducted by a third-party, qualified appraiser. Customarily, the selling dentist pays for this appraisal.
  • Although having staff in place is generally positive because it saves the purchaser the challenges of recruiting, existing staff may be resistant to change and have difficulty accepting the new dentist. A high level of turnover with office and clinical staff is not uncommon during these transitions.
  • Expect attrition of current patient base. Again, an established patient base is positive and adds to the value of the practice. However, the purchasing dentist should not expect 100% of the current patients to remain with the practice. This is an area the selling dentist can help with by using good transition procedures and through thorough communication with patients about the purchase of the practice.
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