How To Buy A Dental Practice: A Comprehensive Acquisition Guide
Buying a dental practice, just like starting anything new, can be a thrilling and still terrifying thing at the same time. Most people tend to lean towards buying an existing practice rather than starting their business from scratch, which is understandable.
With the prospect of acquiring an existent customer base and a tried and tested business system, this could potentially be a good purchase (if done correctly). So how do you go about properly making this acquisition? Here are the ten steps that encompass the entire procedure of buying a private dental practice;
The first thing you need to do when you decide to buy a practice is to choose what area you will like to operate in. If you are in Florida, you can find out your competition in the area with the "local chamber of finance." The ideal situation will be to find an area to enjoy living in and where the competition levels aren't too steep.
After locating your preferred area of operation, the next step involves looking for and deciding on your desired practice. You can find these practices for sale in Florida in trade journals or listings in dental schools. If you know someone in the area, you could ask for a recommendation. If none of these are available to you or don't fancy the required research, you could easily hire a dental practice broker.
As soon as you find your preferred dental practice to purchase, you will need to start hiring a consulting team to help with transitioning and due diligence.
These consultants include an attorney to review legal documents, a specialist healthcare accountant to assist in analysis and tax considerations, and a transition consultant to advise you during your negotiations and help you close the sale.
This is one reason you hired an accountant beforehand. These financial experts will help you scrutinize your potential purchase's financial records as the dentist may be trying to sell a sinking ship to you. Information like profit and loss statements, balance sheets, number of employees, and fee schedule will need to be reviewed.
This step is highly important as you need to find out everything there is to know about the practice's procedures and patients. Understanding its high yielding procedures, the number of active patients, patient demographics, and most popular procedures will give you an indication of what you're getting from your purchase.
This is probably the first time that you will be physically at the dental practice's location. You must take the time to visit the practice to evaluate the equipment, determine if space and lease are suitable, and have enough room for potential expansion in the future.
If, after all of the inspections and due diligence are out of the way and you find the practice satisfactory, the next step is to make an offer. This is where your transition consultant will be useful as he/she will help you appraise the property and suggest a suitable deal. Once all negotiations are done, the details can be settled in the Practice Sale Agreement.
When the deal has been agreed, you will need to develop the funds to make the purchase. In case you are not liquid or do not want to pay out of pocket, a good place to secure finances will be a mid-sized bank or credit union that has worked with dentists before. You can ask for recommendations from your accountant.
After purchasing your chosen practice, you will need to sign a new lease that may or may not include an option to buy. You also need to sign a PSA, which isn't that complicated, but it's always advisable to have your attorney look it over before you put pen to paper to avoid any " surprises."
The time taken to finalize a deal after an accepted offer could span from a few weeks to some months depending on several factors like distance, delayed disbursement, details of the agreement, etc. Tasks like sending patients notification letters, opening a business checking account, and applying for a tax ID number are also performed during this stage.
There you have it, the steps involved in buying a dental practice are easy and straightforward. However, make sure to watch out for the seller's why for making the sale as you want to make sure you're buying an asset and not a liability.
Never make any commitments prematurely, and ensure your attorney is with you before you sign on any dotted lines. Fulfilling your dream of buying a dental practice is relatively simple. You just have to do it right.