Buying an existing practice is often better than starting a dental practice from scratch, but there are still things to consider before you proceed.
At some point in time, whether you are fresh out of school or you have some experience as a dental associate, you are going to consider owning your own practice. This is an exciting time in your dental career, but you want to move slowly and consider your options before making the jump to owning your own dental practice.
You have the option of starting a dental practice from scratch or buying an existing dental practice. Both come with their own challenges. For each there are many things to consider.
In this article I will briefly answer three important questions you need to answer prior to buying an existing dental practice.
- When is the right time to buy a dental practice and why?
- What are the top three things to look for when buying a dental practice?
- What are the business and personal sides to choosing a dental practice?
When is the right time to buy a dental practice and why?
I don’t think there is a set answer to this question. To some degree I think the right time to buy is when you feel ready. What does ready mean?
Clinically I think you have to be confident in yourself to provide high quality care and have enough experience to know you can handle most situations presented in your office. This obviously comes from having the right kind of experience working as an associate for another practice.
From a business perspective you have to be in a position where you are ready to lead a team, provide direction and guidance and have a vision for the practice you want to create. The reasons for this is that once you become a practice owner, you are no longer just a dentist. You are the CEO of a small corporation who is required to take on all the responsibilities of being the CEO. Plus, you still need to be able to practice dentistry.
That being the case, the right time to buy is the time when you feel you are ready to take over all the responsibility for how a practice is managed and run. The right time to buy is when you know or believe you can handle more than just seeing patients that are booked to your schedule.
It is important to note that you may never feel completely ready to own your own practice. It can overwhelm you even when you have a substantial track record of providing superior dental care as an associate.
The little anxiety you might feel is not an indicator that you are not ready. Those feelings are an indicator that you are about to make one of the most important decisions of your life, and likely represent excitement more than apprehension.
The best way to curb some of that anxiety is to look at some important characteristics of the practice you are evaluating to purchase.
What are the top three things to look for when buying a dental practice?
There are many things to consider when you are evaluating an existing dental practice. Much of your ability to succeed will depend on pre-existing variables or characteristics that are both important and out of your control.
There are however three very important things to evaluate before you make an investment in purchasing an existing dental practice. They are…
- Location of the dental practice – The location of the practice is a critical component of a successful practice. Location is considered one of the top reasons a dental practice thrives. The location should be one that is easily accessed, has plenty of parking and is in an area that you ultimately want to spend a large portion of your life living in.
- Historically consistent or steadily growing revenue trend and healthy new dental patient flow – You will need immediate cash flow to service your acquisition debt as well as fund your life style. The easiest way to get the needed cash flow is to purchase a practice that already has a healthy cash flow. You also want to be sure that the practice has a steady flow of new patients to compensate for what will ultimately be some attrition as the old doctor moves on.
- Trained staff – A well trained staff will make your transition smoother and ultimately more successful, in addition to mitigating some of the patient attrition that is bound to occur. You may decide to change some staff over time but initially, the consistency of your staff will help you retain the patient population as well as maintain an efficient operational flow in serving the needs of your current patient population.
What are the business and personal sides to choosing the dental practice?
I often think the financial side of buying a practice is the least important aspect to consider.
Generally speaking, if you do your due diligence, receive proper guidance from a trained valuation expert you will pay the right price for a practice. The more important factor to consider is the impact the purchase will have to your personal life.
Most doctors buy one practice and work that practice for their entire careers 25-35 years. Making sure this practice is somewhere you want to spend that amount of time is critical.
Not only from a practice building perspective but from your personal perspective of where you want to build your life. In addition, as the owner of the practice the day doesn’t end when the last patient leaves.
There are always endless things to consider as the owner of the practice – staff issues, facility issues, equipment issues, marketing, etc.
This article is meant to provide you with the things you need to think about when you are evaluating a practice to purchase. It is not meant to be a comprehensive or exhaustive list of all the details that go into purchasing a dental practice.
Owning your own practice is an awesome experience that comes with equally awesome responsibility. It is again, a very exciting time. If however you are able to take a step back, maybe even hire a qualified dental industry expert, you will be well on your way to a personally and professionally rewarding career as a dental practice owner.
You are going to need help from people who have experience working with new dental practice owners. Here is a list of a few folks you should consider getting to know now, before you are ready to make the jump to owning your own dental practice. They can help you not only make the right purchase decision, but get you started on the right foot and on your way to an extremely profitable and rewarding dental practice.
More About Maria G. Melone, CPA, CVA
Ms. Melone attended Gettysburg College, receiving a B.A. in Economics, and then completed a Master of Science in Accountancy at Bentley College.
She began her career at KPMG, LLP in Boston, primarily working with clients in the Healthcare/Life Science sector and received her CPA license in 1998. Following KPMG, she worked for American Dental Partners, Inc. in their Corporate Development department. During her nearly 10 years with ADPI, Maria was involved in nearly 100 transactions, ranging in size from $50,000 to $90,000,000.
During the last 4½ years of her tenure, she was Director of the department and responsible for overseeing all aspects of the acquisition process including: lead generation, valuation, transaction structuring, legal document negotiation and transition.
In April of 2012, Maria joined forces with Larry, Dennis and Mark to form MORR to assist individual dentists and dental groups with all aspects of transitions. In addition, MORR provides guidance in considering the legal, operational and economic structures for dental group development.
Maria also serves as a volunteer and member of the Board of Directors for Sibling Connections, Inc., an organization focused on reuniting siblings separated when placed in the foster care system.