Buying a dental practice is no small venture, and most aren’t sure where to even start. Choosing between buying a new or established practice, finding the financing solution that works for you, and working within budgeting constraints are just a few of the things that must begin early in order to understand the next steps.
Above all, you want a practice that fulfills you professionally while taking care of you financially. Early planning can be the key!
Finding an area that you want your dental practice to be in is probably something that you’ve already been thinking about. Hopefully, it is because that’s where you’re going to start this venture.
Once you’ve decided on an area for your practice, it’s time to start reaching out to a few places. Dental financing options, dental supply vendors, and accountants specializing in healthcare are all contacts you’re going to need to make.
Once you begin speaking with dental practice owners, a non-disclosure agreement will come your way. Confidentiality is of the utmost importance for business purposes and also out of respect. Staff and patients may get nervous or uneasy. Having a dental broker to represent you is in your best interest.
A Clear Budget
No business can ever be successful without a laid out budget. Early budget preparation will include assessing the current financial situation that you find yourself in and figuring out how you need to budget to have what you need to purchase the practice (in your decided price range).
From there, you’ll have options. Do you want the original dentist and staff to remain working through the transition to help you out? Can you afford it? If not, how will you find a way to afford it? Understanding and exploring your financial options is a must.
Decide Upon Staffing
It’s no secret that frequently, many business takeovers involve the practice of clearing out old employees and restaffing. That’s not a very wise move in most situations.
For a dental practice, in particular, you’ll be absorbing existing hygienists, billing and administrative staff, and supporting staff. Keeping at least some of these people onboard can help patients feel much more comfortable about the switch.
Most likely, the staff already has contacts of important businesses and people that you’ll need in the future. Making sure the transition is smooth and respectful is key to the success of undergoing the transition.
Understand the Practice
Each dental practice has its own set of policies, routines, and patient flows. No one office works the same way. As you can imagine, it’ll be in your best interest to visit the office and observe the practice.
Study their patient history for the last 18 months. From there, you can assess if the business is growing or maintaining, and you can decide if the practice is adequately staffed. Patient flow is the tell-tale sign of whether the business is shrinking or growing. Take a look at the data and try to spot opportunities for improvement that haven’t been taken yet.
Asking Price Assessment
As with any other property on the market, the asking price may or may not be appropriate for the business state at the time of sale. This is where a small business banking specialist comes in. They’re able to calculate a practice’s valuation, and they can help you with financing it.
The banking specialist will review the practice’s records. They’ll review all financial statements, including tax returns, and compare the business’s standing with other dental practices nationwide.
By going through this process, your contact will be able to tell you what you’re in for. For example, if 50% of the business’s income goes to staff salary, look out! The national average is 20%. Having someone to walk you through details like that will save you from buying a practice that’s too far gone.
Negotiations are the next step in preparing to buy a dental practice. Negotiating about the selling price isn’t the only thing you’ll be negotiating. The original owner’s equipment, property, staff, and other parts of the business are up to the conversation as well. Most of the time, though, it’s most common and natural to start with the price negotiation.
There’s always the possibility of an owner being emotionally charged if they feel their practice is worth more than all of the paperwork has assessed it. Getting that settled paves the way for the rest of the things that need to be discussed.
Be wary! It’s not uncommon for the current owner to offer to finance your purchase. That means that, instead of getting a loan from a bank and repaying it, you’ll be indebted to the old owner until the practice is paid off. See where that might get a little scary?
One of the biggest red flags is that, with this option, there’s no need to involve as many professionals to assess the property’s proper value. You have a higher chance of getting a bad deal.
A bank or alternative to a bank is a more neutral road to travel. Here are some things your banker will ask for:
- Tax returns for at least the past two years
- Net worth statement
- Copy of your dental license
From the seller:
- Copy of the dental practice valuation
- Tax returns
- Profit/loss statements
- Depreciation information
- Business plan
- Patient count
Don’t go into buying a dental practice alone. MedTrust Capital Group is here to share their expertise and knowledge with you. Contact them today!
Real Estate Purchase is Separate
To be clear, the dental office’s purchase is different from the purchase of the dental practice. Your banker can help keep these lines clear and moving in a forward direction. As with all other aspects of this process, but especially this one: involve your banker early.
There are many I’s to dot and T’s to cross when it comes to buying a dental practice. Make it easy on yourself and get MedTrust Capital Group to help answer all of your questions and get you on the right path for where you want to go. They offer comprehensive healthcare practice financing options. Start planning for your future today!