The Seven Essentials Of Buying A Dental Practice:

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A GUIDE TO MASTERING YOUR FUTURE

For many dentists, owning their own practice is the ultimate goal with the dream of one day becoming their own boss and having the ability to master their own future.  Thisseven part series focuses on several critical steps you should take in buying a dental practice. 

Buying a dental practice is the most impactful and risky decision a dentist will make in their career.  Whether it’s the first and only dental practice purchase you in engage in with a price of just $100,000, or it’s a strategic expansion of your practice with a price tag of $5,000,000, these critical steps are principally the same.  However, it is important to remember that no dental practice purchase is created equal. Dental practice acquisitions are negotiated deals that represent a combination of a various circumstances and specific conditions. There is no “standard” purchase.  So, having a representative who is familiar with the acquisition process, legal documents, due diligence, and the hidden traps that come along the way is the best way of ensuring that your transaction will go as smoothly as possible and that the purchase will meet your goals. 

This series will identify and discuss seven major steps that buyers should take when buying a dental practice. Over the next several months we will discuss each of the following areas.

  1. Finding the Right Practice
  2. Teamwork with Advisors
  3. Financing the Purchase
  4. Due Diligence Process
  5. The Legal Documents
  6. The Closing
  7. Transitioning Successfully

In this article, along with the introduction, we will discuss #1 on the list…Finding the Right Practice.

  1. Finding the Right Practice 

It probably seems obvious that in order to buy a practice, you need to find one to buy.  Generally speaking, buyers can find practice a number of different ways, including: hiring and/or contacting a dental practice broker; using a dental transition specialist or consultant; speaking with dental lenders; asking a dental attorney; speaking with dental supply company representatives; asking fellow colleagues; asking your current employer; or, reviewing classifieds in Dentaltown, DrBiCuspid, the Michigan Dental Association journal, the Macomb County Dental Society journal, and other dental publications.

As one can see, there are many ways to find a practice to buy. However, the big issue is not just finding a practice to buy, but it’s finding the right practice for you.  In order to find the right practice, one has to know what they want, and, more importantly, what they need.  Some questions to ask yourself in determining if the practice is right for you are the following:

  1. How much is the seller personally making, and is that enough for you?
  2. What is the Production and Collection numbers, where is it coming from hygiene and doctor, and what are those ratios?
  3. What are the Operating Expenses, and is there room for improvement?
  4. Is the practice growing or declining?
  5. If it a Fee for Service or Insurance based practice?
  6. If it’s insurance, what type of insurance does the practice accept and in network with?
  7. How many active patients are in the practice (seen in last 18 months) and what are the demographics of those patients?
  8. What is the type, condition and age of equipment?
  9. What are the hours of operation?
  10. How big is the office (square footage)?
  11. What is the location of the practice (urban, rural, metro; traffic counts; demographics; access; signage and visibility; competitor proximity and dentist to population ratio)?
  12. How many treatment and hygiene rooms?
  13. How many employees?
  14. What is the practice philosophy?
  15. What is the seller’s relationship/reputation within the community?
  16. Do you, or does the seller, want the seller to stay on and work after the sale; and, is there enough room for both of you?
  17. Does the practice have associate dentists?
  18. Will you be leasing or can you buy the real estate?
  19. What is the asking purchase price of practice, and what can you afford?
  20. What do you want your life to look like?

These questions, among others, will allow a dentist to determine if a practice is the right practice for him or her.  These questions will show up again on the due diligence checks when that time comes.  We will discuss due diligence process more in depth in Part 4 of this series.
In conclusion, buying a dental practice is one of the most important decisions in a dentist’s career.  Aside from finding the right practice as discussed above, there are other matters to consider before deciding whether and how to purchase a dental practice.  Working with trusted advisors who understand the business and challenges of a dental practice acquisition can ensure that the dentist makes a thoughtful and informed decision.  Stay tuned for the next part when we discuss assembling your team of advisors and ensuring that they work together for your success.

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The author, Matt LaMaster, is the Principal Attorney of The LaMaster Law Firm, PLLC, a boutique style law firm committed to delivering legal services to dentist and dental practices.  For more information about Matt LaMaster and The LaMaster Law Firm, PLLC, visit www.lamasterlaw.com.
This article includes information about legal issues.  Such materials are for informational purposes only and may not reflect the law in your jurisdiction.  These informational materials are not intended, and should not be taken as legal advice on any particular set of facts or circumstances.  You should contact an attorney for advice on specific legal questions.