1. Not understanding the numbers. Be sure and know what normal dental expenses are and what may be extraneous.
2. Assume the staff are all on board and will be staying with the practice. Know who the staff is and what their relationship is with the seller. Find out if they are planning on staying. Know how loyal the patients are to the hygienist and the rest of the staff.
3. Embezzlement - hire an accountant to look for any irregularities. The ADA estimates 35% of all practices have caught their employees stealing from them. (the other 65% just haven't caught their staff yet). Are courtesy credits high? How about patient refunds?
4. Does the procedures the selling doctor perform match the procedures that you do? Make sure a large amount of the procedures you don't do are not currently being performed by the seller. You don't want to have an immediate drop in production right from the start.
5. What was the definition of "active" patients? Some selling dentists use the life of the practice, others use 24 months. I typically like to quote how many patients have been in the practice in the last 18 months. There are several ways to estimate, but just make sure you spend some time on this area.
6. Has all the treatment been done on patients? Was the doctor too aggressive? You can only find this out by spending several hours delving into patient charts.
7. Are there capitation or other discount plans in place? This can be a big drain on the practice.
These are only a few of the pitfalls to make sure you don't get tricked. Spend as much time in due diligence as you need and bring on experts to help you along the journey.
-Rod Johnston, MBA. CMA