5 Elements of a Successful Practice Purchase After COVID Emergency Shutdown
What a year it has been. Dental practices went through a mandatory shutdown for three months or more. When the practices re-opened, no one knew what to expect. There were dentists in the middle of purchasing a practice or even doing a startup. These potential new practice owners knew what they were looking for when there wasn’t a pandemic. But it is a whole different ball game now. So, what’s the new game plan? Should you wait? What should you look for when purchasing an existing practice? What are some of the red flags?
We have had quite a few successful practice purchases and startups since practices re-opened. We have checked back with all of the new practice owners and found that all of them are doing well. There are some things that have changed, and you should be aware of when purchasing or starting up a practice in this new dental practice environment. Below are a few of those items:
- Collections/Production – Has the practice come back to near its full level of collections prior to the mandatory shut down? If not, why not? Is there a staffing issue? Does the practice have a lot of patients from a few large employers where the employer now allows the employees to work from home? When is the employer requiring employees to come back to work in the office?
- Staffing – Have all the staff come back after the shutdown? Are they all back full time? Or are they working part-time while their kids are home-schooled because of schools being closed? Some assistants and hygienists have decided they are going to continue to stay home and have left their jobs. They decided their spouse does well enough financially and they enjoyed being home with the kids, so they are moving to a one-income household. If there are staff that has left, have they been replaced, or if not, what is the plan to replace them? There is a shortage of hygienists in quite a few areas right now. Finding a replacement can be difficult, so make sure there is a plan in place to get one into the office quickly.
- Patients – Are patients coming back and booking appointments? For most practices, the answer has been “Yes”. The tell-tale sign for a practice is after they have gone through the second cycle of hygiene, that’s usually after the first six months. Some practices have seen a slight drop in hygiene appointments after the first cycle. The question to ask is are the staff members working hard to make sure the schedule is filled? If the answer is no, then the practice needs to improve their recall. It’s not a patient problem, but a management problem.
- Payroll Protection Plan (PPP) Loan – Did the seller take out a PPP Loan? If so, how much and has it been forgiven? The PPP loan agreement states that if a loan has not been forgiven and the practice is sold, then the loan will be the responsibility of the seller to repay the loan. It still “may” be able to be forgiven, but the best practice is to get the loan forgiven as soon as the practice is eligible. The sellers are now required to put the loan amount into escrow at closing until the seller receives their Loan Forgiveness document.
- New COVID-19 Safety Protocol and PPE – Does the practice have the suggested COVID-19 Safety equipment and protocols in place? New air filtration system? Procedures to test for COVID-19 before patients come into the office. Procedures to sterilize operatories and other areas between patients. What happens if a patient has tested positive? Is there a good inventory of PPE in the practice? At least one month’s supply is recommended with two months being optimal.
By just asking a few additional questions, you can tell if a practice has been severely affected by COVID-19, or if the practice has endured the pandemic. With the right protocols, equipment, and staffing in place, most practices have come back, and in some cases, are near above pre-shutdown numbers. Patients still need to see their dentist. Dentists are an essential part of the health of this nation. We will shortly put 2020 and the pandemic behind us. Getting into practice ownership is your next step in achieving financial freedom and developing your own personal practice.