Are There Skeletons in the Practice’s Closet?
The first one to look out for is staff embezzlement. You can tell if there is embezzlement by comparing the tax return numbers to the production/collection reports — and if you want to go further, you can look at bank statements. If the collections reports say there’s $700,000 in annual collections and there’s only $650,000 showing on the tax return, where did the other $50,000 go? Staff’s pocket?
The second skeleton could be that the Doctor is under investigation and you don’t know it. I’ve had a couple of practices where the doctors said they wanted to sell their practice to retire. As I was listing the practice and doing some research, I found out that the doctors were under investigation for insurance fraud. I have also had other listings where I discovered the dentist’s performance was being reviewed by the Dental Board. You can typically find this information on the State Dental Board’s website.
There can be terrifying things with leases as well. Is there a “tear-down” clause in the lease? These clauses allow the landlord to give you notice and a certain period of time to move your practice. That can be frightening, especially if you are thinking about selling and the landlord does decide to tear the building down and not renew your lease. The value of your practice would go down to nearly nothing.
You will also want to know if any associates have left the practice in the last year. If they have, was there a non-compete clause? If there was not, are they opening a practice down the street and going to try and take patients or staff? Ask the seller if they have associate contracts to review.
Is the selling dentist a bit aggressive with their treatment plan? Is all the dentistry that has been treatment planned completed already by the seller? This leaves you with nothing to work on except hygiene exams, which is not going to pay the bills. Do chart reviews, social media reviews, and other research to figure out how aggressive the seller was in the practice.
These are just a few of the scary things you can look out for when getting ready to purchase a practice. Its buyer beware, so be sure and do your due diligence when buying a practice. Contact us for buyer’s representation so we can ensure you have someone helping you on your side.