Author: omniadmin

1.  How many dental practices has your broker sold?  If your broker just started selling practices and has sold between zero practices and ten practices, you may consider finding someone with more experience.  Every transaction is different in the practice transition world.  The seller, buyer, staff, patients, clinic, location, lease, building, attorneys, bankers, and others are all different for each practice.  You must be able to manage different personalities, different types of leases, different building sales, loans, etc.  It’s a complex mix to try to do with little experience.
2. Who does your broker represent in the sale?  Dual representation, where the broker represents BOTH the seller AND the buyer is illegal in several states and I question the ethics of it in all situations.  You want a broker who will represent your best interest as a seller.  Not the best interest of both the buyer and the seller.   If a negotiating point comes up, how is the broker going to ethically work through the conflict by representing both sides?
3. Is the broker licensed to sell a practice and real estate if the real estate is included in the sale?  Some states require a broker to have a real estate license to sell a practice or any type of business.  All states require a broker to have a real estate license to sell real estate.   Check with the state department of licensing to see if your state requires a license and if the broker you are interviewing is licensed.
4. Does the broker have any certifications or designations to perform a practice valuation?  Designations may include a certified valuation analyst, accredited business appraiser, etc. Having a designation means they have spent the time to learn the ins and outs of a valuation and not just a simple rule of thumb.  Certifications and accreditations require weeks and months of training, rigorous testing as well as review by a peer group of valuations.
5. How does the broker perform their valuation?  Do they do a site visit?  Do they just use a rule of thumb valuation, which can be misleading?  Do they use a cap rate, book value or production acquisition value?  There are various types of methods and doing the valuation.  Understanding how they get their numbers is important in the process.
6. Has the broker sold practices to corporates?  If so, have they been compensated by the corporate group in addition to being paid by the seller?  This may be a tough question for some.  Receiving compensation from both the seller and a corporate buyer can be illegal in some states.  At a minimum, it should be disclosed to the seller that they are being compensated by the corporate buyer.
7. Does the broker have a list of buyers ready to go?  Having an active list of buyers will speed up the process of selling the practice.
8. Where does the broker advertise the practice for sale?  If they say “our website and the state association website” then you may consider moving on.  A good broker will go above and beyond and advertise across the nation on many different websites and publications.
9. Is your broker local, or at least familiar with your market?  National brokers will sometimes sit from the comfort of their recliner while having you show your own practice, meet with buyers, send you documents and do most of the work.  Local brokers will meet you at your practice, show the practice themselves and do what they are good at – selling practices.
10. Are you comfortable with the broker’s personality and style?  You’re going to be working closely with your broker through the transition process.  The amount of time maybe up to 100 or more hours.  Be sure you are comfortable with that persons’ style, demeanor and philosophy.  Ask them questions about how they show the practice, what they look for in a buyer and how they determine a good match for your practice.

Choosing the right broker is an important decision.  You spent a good amount of your time, money and emotional value building your practice.  Your staff and patients have become like an extended part of your family.  Wouldn’t you want to choose the best broker to look at for your best interest?  Asking these questions of your broker will help ensure that you have the best broker in your area. ​

​Every potential practice owner comes to a crossroad where they ask themselves, “Should I buy an existing practice, or should I just go start up a new practice at a new location?”  We typically suggest you find a good existing practice to purchase, but if you cannot find one that fits your needs and desires, then the alternative is to start one from scratch.  There are pros and cons to both and a lot depends on your vision.  Here are some things to consider before making a decision:

1.  Cash Flow – Buying an established practice typically gives you instant cash flow.  That’s if it’s a decent practice and if it already cash flows.  Cash flow is the money left over after paying all of the practice bills and your debt service on the loan for the practice.   If you can find a practice in your desired area that has good cash flow, or you believe you can get it to cash flow, then, by all means, you should buy it.
   With a startup practice, it can take 18 to 24 months before you break even.  Cash flow would happen shortly thereafter.  If you spend some time and do some good research, you can cash flow much sooner.  We’ve assisted with demographics for doctors and helped them find locations which cash flowed in 6 to 9 months.
2. Practice Philosophy – Do you have a certain practice philosophy on managing your practice?  Do you want to do certain procedures, treat clients a certain way, and manage the staff in a certain manner?  Then, buying an existing practice where patients and staff are set in their ways may be a challenge.  Clients may be used to making payments.  Staff may be used to leaving early, using their cell phone during work hours, or having their kids hang out in the staff room during work.  Changing patient protocol or staff habits may result in losing some patients and staff.  At a minimum, you will have disgruntled staff.
   If you start up your own practice, you can mold your patients and staff in your philosophy and style.  Clients can be treated and trained to pay upfront, accept your treatment plans, and trust you.  Staff can learn from the beginning how you want them to work and what you expect.
3. Cost – A good practice in a good location is going to be valued at 70% up to 100% of the last 12 months’ collections in the current market.  Great practices that are high producing with low margins in metropolitan areas are going to sell for between 90% and 100% of collections.  There is a high demand for these practices, and they sell quickly.  In rural areas, these practices may reach 80% and possibly 85%.  Low performing practices in these areas will be priced between 70% and up to 80%.
   Construction costs in the Northwest are currently on the high side reach up to $200/sq. ft.  They are traditionally $135/sq. ft.  That is before any equipment is purchased.  This puts a typical startup practice at around $500,000 to $600,000.  This is a negative for currently doing a startup.  The cost to build it out due to the current market is high.
4. Systems – With an existing practice, the systems are already in place.  Patient flow, collections, insurances, staff salaries, and benefits, etc., are for the most part all set up.  You just need to buy the practice and copy what the current owner is doing.  As long as they are good systems, then you’re in the money.  If the systems are bad and going to potentially cost you more money, then you’re in for a headache.  Changing systems can create problems with staff and clients.
   With a startup practice, you need to create your own systems.   You hire your staff and establish benefits and pay.  If you have experience in doing this, or at least know what type of systems, benefits, etc., you want to put in place, then you’re okay.  If not, you may be learning on the job which will end up in mistakes and cost you money.
5. Finances – In certain situations, lenders may ask you to keep your associate position on a part-time basis.  This is just in case the practice doesn’t cash flow enough to support you or the debt.  Or, you may need to have some cash in the bank in order to have something to fall back on if there is a cash shortage during any one month.
   For a startup, they most likely will suggest you keep your associate job one or two days a week until your practice gets going.  If your practice picks up quick, you can quit your associate job and focus on your practice.

Over 65% of doctors want to eventually own their own practice.  Whether it be via purchasing an existing practice or doing a startup is up to you.  Following a few guidelines, getting good demographics, and seeking wise and experienced advice will help you make a good decision.

​Every potential practice owner comes to a crossroad where they ask themselves, “Should I buy an existing practice, or should I just go start up a new practice at a new location?”  We typically suggest you find a good existing practice to purchase, but if you cannot find one that fits your needs and desires, then the alternative is to start one from scratch.  There are pros and cons to both and a lot depends on your vision.  Here are some things to consider before making a decision:

1.  Cash Flow – Buying an established practice typically gives you instant cash flow.  That’s if it’s a decent practice and if it already cash flows.  Cash flow is the money left over after paying all of the practice bills and your debt service on the loan for the practice.   If you can find a practice in your desired area that has good cash flow, or you believe you can get it to cash flow, then, by all means, you should buy it.
   With a startup practice, it can take 18 to 24 months before you break even.  Cash flow would happen shortly thereafter.  If you spend some time and do some good research, you can cash flow much sooner.  We’ve assisted with demographics for doctors and helped them find locations which cash flowed in 6 to 9 months.
2. Practice Philosophy – Do you have a certain practice philosophy on managing your practice?  Do you want to do certain procedures, treat clients a certain way, and manage the staff in a certain manner?  Then, buying an existing practice where patients and staff are set in their ways may be a challenge.  Clients may be used to making payments.  Staff may be used to leaving early, using their cell phone during work hours, or having their kids hang out in the staff room during work.  Changing patient protocol or staff habits may result in losing some patients and staff.  At a minimum, you will have disgruntled staff.
   If you start up your own practice, you can mold your patients and staff in your philosophy and style.  Clients can be treated and trained to pay upfront, accept your treatment plans, and trust you.  Staff can learn from the beginning how you want them to work and what you expect.
3. Cost – A good practice in a good location is going to be valued at 70% up to 100% of the last 12 months’ collections in the current market.  Great practices that are high producing with low margins in metropolitan areas are going to sell for between 90% and 100% of collections.  There is a high demand for these practices, and they sell quickly.  In rural areas, these practices may reach 80% and possibly 85%.  Low performing practices in these areas will be priced between 70% and up to 80%.
   Construction costs in the Northwest are currently on the high side reach up to $200/sq. ft.  They are traditionally $135/sq. ft.  That is before any equipment is purchased.  This puts a typical startup practice at around $500,000 to $600,000.  This is a negative for currently doing a startup.  The cost to build it out due to the current market is high.
4. Systems – With an existing practice, the systems are already in place.  Patient flow, collections, insurances, staff salaries, and benefits, etc., are for the most part all set up.  You just need to buy the practice and copy what the current owner is doing.  As long as they are good systems, then you’re in the money.  If the systems are bad and going to potentially cost you more money, then you’re in for a headache.  Changing systems can create problems with staff and clients.
   With a startup practice, you need to create your own systems.   You hire your staff and establish benefits and pay.  If you have experience in doing this, or at least know what type of systems, benefits, etc., you want to put in place, then you’re okay.  If not, you may be learning on the job which will end up in mistakes and cost you money.
5. Finances – In certain situations, lenders may ask you to keep your associate position on a part-time basis.  This is just in case the practice doesn’t cash flow enough to support you or the debt.  Or, you may need to have some cash in the bank in order to have something to fall back on if there is a cash shortage during any one month.
   For a startup, they most likely will suggest you keep your associate job one or two days a week until your practice gets going.  If your practice picks up quick, you can quit your associate job and focus on your practice.

Over 65% of doctors want to eventually own their own practice.  Whether it be via purchasing an existing practice or doing a startup is up to you.  Following a few guidelines, getting good demographics, and seeking wise and experienced advice will help you make a good decision.

Every potential practice owner comes to a crossroad where they ask themselves, “Should I buy an existing practice, or should I just go start up a new practice at a new location?”  We typically suggest you find a good existing practice to purchase, but if you cannot find one that fits your needs and desires, then the alternative is to start one from scratch.  There are pros and cons to both and a lot depends on your vision.  Here are some things to consider before making a decision:

1.  Cash Flow – Buying an established practice typically gives you instant cash flow.  That’s if it’s a decent practice and if it already cash flows.  Cash flow is the money left over after paying all of the practice bills and your debt service on the loan for the practice.   If you can find a practice in your desired area that has good cash flow, or you believe you can get it to cash flow, then by all means, you should buy it.
   With a startup practice, it can take 18 to 24 months before you break even.  Cash flow would happen shortly thereafter.  If you spend some time and do some good research, you can cash flow much sooner.  We’ve assisted with demographics for doctors and helped them find locations which cash flowed in 6 to 9 months.
2. Practice Philosophy – Do you have a certain practice philosophy on managing your practice?  Do you want to do certain procedures, treat patients a certain way and manage the staff in a certain manner?  Then, buying an existing practice where patients and staff are set in their ways may be a challenge.  Patients may be used to making payments.  Staff may be used to leaving early, using their cell phone during work hours, or having their kids hang out in the staff room during work.  Changing patient protocol or staff habits may result in losing some patients and staff.  At a minimum, you will have disgruntled staff.
   If you start up your own practice, you can mold your patients and staff in your philosophy and style.  Patients can be treated and trained to pay up front, accept your treatment plans and trust you.  Staff can learn from the beginning how you want them to work and what you expect.
3. Cost – A good practice in a good location is going to be valued at 70% up to 100% of the last 12 months collections in the current market.  Great practices that are high producing with low margins in metropolitan areas are going to sell for between 90% and 100% of collections.  There is a high demand for these practices and they sell quick.  In rural areas, these practices may reach 80% and possibly 85%.  Low performing practices in these areas will be priced between 70% and up to 80%.
   Construction costs in the Northwest are currently on the high side reach up to $200/sq. ft.  They are traditionally $135/sq. ft.  That is before any equipment is purchased.  This puts a typical startup practice at around $500,000 to $600,000.  This is a negative for currently doing a startup.  The cost to build it out due to the current market is high.
4. Systems – With an existing practice, the systems are already in place.  Patient flow, collections, insurances, staff salaries, and benefits etc., are for the most part all set up.  You just need to buy the practice and copy what the current owner is doing.  As long as they are good systems, then you’re in the money.  If the systems are bad and going to potentially cost you more money, then you’re in for a headache.  Changing systems can create problems with staff and patients.
   With a startup practice, you need to create your own systems.   You hire your staff and establish benefits and pay.  If you have experience in doing this, or at least know what type of systems, benefits, etc., you want to put in place, then your okay.  If not, you may be learning on the job which will end up in mistakes and cost you money.
5. Finances – In certain situations, lenders may ask you to keep your associate position on a part-time basis.  This is just in case the practice doesn’t cash flow enough to support you or the debt.  Or, you may need to have some cash in the bank in order to have something to fall back on if there is a cash shortage during any one month.
   For a startup, they most likely will suggest you keep your associate job one or two days a week until your practice gets going.  If your practice picks up quick, you can quit your associate job and focus on your practice.

Over 65% of doctors want to eventually own their own practice.  Whether it be via purchasing an existing practice or doing a startup is up to you.  Following a few guidelines, getting good demographics and seeking wise and experienced advice will help you make a good decision.

1.  Potential change in capital gains tax.  You may have read that Washington state is proposing adding a capital gains tax of 9%.  California already has a capital gains tax of 13%.  Other states are also considering either implement or increasing their capital gains tax rate.  I don’t know if this is going to happen or not, I don’t have a crystal ball, but I suggest you talk to your advisers and get their thoughts on capital gains.
2. Interest rates are starting to go up.  The Federal Reserve just had an increase in interest rates a couple of months ago.  The interest rates on practice loans typically lag home loan rates by six months or so.  We have had a nice run of low-interest rates that have been below 5%.  I expect they’ll be going up over 5% and probably end up between 5.25% and 5.75% on the high end.
3. Corporate practices are becoming more active.  There are more and more corporate and smaller groups buying practices at above-market multiples.  We had several doctors who were not considering selling, but when we told them they get a million dollars or more from a corporate buyer than a single individual buyer, they decided the additional funds were worth it.   They sold their practice and made a lot of money all while continuing to work in the practice.  Last we checked they were ecstatic with their decision and enjoying being a veterinarian again.
4. Management headaches – Let’s face it, managing a business isn’t what it used to be.  New taxes such as the new employee leave tax in Washington are being thrust upon us.  Finding good help has become tougher and tougher.  A good economy hasn’t meant higher-paying jobs for entry-level staff at Fortune 100 companies.  Figuring out how to compete against corporates and other veterinarians down the street has become a daunting task.
5. Uncertainty.  Uncertainty is a scary thing.  The economy has been going well, but how long will it sustain itself.   The stock market is up and down like a roller coaster lately.  In addition, we don’t know what the insurance companies will do with reimbursements.

These are a few things to consider if you’re on the fence about selling your practice.  We are always happy to sit down and buy you a cup of coffee/tea and discuss your individual situation. We’ll even give you an approximate value of your practice from both an individual buyer and a corporate buyer standpoint.  Talking through different options always helps in making your decision.  Best wishes for an extremely happy and healthy New Year!