Buyer Articles

By Steve Kikikis

Today we address a question we hear frequently from dentists: If you are at a point in your career where you have paid off your school and initial practice loans, and are tired of paying your landlord’s mortgage payments for him or her, then now is one of the best times to purchase real estate as an owner-user.

As everyone knows, we are in the midst of a good economy.  Commercial real estate interest rates are still very low compared to prior years.  We are seeing interest rates in the 4.25% to 5.25% range.  In year’s past, we typically see them at 5.5% to 7%.  The low-interest rates often times make your potential mortgage note payment lower than what you’re currently paying for your lease.  Also, the Small Business Administration (SBA) has loans where if you occupy more than 50% of the building, they have lower down payments and other requirements on the loans. 
 
The real estate market is also at an interesting point in time.  Baby boomer building owners (try saying that three times fast) are divesting their real estate portfolios in order to get their equity out to fund their retirement.  This makes it an opportune time to acquire a building – the building where your practice is located or another one in your neighborhood.  Or, possibly an investment property.
 
In times like these, there are winners and losers in the investment and real estate world. If you are sitting on real estate and need to move it, you are at quite an advantage. If you are in the market for buying real estate, however, now is also a golden opportunity. Dentists looking to purchase their own buildings have three options. One is to look for an existing building that can be converted over to dental use.  The second option is to find vacant land on which a dental office can be built. The third option is to approach the landlord who owns the building you currently occupy and see if they would be willing to sell.  There are advantages and disadvantage to each.  Of course, if you are currently in a nice building, purchasing the building you are already in, makes the most sense.  The main advantage of buying an existing building and converting it is time. It takes considerably less time to convert an existing building into a dental office than to start from the ground up. The largest disadvantage is the commitment to the basic structure of the building and the existing lot. The main advantage of starting from the ground up is that the building can be designed and built to exactly meet the dentist’s needs. The disadvantage is that it takes much more time to find the land, to have the building designed and permitted, and to construct the building.
 
As commercial real estate brokers, we can help you with the process of purchasing an existing building or land on which to build your ideal dental building. We can also assist in speaking with your current building owner to see if they would be willing to sell their building.  The biggest mistake a dentist can make is to start the process with time running out on his/her lease. The process should be started at least 18 to 24 months before the end of your lease. It can take up to 6 months or more to find the ideal building or land and then an additional 1 to 2 years to convert an existing building or build from the ground up. It is also important to assemble a team that can support you throughout the entire process. We can act as a resource in helping you assemble your team. Your team should include people experienced in the dental field, who are familiar with the dentist’s wants and needs. Your team should include a general contractor, and may or may not include an architect, depending on the scale of the project. Your team should also include an attorney and a lender. The key to any successful venture is planning. Picking an experienced team of experts and working closely with them is critical to making a successful transition to owning your own office building.

If you think this might be the time for you to start looking for that ideal dental building, you can begin by calling the best dental real estate broker in the Northwest – Omni’s own, Steve Kikikis.  Steve can sit down with you to start the process and lay out a plan for owning your own building.  Steve can be reached at steve@omni-pg.com, or you can call him at 425-905-6920.

By Jim Vander Mey, CPA, ABI and Rod Johnston, MBA, CMA

​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.

By Jim Vander Mey, CPA, ABI and Rod Johnston, MBA, CMA

​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.

By Jim Vander Mey, CPA, ABI and Rod Johnston, MBA, CMA
​Happy New Year!  Is this the year you finally take the plunge and buy your own practice?  Or are you content with being an associate working for someone else?  Here are a few reasons why 2019 should be the year you become a practice owner:

1. Interest rates are starting to move up. The past few years have rewarded buyers with interest rates in the 4% to 5% range and some with as low as 3.75%.  Interest rates moving up means you may have higher payments on your practice loan.
2. Bank financing is readily available.  If you think you cannot get financed because of high student loan debt, personal debt, bad credit, etc., then think again.  Banks view your diploma and the accompanying school debt as a positive thing.  It’s an asset that can be used to generate a good income.  Call us and we can hook you up with a bank to discuss your situation.
3. Jump in, the water is warm.  Studies have shown that those who are successful in both business and in their personal lives take calculated risks.  Owning a practice is a well-calculated risk with the failure rate on practice ownership less than .25%.  Yet, many doctors continue to be an associate as they deem practice ownership to be a risk.
4. Pay off debt and retire sooner.  By purchasing or building a new practice this year versus several years down the road, you can pay off your debt sooner, put more money in your pocket and retire sooner.  I know of several examples of doctors who bought a practice two years out of school and five years later had their practice completely paid off and are putting that money towards retirement.  Plus, practice owners make an average of 25% more per year than typical veterinarians who are associate employees in someone else’s practice.
5. Become independent.  Owning your own practice allows you to do the procedures you want to do and work on the patients you want to work on.  It also allows you to choose your staff, location and everything else for that matter.  You get to work when you want to work and go on vacation when you want to go on vacation.  It is all up to you as you are the boss!

Whether you decide to purchase or start a practice in 2019 or continue to work as an associate, Omni Veterinary Practice Group would like to wish you a Happy and Prosperous New Year!