Buyer Articles

​You’ve heard it before, the separation is in the preparation.  This is a quote that is typically heard in athletics, but can be applied to other endeavors as well, including buying or starting a new practice.  But, what do you prepare for before you jump into dental practice ownership.  Just ask any practice owner, there are a lot of things you can prepare for before you buy a dental practice.  Here are a few things that will help you separate yourself from the rest of the pack and allow you to hit the ground running when you become a practice owner:

1. Where You Practice Matters – Know where you want to practice and the demographics of the area you are looking to practice. There are a lot of different websites and services you can look to in order to get this information. A lot of commercial brokers (Steve at Omni Healthcare Real Estate) will have data ranging from a breakdown of the age of the population, to ethnicity, income levels, how much money was spent on dog food per person, etc., There are several services such as Scott McDonald’s that will help you gather data as well.

2.  Knowing Your Market – Understand what the numbers and ratios of a typical dental practice should look like.  Your state or national association has resources that will show how much you should be spending on staff salaries and benefits as a percentage of total collections, as well as rent, marketing and other financial data as a percentage of collections.

3.  Basic Accounting – Start educating yourself on basic accounting principles.  Specifically, learn how to read a financial statement – profit and loss report and balance sheet.  You will be given these by the dental broker when looking at a practice, so you should at least know what they are and what a financially viable practice looks like vs. a not so nice practice.

4.  Bank Financing – Contact a bank that specializes in dental practice financing before you start looking.  They cannot necessarily pre-approve you for a certain practice, but they can tell you whether you can get a loan, approximately what rate and terms you can get and possibly how much you may be able to qualify for.  You don’t want to go after a $2 million practice if you cannot get a $2 million loan.

5.  Looking For Red Flags – Knowing where to find the skeletons in the practice is a key element in the process. Where do you look for embezzlement in the practice?   How about hidden staff incentives and payments?  Over or under treating patients?  Uncollected accounts receivable?  Etc.,

6.  Learn About Leases – What is a triple net lease?  What is the market rate for leases?  How much time is left on the lease?   What’s a tear down clause?,etc.,

7.   Surround Yourself With a Good Team– Surround yourself with a good team; CPA, Broker, Attorney, Consultant, etc., Find those that specialize in your specific discipline.  They can help you avoid some of the pitfalls you may miss.

By preparing yourself ahead of time with some of these things, you can avoid having to spend more than you need to and find a practice that will bring you great professional challenges and rewards in the long run.

​You’ve heard it before, the separation is in the preparation.  This is a quote that is typically heard in athletics, but can be applied to other endeavors as well, including buying or starting a new practice.  But, what do you prepare for before you jump into Veterinary practice ownership.  Just ask any practice owner, there are a lot of things you can prepare for before you buy a Veterinary practice.  Here are a few things that will help you separate yourself from the rest of the pack and allow you to hit the ground running when you become a practice owner:

1. Where You Practice Matters – Know where you want to practice and the demographics of the area you are looking to practice. There are a lot of different websites and services you can look to in order to get this information. A lot of commercial brokers (Steve at Omni Healthcare Real Estate) will have data ranging from a breakdown of the age of the population, to ethnicity, income levels, how much money was spent on dog food per person, etc., There are several services such as Scott McDonald’s that will help you gather data as well.

2.  Knowing Your Market – Understand what the numbers and ratios of a typical Veterinary practice should look like.  Your state or national association has resources that will show how much you should be spending on staff salaries and benefits as a percentage of total collections, as well as rent, marketing and other financial data as a percentage of collections.

3.  Basic Accounting – Start educating yourself on basic accounting principles.  Specifically, learn how to read a financial statement – profit and loss report and balance sheet.  You will be given these by the Veterinary broker when looking at a practice, so you should at least know what they are and what a financially viable practice looks like vs. a not so nice practice.

4.  Bank Financing – Contact a bank that specializes in Veterinary practice financing before you start looking.  They cannot necessarily pre-approve you for a certain practice, but they can tell you whether you can get a loan, approximately what rate and terms you can get and possibly how much you may be able to qualify for.  You don’t want to go after a $2 million practice if you cannot get a $2 million loan.

5.  Looking For Red Flags – Knowing where to find the skeletons in the practice is a key element in the process. Where do you look for embezzlement in the practice?   How about hidden staff incentives and payments?  Over or under treating patients?  Uncollected accounts receivable?  Etc.,

6.  Learn About Leases – What is a triple net lease?  What is the market rate for leases?  How much time is left on the lease?   What’s a tear down clause?,etc.,

7.  Surround Yourself With a Good Team – Surround yourself with a good team; CPA, Broker, Attorney, Consultant, etc., Find those that specialize in your specific discipline.  They can help you avoid some of the pitfalls you may miss.

By preparing yourself ahead of time with some of these things, you can avoid having to spend more than you need to and find a practice that will bring you great professional challenges and rewards in the long run.

​Buying a practice can be a daunting task.  That’s why it’s important to not only have the skills and education to analyze a practice, it’s also important to have a good team on your side.  On your team, you will want a Certified Public Accountant that has a big emphasis or specialization in your field.  They need to know the industry, numbers, etc., they should also be accredited in practice valuations.  The second person on your team will be a dental specific attorney.  There are too many idiosyncrasies to not have someone who doesn’t specialize in your field.  Non-compete provisions and other conditions are specific to dentistry.  A banker that specifically works on practice loans is another important member.  They will know the reasons why a practice may be what it is and explain to the underwriters what’s going on in the practice.  You will also want a broker who has done many transitions.  Having an experienced broker will help make the transition as smooth as possible.  Another person that may be necessary is a dental consultant.  The consultant can help analyze the practice and make sure it’s what you are looking for.  Omni Practice Group has a list of many of these team members.  If you would like our preferred list of vendors, please e-mail us at info@omni-pg.com.

Buying a practice can be a daunting task.  That’s why it’s important to not only have the skills and education to analyze a practice, it’s also important to have a good team on your side.  On your team, you will want a Certified Public Accountant that has a big emphasis or specialization in your field.  They need to know the industry, numbers, etc., they should also be accredited in practice valuations.  The second person on your team will be a veterinary specific attorney.  There are too many idiosyncrasies to not have someone who doesn’t specialize in your field.  Non-compete provisions and other conditions are specific to veterinary medicine.  A banker that specifically works on practice loans is another important member.  They will know the reasons why a practice may be what it is and explain to the underwriters what’s going on in the practice.  You will also want a broker who has done many transitions.  Having an experienced broker will help make the transition as smooth as possible.  Another person that may be necessary is a veterinary consultant.  The consultant can help analyze the practice and make sure it’s what you are looking for.  Omni Practice Group has a list of many of these team members.  If you would like our preferred list of vendors, please e-mail us at info@omnipg-vet.com.

When buying a dental practice, there are several essential reports you absolutely must have in order to evaluate the practice.  The reports are as follows:

• Minimum of 3 years Tax Returns and Financial Statements
• Minimum of most recent 3 years annual productions, collections and adjustments
• Most recent production by procedure code report
• Fee Schedule
• Patient demographic information
• Accounts receivable and insurance receivable aging
• Employee census information
• Copy of the lease
• List of included equipment and furniture
• Outstanding treatment plan report

Now that you have these reports, it’s essential you understand what they mean.  If you don’t know how to read financial statements or tax returns, be sure you have a knowledgeable OMNI accountant on your team.  If you need help with the practice management reports, hire a consultant or third party practice broker, like myself and my OMNI colleagues.  We can help you evaluate the practice.
In the long run hiring OMNI experts to evaluate the reports will more than pay off.
-Rod Johnston, MBA. CMA