Buyer Articles

​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

I get the question a lot, “do you think I am ready to buy or start a new practice?”  I’m probably the wrong person to ask as I’m somewhat of a serial entrepreneur.  I tend to live by the quote “Fortune favors the Bold”.  Maybe I can answer better by giving you a few real-life case studies.

Case Study #1 – I helped this young dentist locate a practice right out of school.  He was a typical new graduate.  He was clinically sound, somewhat slow with procedures as expected, and not confident at all in managing a practice.  However, he found a decent practice that I helped him evaluate.  It was not great, but it was producing $45,000 per month.  He struggled for the first six months to make ends meet.  He had to dip into his working capital to keep things going for a couple of months.  We continued to work with him and help him ramp things up.  He said he felt more and more confident as time was going on.  His hand speed improved and he worked through a few management issues that helped him get respect from the staff.  Fast forward 3 years later and he’s now producing $125,000 per month, has low overhead, and is well on his way to a potential early retirement.

Case Study #2 – A dentist had been out of school for about 4 years.  He kept looking for that perfect practice in King County.  I showed him a number of practices, but nothing fit his model.  He finally decided that if a practice wasn’t going to come up on the market that fit his needs, he would need to create one from scratch.  We found him a nice location in the heart of the area he was looking.  He went from $0 to $40,000 per month within 9 months.  Five years later, he’s comfortably doing $80,000 per month.

Case Study #3 – A dentist searched for several years for the perfect practice.  There were over 20 practices in a five-year period I have shown this person.  We even looked at starting up a practice.  We put letters of intent on a number of practices and new start-up locations, but nothing stuck.  This dentist is still looking and still has yet to find the perfect practice.  By the time they find the perfect practice, their friends will have owned a practice for 7 years and be well ahead of them in terms of building a practice and being in a better financial position.

The moral of the story is that you are never 100% ready to buy or start a practice.  Dental schools do not spend enough time teaching you to manage or own a practice.  If you have been out of school for a few years, have a good number of associate jobs under your belt, and have a desire to own or start your own practice, it’s time.  Find a good practice or location, do your due diligence, get good advice from your advisory team and go for it.

-Rod Johnston, MBA. CMA

Caveat Emptor is not a garnish at your local Italian restaurant.  As you go through the steps in buying a practice, you should be cautious while going through due diligence.  Due diligence is the thorough, in-depth analysis of the practice charts, equipment, systems, computers, and everything else in the practice.  If you missed our buyers’ seminar last month, you would have received our very lengthy due diligence checklist.  There is a lot to cover and a lot that can be uncovered in the process of due diligence, and there is a lengthy checklist involved, embezzlement, fraud, misstatements of numbers including active patient counts, faulty equipment over and under-treatment are just a few things that can be uncovered during the due diligence process.  Do not take the word of the seller or broker, dig in and find the information yourself.  Caveat Emptor is prudent advice when shopping for a practice.

-Rod Johnston, MBA. CMA