Buying a Practice

The Most Important Factor in Practice Transitions: Effective Communication

By Rod Johnston, MBA, CMA

As practice transition consultants, we are often asked “What is the most important factor in facilitating a successful practice transition?” The simple answer is Communication. While it is imperative for the buying doctor to build a strong team of advisors, complete due diligence on the practice, secure financing, and navigate the closing process, all else could be lost if there is no effective communication between the buyer and seller during and following the transition of ownership.

As part of the due diligence process, the buying doctor should schedule a face-to-face meeting with the selling doctor well in advance of closing.  We typically recommend this meeting be held at the seller’s office after operating hours, with the practice transition consulting attending if possible. The initial meeting is designed to allow both parties to get to know one another, ask any questions they may have regarding the practice or each other, discuss practice philosophies, etc. During this meeting, the parties may also exchange contact information so they can reach out to each other directly to discuss any remaining questions or concerns leading up to closing (while also keeping the practice broker in the loop).

The buyer typically learns a great deal about the seller and practice during this interaction and leaves the meeting knowing if the opportunity is the right fit for them.  Once the buyer and seller have met and established a personal connection, we also find that negotiations are more amicable and the closing process goes much smoother.

With a fee-for-service and/or personality-driven practice (where most of the patients or clients are coming to the practice specifically because of the seller’s personality), we have found that a second meeting between the buyer and seller in a more casual setting such as lunch, dinner, or happy hour can allow the parties to loosen up and gain additional insight into each other’s personalities, interests, practice philosophies, etc. It is important to mention that we suggest the parties steer clear of discussing pricing, allocations, or any other negotiable items during any of these meetings.

Throughout the closing process, the buyer should clearly communicate his or her expectations of the seller leading up to and following the sale and the seller should notify the buyer if he or she is unwilling or unable to fulfill these obligations. Regardless of the seller’s post-closing plans or obligations, the selling doctor should plan to serve as a resource to the buyer following the sale and be available for a phone consultation to answer questions and offer advice.

By effectively communicating throughout the transition process, the buyer and seller will have established a solid foundation for a smooth and successful healthcare practice transition.

Read More

Pitfalls to Avoid in Buying a Building

By Steve Kikikis, Vice President, Commercial Real Estate Broker

Money Pit or Cash Cow?

On occasion when a doctor purchases a practice there is also an option to purchase the real estate.  Historically, real estate has been a good investment over time, but owning a commercial building has its own nuances.

There are a lot of similarities between owning a commercial building and a residential house.  As the building owner or homeowner, you are responsible for paying the insurance, maintenance, and property taxes.  Be sure to understand what your out-of-pocket costs are before you take on the responsibility of purchasing a property.  Investing in a building or home inspection conducted by a reputable building inspector is always worth it.

Before you purchase a commercial building, know your demographics, and do your research.  If a building is a steal, make sure you do some research to find out why.  A commercial real estate broker that specializes in your industry can assist you in looking at the demographic information to fully understand the value of the real estate.

After you’ve purchased the practice, you are now the king of your castle and if you are business savvy, you can make a profit from owning your building.  Having some knowledge of what to expect and what the pitfalls are of owning a building can save a lot of headaches down the road.  For this article, we will consider that you are the owner and sole tenant of your building.

Maintenance

You’re now responsible for everything from the leaky roof, sweeping the parking lot, HVAC systems, lighting, ADA compliance, security systems, plumbing, and possibly the water and sewer mains underneath the property.   The best advice is to adhere to a schedule with regular and preventive maintenance.  Don’t skimp on issues that may seem small but that can turn into a bigger safety issue (both expensive and potential lawsuit if hazardous) in the long run.

A lot of potential challenges are dependent on the age of the building and how the previous owner took care of the property.  You can hire a property manager to be the point of contact so you’re not distracted and can concentrate on your work.  Some owners like to be involved in every decision, while others don’t want the hassle of being contacted for leaky pipes, clogged toilets, etc.

Insurance

A commercial building policy will differ from a residential homeowner’s policy on your home.  A commercial policy will also have coverage for the business operations, its products, and operations liability.  Much like homeowner’s insurance, the age and construction type of the commercial property will determine the premiums.  Commercial insurance is also based on the neighborhood where the building is located.

Although chances are slim, some policies cover loss of income in the event of a fire or other loss of the building.  These are usually additional policies that can provide peace of mind.

City Ordinances

Although you may own the building, ownership doesn’t necessarily mean you can do anything you want.   An example is a new building owner who wanted to utilize a specific size of a sign for his business, but the city ordinances stated a sign can be no bigger than 30 square feet.  Be sure to reach out to the city before you decide to change or update the signage on your building and also verify if there are any restrictions for the exterior of your building such as signage, color, material, etc.

Taxes

There are two points on the taxes. First, for the building taxes, make sure your ownership is properly transferred to you during the purchase, and make sure that you keep up-to-date on your taxes. Set up an account directly within the municipality you are located or make sure your loan program is paying it directly. For your business taxes, owning your own commercial real estate has many tax advantages. Connect with your CPA, make sure you’re paying your real estate entity as a business expense, and more.

Money Pit or Cash Cow?

There will be costs to owning your own commercial real estate, but taking the proper steps and working with an experienced commercial real estate broker that specializes in medical/dental purchases will save you time and a lot of money. Just think, if you are leasing a space, after 10 years you will be signing up for paying the landlord another 5 years of income. If you own, after 10 years, you will be working towards paying that building off and have the equity in the building.

Read More

Practice Ownership: A Path to Financial Freedom for Dental Graduates

By: Max Truesdel

Dental students often graduate with substantial debt, which can feel overwhelming at first. However, practice ownership presents a viable strategy to overcome this financial burden. By owning a dental practice, dentists can significantly increase their income potential and build equity, offering a clear path to financial freedom.

The dental industry has experienced remarkable growth over the past decade, with increased awareness of oral health and spending on dental care. This expansion presents a lucrative opportunity for dentists to capitalize on a thriving market. Owning a practice allows dentists to directly benefit from this growth, as opposed to working as associates where income potential is often capped.

One critical step in this process is finding the right practice to purchase. This is where a dental practice broker becomes invaluable. Dental practice brokers specialize in connecting buyers with suitable practices, ensuring that the location and operational aspects align with the buyer’s goals. They provide insights into market trends, financial evaluations, and facilitate negotiations, making the complex process of purchasing a practice more manageable and less risky.

Using a dental practice broker also helps to identify practices in high-growth areas, ensuring better patient flow and higher revenue potential. They can access a wide range of listings that may not be publicly available, providing more opportunities to find the perfect match.

Additionally, brokers can assist with due diligence, ensuring that the financial health of the practice is sound and that there are no hidden liabilities. This thorough vetting process is crucial for new owners to start on solid ground and focus on growing their patient base.

In conclusion, practice ownership is a powerful way for dentists to overcome student debt and achieve financial stability. The dental industry’s continued growth enhances this opportunity, and using a dental practice broker can significantly ease the transition into ownership. By leveraging the expertise of brokers, new dentists can find the right practice, set the stage for success, and turn their student debt into a stepping stone towards a prosperous career.

Read More

Overcoming Veterinary Student Debt Through Practice Ownership

By: Max Truesdel

Veterinary students often graduate with substantial debt, which can be daunting. However, practice ownership presents a viable strategy to overcome this financial burden. By owning a veterinary practice, veterinarians can significantly increase their income potential and build equity, offering a path to financial freedom.

The veterinary industry has seen remarkable growth over the past decade, with increased pet ownership and spending on pet healthcare. This expansion presents a lucrative opportunity for veterinarians to capitalize on a thriving market. Owning a practice allows veterinarians to directly benefit from this growth, as opposed to working as salaried employees where income potential is capped.

One critical step in this process is to find the right practice to purchase. This is where a business broker becomes invaluable. Business brokers specialize in connecting buyers with suitable practices, ensuring that the location and operational aspects align with the buyer’s goals. They provide insights into market trends, financial evaluations, and facilitate negotiations, making the complex process of purchasing a practice more manageable and less risky.

Using a business broker also helps to identify practices in high-growth areas, ensuring better patient flow and higher revenue potential. They can access a wide range of listings that may not be publicly available, providing more opportunities to find the perfect match.

Additionally, brokers can assist with due diligence, ensuring that the financial health of the practice is sound and that there are no hidden liabilities. This thorough vetting process is crucial for new owners to start on solid ground and focus on growing their business.

In conclusion, practice ownership is a powerful way for veterinarians to overcome student debt and achieve financial stability. The veterinary industry’s growth over the past decade enhances this opportunity, and using a business broker can significantly ease the transition into ownership. By leveraging the expertise of brokers, veterinarians can find the right practice, set the stage for success, and turn their debt into a stepping stone towards a prosperous career.

Read More

From Outdated to Outstanding: The Risks and Rewards of Buying a Fixer-Upper Veterinary Practice

By: Max Truesdel

The idea of buying a fixer-upper veterinary practice might remind you of those popular home renovation shows—where vision, investment, and hard work transform a dated property into a dream space. Similarly, purchasing a veterinary practice in need of upgrades can be a rewarding venture, but it comes with its own set of opportunities and challenges. If you’re considering this path, here’s how to approach it wisely.

Why a Fixer-Upper Might Be Right for You

For many aspiring practice owners, a fixer-upper veterinary clinic offers a unique opportunity to enter the market at a lower cost while building a practice tailored to their vision. These practices often come with a lower upfront price tag compared to turnkey operations, making ownership more accessible.

One reason for this lower cost is the reduced competition. Many buyers are looking for fully operational, modern clinics, which means fixer-uppers often attract fewer offers. With fewer buyers vying for these opportunities, you may have more room to negotiate favorable terms and secure a deal that works for you.

One of the most appealing aspects of a fixer-upper is the chance to customize the practice to your exact needs. Whether it’s modernizing outdated equipment, refreshing the clinic’s branding, or redesigning the facility layout, you have the freedom to shape the practice into a space that truly reflects your vision and values. Additionally, these practices often have untapped potential. By introducing modern tools, efficient workflows, and effective marketing strategies, you can significantly boost profitability and client satisfaction.

Perhaps the biggest advantage is the existing client base. Unlike starting from scratch, a fixer-upper comes with a built-in roster of clients. With the right improvements and a focus on exceptional service, you can enhance their experience, build loyalty, and attract new clients—all while avoiding the challenges of building a practice from the ground up.

What to Watch Out For 

While the opportunities are compelling, buying a fixer-upper practice isn’t without its risks. One of the most common pitfalls is underestimating the costs involved. Renovating a practice can quickly become expensive, with equipment upgrades, facility repairs, and software investments adding up. Before committing, it’s essential to conduct a thorough financial analysis and consult with experts to understand the full scope of costs.

Another potential challenge is structural or zoning issues. If the building requires major repairs or isn’t zoned for veterinary use, you could face unexpected expenses and delays. Always have the facility inspected and verify zoning regulations before finalizing the purchase.

Reputation can also be a hurdle. If the practice has a history of poor service or outdated practices, rebuilding trust with clients will take time. Research online reviews, talk to current clients, and develop a plan to address any negative perceptions.

Staffing concerns are another factor to consider. A struggling practice may have overworked employees, outdated training, or high turnover. Assess the current team’s strengths and weaknesses, and plan for training or hiring to align with your vision.

Finally, rapid or drastic changes can unsettle long-time clients. A thoughtful transition plan—with clear communication and gradual improvements—can help retain their trust and loyalty during the transformation.

Navigating the Process Successfully

To turn a fixer-upper practice into a thriving business, careful planning and execution are key. Start by performing thorough due diligence. Review financial records, client retention rates, and facility conditions. Partnering with an experienced veterinary practice broker can provide valuable insights into the practice’s strengths and weaknesses.

Once you’ve assessed the practice, create a detailed renovation and investment plan. Identify immediate needs versus long-term goals, and prioritize upgrades that improve patient care and client experience. For example, modernizing medical equipment or refreshing the waiting area can have an immediate impact.

Securing financing is another critical step. Account for the purchase price, renovation costs, and working capital to cover expenses during the transition. Work with a lender familiar with veterinary practice financing to ensure you have the resources needed to succeed.

Engaging the current team and clients is equally important. Involve staff in the transition process, listen to their feedback, and address their concerns. Clear communication and a shared vision can help build trust and buy-in. Similarly, keep clients informed about the changes and reassure them that their care remains a top priority.

Finally, focus on marketing and branding to showcase your revitalized practice. Update your website, social media, and local listings to highlight improvements and attract new clients. A strong digital presence can help position your practice as a modern, client-focused destination.

Final Thoughts

Buying a fixer-upper veterinary practice can be a rewarding investment if approached strategically. With careful planning, the right financial approach, and a commitment to revitalization, you can transform an underperforming clinic into a thriving, modern practice. Much like the home renovation shows we love, success comes from vision, persistence, and a well-executed plan.

If you’re considering this path, Omni Practice Group can help you navigate the process, from valuation to transition strategy, ensuring your dream practice becomes a reality.

Read More