Buying a Practice

The question we often get from a potential practice buyer is “Where is a good spot to own a practice?”  There are a lot of factors that go into the answer to that question. But first, think about the reasons why you want to own a practice.

If you’re in it because you love being a veterinarian and love helping patients and not necessarily in it to make the big bucks, you can really practice almost anywhere. A lot of buyers seem to want the downtown metropolitan practice thinking it’s a great place to practice since there are so many potential patients and you can live the urban lifestyle.  We’ve helped doctors who absolutely wanted to be in a metropolitan area, even though the demographics made no sense whatsoever, who then started a practice and did quite well.  One doctor that we helped always dreamed of owning a practice in a particular city.  He went for it and is successful.  And we have seen others want a practice in a certain area, and although the numbers didn’t make sense, they did it anyway and were successful.

Some of you are buying a practice because you want to make a lot of money, in which case, further analysis and discussion is needed. The failure rate for veterinarians is somewhere around .015%.  If you’re buying an existing practice and the practice already has good cash flow that you’ve identified, you can purchase the practice and have success almost no matter where it is. If it’s a poor performing practice, you would need to examine if the poor performance is because of the location, the management, or something else.  If you want to buy an existing practice and are looking for an opportunity to grow and have lower overhead, I would suggest looking outside of the metropolitan areas.  Those areas have less competition, wages and rent are lower and it’s easier to grow those practices.  And if you are considering doing a startup practice, the same rules apply.  Look for a location with good demographics outside of metropolitan areas.  Of course, if you absolutely want to be in a metropolitan area, don’t be afraid to go for it.  Just look closely at the numbers and hire a good veterinarian practice or real estate broker to help you out. 

One of the advantages of working with Omni is we have both practice brokers and real estate brokers to help you traverse the ownership trail in any way we can.  Just give us a call at 877-866-6053 or email info@omni-pg.com and we’ll be happy to help get you started.

I remember when I bought my first house.  I wasn’t sure if the timing was right, whether the house the real estate agent recommended I buy was the right house or if I could afford the house payments.  At the ripe age of 26, I took the plunge and bought the house.  It turned out that years later, those trepidations I had were irrelevant.  This wasn’t the perfect house, but I remodeled it and made it near perfect to me at that time.  The value grew and I built equity.  I made adjustments to afford the payments and the timing really didn’t matter. 

The same goes for buying a practice.  The practice you buy does not have to be perfect and the last practice you buy.   You buy a practice that fits your needs at your current time in your life.  You put sweat equity and hard work into the practice to make it profitable.  You do a bit of remodeling to make it fit your personality and style.  You work in the practice building equity and you hone your skills as a practice owner and a business manager.  In the end, timing is not as important as you think.  I know many doctors who bought their first practice when interest rates were 15%.  Also, keep in mind that practice owners earn 20% more than associates who are employees.  (Read Rich Dad, Poor Dad if you want to understand why you should own and not be an employee).

The moral of the story is if you feel you might be ready but are not quite sure, you’re ready.  Interest rates continue to be low.  The economy is doing well.  There are great resources that can help you own and run a practice.  If you would like to discuss whether or not you are ready to own, feel free to reach out to any of us at Omni to discuss your individual situation. Send us an email or give us a call at 877-866-6053 today!

Over the past several months, the economy has been going quite well.  The Dow Jones average is up over 21,000 and setting all-time highs.  Employment levels are up while unemployment levels are down.  Current unemployment levels in King, Snohomish and Pierce counties are at 3.3%.  Amazing numbers for a strong economy.
The strong numbers have played a part in the increase in practice sales.  Practice owners who are over 55, are seeing the strong numbers and returns in their portfolios and deciding now is the time to retire.  Buyers are also watching the economy and realizing it’s a good time to buy a practice.  Interest rates are still good at between 5.25% and 5.5%.  Consumer’s discretionary income is up freeing funds for consumers to do elective and cosmetic dentistry.   (I know you shouldn’t base your dentistry on discretionary income, but many do).
The result of all of this is that practice listings and sales are up.  We typically carry an inventory of 10 to 15 practices and we’re now up to approximately 25 practices.  We have spoken to other brokers and most are experiencing a similar increase in business.  The interesting thing is that valuations are still staying true to normal formulas and historical numbers.
What this means to you is you can either be a participant in this booming market, or you can be a bystander and watch opportunity pass you by.   If you would like to get any information on any of our practices, let us know.  Consultations and phone calls are always free!

Understanding how many patients, or what type of patients, are in a practice is an important part of evaluating a potential practice to purchase.  What is one man’s trash is another man’s treasure.
When you are evaluating a practice, you may be told that there are a certain number of “active” patients in the practice.  That term “active” is one of my least favorite terms when trying to evaluate or sell a practice.   One person may define “active” as having been in the office once within the past 24 months.  Another person may define it as the patient having been in the practice once in the last 12 months.  And yet a third may say the patient is “active” because they came into the office at one point or another while the doctor was practicing.  It doesn’t even matter to them how long ago it was, or if the patient is even alive.  If I were in your shoes, I would throw out what anyone says and count the charts myself.  If the practice is digital, I would look at the number of hygiene appointments seen in the past 12 months and divide by two to get the number of active patients seen that year.  You can gross it up by 50% to account for walk-ins and other types of procedures, but that should give you a ballpark of the number of active patients.  Another quick rule of thumb is to divide the annual collections by $1,000.   A practice producing $500,000 per year, should have in the neighborhood of 500 patients ($500,000 divided by $1,000 per patient)Patient demographics is another thing to be aware of.  Buyers often blow off a practice that has an aged patient demographic.  Little do they know that a lot of elderly patients pay cash for their treatment and they still want their treatment.  They also have more required work than patients that are in their 20’s, 30’s and 40’s.   These patients are very profitable patients.

Hopefully looking at these two areas of patient demographics will help you make the right decision when evaluating a practice.