Buying a Practice

Choosing between Buying an Existing Practice Or Doing a New Build

By Corey Young, DDS, MBA

Choosing between buying an existing practice and doing a start-up practice can be one of the biggest decisions of your life. Here are four considerations and two suggestions for when you are contemplating.

The four considerations:

Market Saturation – How many dentists are practicing in the area you are considering? Hardly any? One on every corner? Somewhere in between? Establishing traction in a high competition area will require a much higher marketing budget. Do you know your marketing budget? Do you have a marketing plan?

Available Practices for Sale – How many practices are for sale in the area you are considering? Do those practices have a broker representing them? Broker representation usually equates to well-substantiated pricing and a defined plan for acquisition. For-sale-by-owner practices can be more of a wild card.

Population Demographics – If you are considering an area for a new build, will the demographics of the area you are considering support your business plan?

Personal Financial Situation – Do you have the financial reserves to weather a start-up? While there are pros and cons to both routes, buying an established practice certainly generates more initial cash flow.

The two suggestions:

Get Help – This will be one of the biggest decisions of your life, whichever route you take. There are some truly skilled and experienced professionals out there that will help guide you through this process in an efficient manner and allow you to minimize risk while seizing the opportunity.

If You Can Produce, Get Moving – Are you a high producer? Can you manage and lead? Can you do great dentistry without someone looking over your shoulder? If you answered yes to these questions, what are you waiting for?

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Want to Purchase a Practice?

By Megan Urban, Practice Transition Advisor

Want to purchase a dental practice? Here is a basic starting To-Do List to get you going!

– Where do you want to practice and where will you and your family be happy?

– Get your last 3 years of personal tax returns together.

– Gather your debt details: student loan, credit card, mortgage, etc.

– Start to look at your current production, or if you are in public health, monitor your procedure frequency report.

Talk with a transition specialist that can guide you through the process. They will look at some or all the following items in detail with you:

– Select a dental-specific attorney, bank, and CPA.

– Assist you to understand details of the practice, such as active patient count, expenses, insurance participation, recare, procedures completed and those referred out, potential marketing, cash flow, and due diligence in general.

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When is it Time to Value Your Practice?

By Kevin Brady, Practice Transition Advisor

Transitioning the practice is probably one of the biggest decisions a dentist will make in their career. Deciding whether to transition the practice to a partner, associate, a new dentist, or corporate dentistry, you will need a plan and experts to help you make the right decision.

3 to 5 Years Before Retirement

Having a financial plan when you are 3-5 years out from selling your practice will allow you to know what the total value of your assets are and what value is needed from your practice to afford to retire. Knowing the value of the practice 3-5 years out will also allow you to focus on reducing debt, increasing production, and collections, which are critical factors in determining the practice valuation.

When developing your financial plan, you will need to have your CPA do a thorough review and analysis of your financials and advise of any necessary adjustments. This would include family members on the payroll who don’t work in the office, expenses that are above industry averages, and other expense benefits being run through the practice. Review your internal and external marketing programs with your marketing professional to focus on increasing new patients and adding additional revenue to the practice.

1 to 2 Years Before Retirement

Once you have an established financial plan and are 1-2 years from retirement, you need to find a dental broker to help with a practice valuation and options for selling your practice.

The benefits of enlisting a professional dental broker are:

• Independent and accredited appraisal of your practice’s worth, the patient population, equipment, and, if applicable, the real estate.
• Knowing what your minimum sales price will need to be to meet your financial goals to retire.
• Exploring the different buyer options for the sale and which one is right for you.
• Developing a marketing plan for your practice that will keep it confidential until a buyer is found.
• Determining the average length of time it will take to market and sell your practice.
• Identifying what improvements or changes could make the practice more attractive to potential buyers.

1 Year or Less Before Retirement

It is time to implement your plan to sell the practice. The average practice takes 6-8 months to sell Pre COVID-19. Some rural practices might average 18 -24 months to sell. Enlisting a professional broker will save you time putting together a marketing prospectus and then marketing the practice locally and nationally. A broker can also assist you with updating your valuation to determine the asking price for the practice. Keys areas to focus on with less than a year are reducing as much debt as possible and keeping the hygiene and doctor production as high as possible.

There is no doubt that the COVID-19 pandemic has created new considerations for anyone who is considering selling their dental practice. Selling a dental practice doesn’t happen overnight. Developing a plan with experts can ensure you get what you want out of a sale while maximizing your dental practice’s value and allowing for a smooth transition to the purchaser.

Omni Practice Group has been helping dentists for over 15 years develop plans for dentists to transition their practice. Our goal is to help you find the right buyer and make a smooth transition of your practice when the time is right.

Contact us today for a free no-obligation consultation with one of our Practice Transition Advisors. We are here to help – Kevin@omni-pg.com.