Buying a Practice Archives - Page 6 of 21

by omniadminFebruary 20, 2022 Buyer Articles, Buyer FAQ, Buying a Practice0 comments

Dental Practice Buyer FAQ

by Megan Urban, Practice Transition Specialist

Where / How do I start?

Where do you want to live? Not that you can’t change your mind and sell, move, or buy again. But it’s typically best to determine where you want to live, such as in close proximity to family members, or near an airport, or close to beaches and surfing, or near ski resorts. Are you a city dweller? Are you a nature enthusiast?

Next, contact a reputable transition consultant/broker to discuss the general process and to get answers to your questions. This broker will also recommend dental lenders, dental CPAs, and dental attorneys.

What is your confidence level with all procedures? For example, if you do not yet place surgical implants, you will want a practice that doesn’t place implants. However, if placing implants in a particular practice keeps their production numbers high, it might make sense to consider the practice and keep the seller on for these procedures until you can take them on.

If you are currently working, be sure to print out a production by procedure report so your advisors can see what experience you have.

Can I afford a practice?

We can recommend several dental specific lenders to assist you and they expect you to have student debt. They will ask you for your tax returns and debt details such as student loans, cars loans, home mortgage, etc. Then once you find a practice that you like, the bank will analyze the cashflow of the practice and work with you to determine if or how much they can lend on that specific opportunity.

Do I need to utilize a dental-specific lender, attorney, and CPA?

Sometimes dental buyers have a relative that is an attorney or another advisor, but when both the buyer and seller utilize dental specific folks, the job gets done correctly and in a timely manner. You are a dentist but may not feel confident with complete boney third molar extractions. It’s the same thing. Using the right people will give you the best experience and result.

What do I need to know about a practice?

The listing transition consultant will provide a Prospectus reflecting all the important aspects of the practice and can walk you through the details. No practice is perfect, and you will want to go in knowing what is happening now and areas of future opportunity. Below are just a few of the items that may be in the Prospectus and if it’s the practice you want, you will have due diligence time later and we can provide an example of how the process typically works.

Cash flow
Procedure frequency
Active patient count
Accounts receivable and credit balances
Hygiene stats
Insurance participation
Team information

What else should I know or think about?

The listing transition consultant will provide you with a Closing Checklist of what needs to be addressed. Your consultant/broker will work closely with your other advisors to complete a Letter of Intent and conduct due diligence. Your attorney will complete all purchase and sale documents, non-compete agreements, redo treatment provisions, etc. Your CPA will help with taxes relating to the purchase, and set up payroll and accounting, etc.

Should / Can I purchase the real estate?

Many young dentists assume they can’t afford the real estate piece or that the seller wants to wait to sell in the next year or so. We strongly believe the best person to own the dental real estate is the dentist practicing there. Depending on the cash flow of the practice, you may not need any money down and if you do, the seller will often carry the loan on the down payment and the bank will carry the remainder.

Do I have to keep all or most of the existing staff?

It is recommended that you do keep the existing staff. If they are good at their jobs and have well-established relationships with the patients, their presence most definitely contributes to a smooth practice transition.

However, there are always exceptions. If the practice overhead is very high due in part to high salaries of some staff members, then it may be recommended that staff be cut back. Or there may be instances where a seller has kept an underperforming employee on board and letting that person go may be a healthy decision for the overall morale of the other employees.

In Summary

The sooner you purchase a practice, typically the more money you make over the life of your career. The more you make, the more your CPA gets involved to assist you to keep more of what you make by implementing tax and retirement planning. So, start today by talking with your practice transition specialist/broker.

by omniadminFebruary 1, 2022 Buyer Articles, Buying a Practice0 comments

Merging an Existing Veterinary Practice

If you already own a veterinary practice, have you ever considered buying an existing veterinary practice located close to your first practice and merging the two together? If you ask most doctors, they will say the best way to build a practice is through taking care of your patients and bringing in new patients via word of mouth and marketing. And, they would be correct. However, acquiring a second practice and merging the two together makes sense in many ways.

First off, have you ever calculated the cost of acquiring a patient via old-fashioned word of mouth? It requires a lot of work if you include everything from building your brand, training your staff, maintaining a spotless, high-tech practice, etc., the cost could easily be hundreds of dollars or more per patient. The cost of acquiring a patient via marketing is even more. Acquiring a veterinary practice with existing patients can typically run from several hundred dollars per active patient to $1,000 per active patient. Slightly less to maybe equal to acquiring a patient through a normal channel. However, you get a high volume of patients very quickly in addition to adding income to your pocket.

Secondly, you acquire a stream of revenue at a near dollar-to-dollar relationship. If the selling practice is producing $500,000 per year, you should be able to repeat the $500,000 in revenue by merging the practices together, or worst case, slightly below the $500,000. The good news is you don’t bring over all of the expenses of the selling practice. You typically can save in a number of ways including reducing the staff of the selling practice, utilities are not double as the practices merge to one location, there is only one rent payment (more on that in a minute), only one set of books, so only one payroll service and one bookkeeper and accountant and several other services can be eliminated. So, while getting most of the revenue to increase your practice collections, you only get a portion of the expenses. This increases the income of the practice owner – you!

Thirdly, by acquiring another veterinarian’s office, you reduce the number of practices in your area by one. Less competition equals more new patients for you. You can hire the selling doctor as an employee to help with the veterinary transition as well as perform some other things that will help with patient retention.

info@omnipg-vet.com
877-866-6053

by omniadminJanuary 3, 2022 Associate Articles, Buyer Articles, Buying a Practice0 comments

New Year’s Resolution for Associate Dentists in 2022

By Rod Johnston, MBA, CMA

Happy New Year! We would like to wish you a new and improved year over 2020 and 2021. If you’re like most people, you have set some New Year’s resolutions. Perhaps one of them is going to the gym. Another may be eating healthier. A third popular one is spending more time with family and friends. Statistics show that on average, it takes 32 days before people give up on their resolutions. My thought is, why wait? I’m having a hot fudge sundae for lunch and not going to the gym! But how about a resolution to further your career as a dentist?

One way to further your career may be to learn a new procedure or two. As an associate or existing practice owner, you can improve your skills and your income by learning new procedures. A few suggestions would be to advance your endo skills. Maybe you know enough but just haven’t had any advanced training. There are a lot of courses to further advance your endo skills. You can also learn how to place implants. There are probably a lot of patients in your practice who want an implant, but don’t want to go to another office. If you’re a general dentist, you can also learn how to do some form of orthodontics with either Invisalign, ClearCorrect, or another company’s process. Learning a new procedure can make you more marketable as an associate and as a practice owner.

Another way to further your career may be to find a new associate position. If you’re frustrated in your current role because you’re not allowed to do anything more than hygiene checks and fillings, maybe it’s time to look elsewhere. The state associations list openings in their classified ads. If you’re not happy where you are, staying there will make you disgruntled with dentistry and cause you nothing but grief.

A third way of expanding your career in 2022 is by purchasing a practice. Practice owners make 15% to 20% more than associate dentists. They also build equity in their practice typically paying off their entire loans in 10 years. If you purchased a $500,000 practice and simply sustain its production, you now have earned 15% to 20% more per year PLUS you’ve earned $500,000 of equity in your practice. If you grew it 10% per year, you now have over $1 million in equity. I know many associate dentists are afraid of owning a practice. They think Dental Service Organizations (DSOs) are going to take over the world and they get better deals on supplies. First of all, DSOs will not be taking over the world. There will always be room for individual practice owners. In fact, if I had a choice, I would prefer to go to an individual owner before I would go to a DSO or group-owned practice. I think most people would agree. Regarding better deals on supplies, I’ve had several supply reps tell me that they would give the same deal to an individual as they would to a DSO. Supplies as a percentage of gross revenues make up a small number. So, even if they did get better deals, it would not make that big of a difference. Don’t be afraid of owning a practice and competing against the big guys. You can provide a much better and more personalized experience than they can.

These are just a few ideas for your New Year’s resolutions if you haven’t come up with your own. Now, go to the gym, grab a salad and then, go improve your career!

by omniadminDecember 7, 2021 Buyer Articles, Buying a Practice0 comments

Did You Achieve Your Goal in 2021?

By Rod Johnston, MBA, CMA

Did you reach your goals this year? Was one of them to buy a practice by the end of 2021? Ahem, it’s December. You know who I’m talking about! Do you remember when the year started back in January, and you said to yourself, and perhaps to some of your family and friends, “This is the year I’m going to buy a practice!” Well? What happened?

Did you know that on average a veterinary practice owner makes 20% to 25% more than an associate veterinarian? Practice owners also build up equity in their practice similar to owning a house. A million-dollar practice with no debt will give you a million dollars in equity. Did you know that most practice owners tend to be happy in their veterinary profession? Practice owners get the privilege of setting their own hours. They get to choose what type of hospital they want to have and even which procedures they want to do. They also hire their own staff and let go of those that they don’t believe are doing a good job. Practice owners even get to pick out the music that gets played at the practice. (Although, staff may overrule you on that last one).

We gave buyers a mulligan in 2020. Covid-19 hit us all pretty hard. I caught it early and it took most of the year for me to get back to normal. The industry reeled for a few months due to the Covid shutdowns and various mandates provided at the federal and state levels. But after the shutdown was over, practices came back. Offices that were collecting $80,000 per month prior to the Covid-19 shutdowns were doing $80,000 per month if not more. We can’t predict when this Covid craziness will go away, especially with a new variant popping up every six months or so. But we can say that veterinary practices are resilient.

Those of you who kept your goals and purchased a practice in 2021 are doing well. The practices they purchased are at least producing what they were producing prior to them acquiring the practice. They took out a 10-year loan and they are now 1/10 of the way to paying off their practice debt. Think about those who purchased a practice five years ago. They’re halfway to paying off their practice debt. If they purchased a million-dollar practice, they now have $500,000 of equity in their practice. A half a million dollars! I tell the story of a veterinarian who would come to our buyer’s seminars year after year. At year 7 this veterinarian came to our buyer’s seminar, and I called her out. I pointed out that if she would have purchased the first practice that I showed her 7 years ago with a 7-year loan, she would have had the practice paid off. The practice was a $950,000 practice. She would have equity of close to and if not more than $1 million if she would have just taken action. That motivated her to purchase a practice a few months after the buyer’s seminar. The practice she purchased was three miles from the first practice I had shown her 7 years earlier!

So, as we end the year and you start to think about your goals for next year, think beyond the goal. What can you do better this year that will help you reach the goal of purchasing a practice in 2022? Make finding a practice to buy a priority. In the not-so-long run, you will be thankful you did. The brokers at Omni are always available for a phone call to discuss what you need to do to purchase a practice. Just pick up the phone and give us a call – 877-866-6053.

by omniadminNovember 30, 2021 Buyer Articles, Buying a Practice0 comments

Did You Achieve Your Goal in 2021?

By Rod Johnston, MBA, CMA

Did you know that on average a dental practice owner makes 20% to 25% more than an associate dentist? Practice owners also build up equity in their practice similar to owning a house. A million-dollar practice with no debt will give you a million dollars in equity. Did you know that most practice owners tend to be happy in their dental profession? Practice owners get the privilege of setting their own hours. They get to choose which procedures they want to do and which procedures they want to refer out. They also hire their own staff and let go of those that they don’t believe are doing a good job. Practice owners even get to pick out the music that gets played at the practice. Although, staff may overrule you on that last one.

We gave buyers a mulligan in 2020. Covid-19 hit us all pretty hard. I caught it early and it took most of the year for me to get back to normal. The industry reeled for a few months due to the Covid shut down and various mandates provided at the federal and state levels. But after the shutdown was over, patients came back. Practices came back with a vengeance. Offices that were collecting $80,000 per month prior to the Covid-19 shutdown were producing $80,000 or even more upon the re-opening. In 2021, I would say the majority of practices are back at full capacity. We can’t predict when this Covid craziness will go away, especially with a new variant popping up every six months or so. But we can say that dental practices are resilient.

Those of you who kept your goals and purchased a practice in 2021 are doing well. The practices they purchased are at least producing what they were producing prior to them acquiring the practice. They took out a 10-year loan and they are now 1/10 of the way to paying off their practice debt. Think about those who purchased a practice five years ago. They’re halfway to paying off their practice debt. If they purchased a million-dollar practice, they now have $500,000 of equity in their practice. A half a million dollars! I tell the story of a dentist who would come to our buyer’s seminars year after year. At year 7 this dentist came to our buyer’s seminar, and I called her out. I pointed out that if she would have purchased the first practice that I showed her 7 years ago with a 7-year loan, she would have had the practice paid off. The practice was a $950,000 practice. She would have equity of close to and if not more than $1 million if she would have just taken action. That motivated her to purchase a practice a few months after the buyer’s seminar. The practice she purchased was three miles from the first practice I had shown her 7 years earlier!