Every dental practice sale is different. But they also have lots in common. After helping broker the purchase of thousands of practices, I’ve come up with some advice that’s applicable to pretty much every dentist looking to make the leap to ownership.
So if you want to buy a practice and just need to know where to start, here are 5 tips for you to use today:
1. Establish a network of reliable advisors for guidance throughout the process, and do so early.
You shouldn’t take on this process alone. Instead, assemble a team of experts to guide you through the purchase. You’ll spend some money, but it’s well worth it to avoid costly mistakes and to keep the purchase on track.
- Practice Transition Consultant (that’s me!)
- Dental-specific CPA
- Dental-specific attorney
How do you find these people? Google is an okay place to start, but don’t just assume the first lawyer or CPA you come across is the right one. Try to meet with a few people in each category and consider their knowledge, commitment, and communication.
2. Create a well-defined budget for the purchase.
Banks will usually lend 100% of the purchase price of a practice, so you don’t need to budget, right? Wrong. Banks expect you to have cash on hand at the time of the purchase ($50K+ minimum), for contingencies that might arise during those crucial first few months of ownership.
Be realistic about your financial situation here and now, but also in the future. Do you have the time, the hand speed, and the managerial wherewithal to handle a $3M practice? It may be more realistic to look at that $1M practice instead.
3. Ask friends and colleagues if they’re happy with their dental practices.
Friends, relatives, random doctors you met at some event last year: they’re all happy to share their wisdom with you. And they have plenty! Ask them about their experience with ownership and pay close attention to the list of things they love, as well as the things they’d have done differently if they went through the process today.
4. Take location and demographics into account during the decision-making process.
This might sound obvious, but it bears repeating: not all practices are created equal. I talk a lot about finding the right practice in financial terms, but that’s because I’m an accountant. It’s important not to forget the non-financial factors at play.
- Is this an area you want to live in? More importantly in some cases, does your spouse want to live there?
- What are the economic trends in the area, up or down? Both can be okay, depending on your goals. Be sure you know what those are.
- Does the physical location of the practice make sense? Can you live close enough for a decent commute? How’s the foot or car traffic? Signage?
5. Connect with dental professionals in your desired area.
This one is vital to finding a great practice to buy. Most great practices aren’t listed publicly; instead, they go to the dentists who know the sellers personally. So how do you get to know those dentists? The old school way. Give them a call, send a mailer, show up at events and introduce yourself.
Those are just 5 tips. I actually have 14 tips on how to buy a dental practice, distilled from years of experience. The full article is a great jumping-off point to learn what you need to about the process you’re embarking on.