Choosing to purchase a pre-existing dental practice is a big decision that shouldn’t be taken lightly. When done correctly, you’ll have a long-lasting, profitable business that offers a valuable service to the community. On the other hand, taking the wrong approach to this venture could result in a constant financial drain on your bank account. To help you get started on the right foot, we’ve compiled a list of 5 important tips for buying a dental practice.
One of the first things you’ll want to analyze is the financial history of the practice. Ask the current owner or manager for a copy of their revenue and expenses going back at least 3 years. Depending on the size of the practice, you may or may not be able to make sense of it by yourself. If the financial information is overwhelming, a CPA or a dental practice consultant like 1st Med Financial can assist in analyzing the cash flow. Make sure to look for sudden drops in revenue along with any outstanding debts.
Location is a key element that you must address when purchasing a dental practice. Ideally, the practice should be located in a busy, easy-to-find area that’s near a major highway or thoroughfare. A good location will make it easy for new customers to find the practice, leading to higher sales and profits. It’s an all-too-common mistake for dentists to lease buildings located in obscure areas. You may save a couple hundred bucks a month on their lease, but you will pay for it in the long run with fewer clients.
I guess you could say competition goes hand in hand with location. Before you purchase a dental practice, do some research to determine how many other practices are located in the same area. Trying to force your way into an already crowded market will make your job ten times more difficult. It’s not impossible to get a piece of the action, but it’s certainly going to require more work.
Of course, you’ll also want to check the practice’s tools before signing any official purchase agreement. Don’t just take the owner’s word for it, but instead go test the tools for yourself. Make sure they are clean and function properly. If any tools are broken, talk with the owner to see if they will fix them or reduce the sales price to cover the added expense you will incur to purchase them.
Lastly, do your homework on the staff to see if they are fully trained and capable of running the practice. Dedicated, dependable employees are an invaluable tool in dental practices. While you can always hire new employees later, it’s nice to have a strong base of loyal workers to start off on the right foot.
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“First, let me take a minute to say Thank You! The time and effort you and your team took to get me the financing I needed for my buy-out, acquisition and consolidation was, to say the least, beyond awesome. I was treated by everyone as if we were long lost best friends.
Through the entire process, it felt as though getting this done was a personal task....not a job. Embarrassingly enough, I had come to you once, but decided to go to my bank "because they knew me". They were terrible, to put it nicely.
Bottom line, I'm where I am today with my practice because of you.”