You are looking for a dental practice for-sale
You invested weeks or even months looking for the right dental practice. You want one that is clean, has a good location, is well maintained, has great foot traffic, and you found one.
You are excited. The dental practice for sale is in a great neighborhood, the clientele is thriving, the price is what you can afford, so you eager to buy it! The only thing is that question is still in the back of your mind, is it a good investment? The owner wants to sell and the offer seems fair, but before your purchase how can you be totally sure it is a good deal.
Finding a good deal can be difficult and by making the wrong investment, it could leave you and your new career flatfooted. So in order to help you with your investment we’ve compiled a list of tips for you to research before buying a dental practice:
What to Look For:Dental Practice Buying Tips
Here are eight keys tips to consider when buying a dental practice.
1)Know What You Want:
It is important to know what you want and what you can spend. Having a budget and a list of requirements ensures you don’t overspend. If you do not know what you want try asking a few successful dental friends you may know what exactly they would want if they were buying a dental practice.
2)Research the Facility & Location
Since dental practices are not easily movable, often a large part of your purchasing includes the facility. To ensure your investment is good you need to consider a few key items:
- Is the location a good one? How many competing practices are nearby? What is your market size and how much of that market do you plan on acquiring. Is the market large enough to be able to build and own the practice you know you want.
- Is area one that you and your patients would feel comfortable in? is there adaquite parking for your staff the patient load you are expecting to have in 3-5 years?
- How much lease hold improvements are needed – you may what to have a building inspector inspect the property and building to compile a list of necessary repairs that may be needed?
Town and City Building and Zoning issues: Be sure to check out the building codes to be sure that the practice is legal. Consider having a contractor walk through the building to check for repairs and code violations.
3)Check the Dental Equipment
Equipment is a large cost of any practice. Before purchasing ask the following questions.
- Is the equipment up to date how old is the equipment?
- Is the equipment in good shape? What updates maybe needed?
- Is the equipment paid off or does the practice still owe on it?
- Has the owner scheduled regular maintenance? Ask to see maintenance records of the equipment.
You may want to hire a dental service company to check the equipment, and write a report on what repairs are needed and what should be replaced. Include that in your final cost or ask the seller to deduct this cost from the final price.
4)Leasing Agreement or Ownership
Leasing: If you are buying a practice in a commercial development and/or a leased facility, be sure to check into the lease agreement. You won’d want to buy a business where the rent will double in the second year.
Owning:If the business includes the real estate have the space assessed. This will help you understand the value of the land and the building. You will also see what property taxes will cost you every year.
5)Employees & Staff
Staff is the largest expense in running a practice. Examine salaries and see inquire if there are any employee contracts in place. You will also need to know what current benefits the staff has been receiving so you know what to expect with raising health insurance premiums etc.
You may also what to explore ways you can reduce staff, or see if your may have to increase staff. By spending time in the practice you may be able to get a feel for what the workload is.
6)Clientele and Cash Flow
Before buying ensure the practice has a steady stream of clients in place. Look at the customer list and study the activity, scrutinize the amount of actual customers/goodwill you actually are purchasing.
7) Tax Returns and Law Suits
You need to know if the business is making money and how long it has been making money. Reviewing five years worth of tax returns will show you:
- What money has come in
- How much taxes are paid
- And show if the business has been making money.
If the business is only showing profit for the last year or two you will need to find out ‘why’.
You need to know if the business turned around, did they get new equipment and offer more services, did they get a better marketing plan, did another practice close, or did the owner quit paying themselves to show profits?
You will also need to be sure if the practice does not have any current or pending lawsuits.
8) Financial Accounts
Accounts Payable: Be sure that the practice has no long term outstanding debts with any vendors. You should ask for the vendor list call each one and ask what the current balance is with each vendor. The last thing you will want is to end up liable for a 3 year old bill that you had know idea existed.
Accounts Receivable: As for an accounts receivable aging statement. You will want to be sure that you are not purchasing bad debtor accounts that are not collect-able.
Investing in a dental practice doesn’t have to be difficult. If you want to ensure your investment is good be sure to review the key things mentioned and stick to your budget. Being prepared and doing your homework will ensure the deal you get is the best one possible.