What You Should Be Looking For In A Practice You Want To Consider Purchasing
There are so-called good practices and bad practices, and sometimes practices that work for some of you that wouldn’t work at all for others. But, there are general things you should look for when considering a practice to purchase.
Here’s what I think you should look for:
1. Buy a practice with a lot of goodwill.
You are really buying a practice for the goodwill. Remember - you aren’t buying used dental equipment. In fact, I don’t think you necessarily should be looking for glitz and glam. What you should be looking for is goodwill, a long track record, and devoted patients who provide the practice with a steady cash flow.
To me, there is no substitute for goodwill, which provides cash flow - and that should be first on your list.
Goodwill = Cash Flow to You!
You will almost always find the most goodwill in a practice with:
a. A retiring doctor.
b. A doctor that was in the same location for all of their career.
Doctors like this are usually ethical, have integrity, and everything they tell you and show you is very likely going to be true. Their word is as good as their handshake. And, in my opinion, that’s the kind of practice you want to buy.
2. Buy a practice that is run like a business.
You want a practice that is organized, almost excessively organized. A dental office shouldbe neat, clean, and organized. That goes for the financial data, information in the computer system – and also the drawers and cabinets.
The selling doctor should be able to find things, numbers should be correct, and procedures should be correct and accurately posted to the correct provider.
3. Buy a practice that is profitable.
This is HUGE. It should be profitable the day you buy itand continue that way for your whole period of ownership. Never ever buy “potential” – whatever that is.
You want and need to make money starting Day One. And you should.
You should know the office’s exact profitability before you buy it – and don’t take anyone else’s word for it, especially a brokers. You need to calculate profitability on an excel document yourself. You need to touch it and feel it - and also play with it - change different variables and see what affect they have on profitability.
A practice that has a stable staff is usually a good practice to buy. This isn’t always possible - but at least one or two of the staff members should have been working in the office for several years or more. You should know why and when employees left, if they did, and it should be in the contract.
5. Buy a practice that you like.
I know this seems obvious, but so many buyers look at practices and want to change them almost completely.
Don’t buy a practice you feel that way about.
I think you should like at least 75 to 80% of things about a practice you want to buy.
I mean, it is one thing to want to change the wallpaper and drapes and quite another to want to change a Denti-cal practice into fee for service practice– or vice versa. And yes, I just heard that one a couple weeks ago.
For the record, leave the wallpaper and drapes alone at least the first year! Patients are used to them and that’s what you should be concerned about – keeping patients happy and comfortable.
6. Buy a practice from a seller you like.
Trust your gut, if you just don’t like the selling doctor – for whatever reason –it isn’t the practice for you.
If you can imagine yourself having coffee or wine with the seller once a week or so - soaking up all the info they know about the practice, patients, staff, the community – you are probably on the right track.
A couple years ago, I had a buyer back out almost at the last minute. A horrible time to back out. The only reason he could really articulate is that he just didn’t like the seller, didn’t trust him. So, it was probably a good decision of him.
Just like you wouldn’t marry someone you didn’t like – you also don’t want to buy a practice from someone you don’t like. A practice purchase is a very personal thing.
7. Make sure you have a very similar philosophy of dentistry as the seller.
If you can’t see yourself doing dentistry a lot like the seller was doing it, it probably isn’t the right practice for you.
If you are doing about the same procedures as the seller, and think you could do even more procedures than the seller, then it should be a good fit.
8. Buy a practice where hygienists and any associates are appropriately profitable, as well as the rest of the office.
Hygienists should generally produce about 3 times what they are paid. You do need to know what each individual hygienist made, and how much they produced.
Figure out that number, and if it isn’t quite there, fix it. But if it way off, this may not be the practice for you.
So, I hope this helps and happy looking!