Secrets to Buying Your Ideal Dental Practice was published in 2016. A lot has changed in the last several years but the fundamentals remain the same for an individual dentist looking to buy a dental practice. This excerpt is posted with the permission of the author.
Excerpt from Secrets to Buying Your Ideal Dental Practice
I designed this short book to give quick, concise business information to any dentist considering buying a dental practice. My goal was to keep it efficient and short, not wasting time on nonessential fluff. After reading this book, you will know how to use basic concepts and have a good handle on the key numbers of a dental practice in a few minutes! My goal in writing this book was to show how dental brokers and consultants approach this process and how you can do the same thing. By understanding some basic math and mastering the language of the experts, you can potentially save and earn additional hundreds of thousands of dollars over your career. You may be asking yourself why you would want to buy a dental practice in the first place. The answer is that you would like to have an established income stream. The practice you invest in should have a long-documented history of cash flow. You are always better off starting with existing patients and money coming into the office rather than with a beautifully equipped new office with no history of patients. If you choose to have a start-up practice, you will need to hire and train new employees. With a practice purchase, you have trained staff and equipment in place and ready to produce on day one. From a financial perspective, it is almost always better to buy than to start from scratch. Owning a practice is not for everyone. Many dentists do not want the additional responsibility of ownership, and that is understandable. Buying an existing practice is not for everyone. Some dentists prefer to start from scratch because they want their practice to have their own stamp from day one, but it is always good to understand your options.
We will review what you need to know in a simple step-by-step format to make it easy to understand. You will immediately see how to use this system in your own practice, or with the numbers the seller or practice broker is giving you. You will also have action steps that you can take today. Let’s be real; it’s not that complicated! Once you see the key metrics, it really can be a cookbook methodology. The main takeaway should be the percentage of your personal production you take home after making your practice loan payment if everything stays constant. In other words, how much money will you take home if you buy a particular practice? You may be asking, why do I want to know that? The answer is, for most dentists, the main option, other than buying a practice, is to be an associate. You will want to compare the purchase opportunity against what you would make as an associate. You want to compare your actual take-home pay after buying the practice to other opportunities. The alternatives we give up are our opportunity costs. Everyone will make different decisions based on the data and their personal situation, but at least you will be able to analyze the data to make a good decision for you. You might find a practice that will allow you to make 25 percent of your personal collections, but guess what? You are a surfer, and the practice is located in Malibu, California, and that sounds great to you. If you know what the numbers should be, and you still want to buy it, then go ahead and buy it. At least you will be making an informed decision, and you will know your opportunity cost. This book should in no way replace hiring experienced professionals to help you navigate through this process. In fact, that should be one of the first things to do: find an experienced broker, attorney, and CPA. As a buyer, remember that a broker is assuming that you will engage in a reasonable effort of due diligence using the financial information and access to the practice you are given. This book can provide you with the right questions to ask the broker, your attorney, and your CPA.