Volume 4: Buyer Be Aware

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There are many fundamental steps in purchasing a practice, the purchaser should complete all of them. Purchasing an existing practice cuts down the risk of failure when compared to starting from scratch but there are risks. In the next few articles I will cover what I consider are the key steps in purchasing a practice regardless of whether the purchase is through a broker or you are dealing directly with the vendor.

The number one rule in purchasing a practice is to count the charts. Do not believe anyone! Not even me! You should set aside up to three or four hours to review the charts. Take another dentist with you to assist in the count but remember all the information is confidential and no specific information such as name, address or telephone number is to be written or taken away. In fact, a confidentiality letter may be requested.

As you would have read in Article 2 "Patients and Profit" are the keys to value. Your accountant will review the profit for reasonableness and sustainability but you are directly responsible for the documentation of the quality and quantity of the patient base you are acquiring. Remember, you are generally purchasing a patient base and the location and equipment simply are used to facilitate the treatment of the patients.

When reviewing patient files, to better understand the patient base, attention should be paid to the following top ten list:

  1. How many patients have received treatment in the past 24 months? (If they have not been in for more than 24 months they are of limited value)
  2. What percentage of patients receive treatment at least annually?
  3. How many are new patients who have not had a return appointment in the last year? That is, a subsequent visit after the initial visit or series of visits.
  4. Do the patients work or reside within a reasonable distance from the practice?
  5. Are the fees charged reasonably consistent with the O.D.A. fee guide?
  6. Does the practice accept assignment and does the doctor collect the coinsurance from the patients?
  7. What percentage of the patients are paid by social services?
  8. Can you read the charts, is the writing legible?
  9. What treatments are being performed in the practice and do you feel comfortable performing them i.e. orthodontics?
  10. Alternately, what procedures are being sent out to specialists, that you could perform to increase the fees?
  11. If there is a noticeable ethnic base in the practice, is it one that you are comfortable with?

Subsequent articles will discuss other steps in the purchase of a practice.

The Professional Advisory

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead