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Volume 62: Dave’s Top Ten List for Buyers (Vendors should read this too!)

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In Issue number 60 of The Professional Advisory, I provided my Top Ten List for Vendors. As a follow up this issue will have a similar theme, but this time I will focus on the Buyers. As a dental practice appraiser and broker I see what strategies work and what approaches do not work for buyers wishing to purchase a practice.  This article will take a page from Late Show Host David Letterman’s monologue and enlighten you about my “Top Ten List” for Dental Practice Buyers.

  10. Be Patient – It takes a long time and is a lot of work to find the right practice. Create a list of “nice to haves” and “need to haves” in order to make your journey easier. Don’t compromise on your needs but be prepared to be flexible on the nice to haves. When you find the right practice, act swiftly.

  9. Know the Market – Take the time to understand practice values. Visit as many practices that are for sale as you can. This will help you learn what you want and also what you cannot live with. The patient charts are a clear indicator of what takes place in the practice. Spend time looking at the charts and read between the lines.

  8. Think Long Term – Buying a practice may be the longest term investment you make in your life. There are things you can change and things you can’t change. If the practice is located in an area of town that you are not comfortable in, then you should not buy it. However, if the colour of the paint on the walls or the look of the front desk doesn’t appeal to you, then proceed; knowing you can easily change those things over time.

  7. Consider Locating Outside the Big Cities – Life is good for dentists outside the big cities. They enjoy larger patient bases, are well respected by their patients, work fewer hours, and have a better work/life balance. If your personal circumstances will allow it, you could enjoy all of the above and pay less (sometimes much less depending on location) for the practice too!

  6. Pay a Fair Price – There are no great deals out there. This is a seller’s market so you should be prepared to pay full market value for what you buy. You should not however pay for what the practice could or should be if you made it better. This is potential, and the potential value creation should accrue to the person who realizes it.

  5. Get Exposed – In order to find the right practice, the brokerage community needs to know you are out there. Get to know us all, visit us at trade shows, and come to our showings. Quite often, we will see a fit with people that we meet in various ways and we will try to match them up with a practice that we have for sale.

4. Pick a Good Fit for You –There is no one size fits all in dental practices. Be honest about what kind of practice will work for you and what kind will not. For instance, if you really enjoy the higher end cosmetic types of procedures, a practice with a patient base of middle to low income patients and 20 per cent social service patients would be a bad fit. Ideally you should learn about the practice philosophy of the Vendor and buy a practice where the philosophy aligns with yours.

3.  Hire a Team of Experts – Buying a dental practice is a complex undertaking. You will likely need to incorporate, buy shares of a Dentistry Professional Corporation (DPC), have debt structuring to consider, staff and a landlord to deal with, and have diligence to undertake. It is extremely important to consult with professionals that know what they are doing. Your accountant, lawyer, financial advisor, banker and broker all play an integral role in a successful outcome.

2. Buy the Practice You Work in – This can be a very smooth way of acquiring a practice. You already know the practice well. The staff and patients know you too. The key to making this work is to understand that you should pay what the market would pay for the practice. This is a business deal for your principal dentist. You as the associate, do not own anything. The patients you treat are the principal’s patients, not yours. You should pay full value for the goodwill of the practice. This may feel like you are buying your own goodwill but you are not.

 1. Patients and Profit Come First – Patients and profit are the two biggest value drivers in a dental practice. Gross production is important but not in isolation. Take the time to understand the relationship between patients and gross and net incomes in order to know when you have found a practice that is worth pursuing.

The purchase of a practice, while a complex undertaking, can and should be a very rewarding process. It will allow you to acquire a practice that matches your unique ability, where you can practice your profession and continue the legacy that is left for you by the vendor. Most importantly, you will have patients to treat, to whom you can provide the highest level of care.

David Lind is a Principal and Broker of Record in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices.  He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: david.lind@ppsales.com

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

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