In my book, I address some of these topics in some detail. The key is preparation and planning. In many cases it may not be the best option, but in others, it may lead to a more productive professional arrangement.
There are many companies that provide services matching sellers with potential buyers of dental practices. I do not intend to endorse any one company over another, nor do I have a professional or business relationship with any firms other than as being one of the many clients of our accounting firm Cain, Watters and Associates LLC in Dallas, Texas. I provide this guest post to add to the information available and to get young dental students and young professionals thinking. Here is Abigail's Post:
If You are Buying a Practice in 2013, Isn’t It Best to Create an Ideal Practice Checklist? Here’s Five Considerations for Your First Practice Acquisition.
If you’ve ever purchased a new home, or even if you’ve watch a real estate television show, you know that the checklist sets the parameters for the first viewings. Then, the reality hits: the checklist of absolute needs and the availability of homes on the market simply don’t align! Needs are re-evaluated as wants and compromise begins, doesn’t it? With a new prioritization, something that’s available becomes a ‘fit’ and the buyer is confident in their final choice. If you’ve been the one at the closing table, you understand the process!
And buying a practice is similar to buying a new home. Without narrowing criteria and understanding where the value lies within the practice, you could overlook key profitability drivers as well as preferences that impact your long-term future. Best to be prepared with a checklist. Here’s five considerations that can help you prioritize your search:
Income Requirements. You are familiar with personal and financial sacrifice and perhaps you were motivated during those long study nights in dental school by the income potential of your profession. As you look at ownership, you are probably like most who require a loan to realize their dream, and take advantage of the value proposition of being a solo practitioner!
Before you review a practice’s valuation, sit down and evaluate the costs and the monthly repayment amount that makes sense for your lifestyle. Guessing your income requirement could mean personal and practice strain sooner than later. Be honest with yourself so when you do see what the practice is netting, you can run the numbers and understand your future better!
Layout. Open floor plan versus semi-private operatories? How many operatories are needed to reflect your ideal daily patient load? And does it matter?
Recently, I visited a pediatric dentist who is creating a ‘dental spa’ for his young patients. During his associateship, he observed that in the practice’s open floor plan, when one child became unruly that all the other followed suit. In designed his dental spa, he redesigned the space to include six semi-private operatories so that should a child became upset, the others sitting in the chairs would not watch and potentially mimic the behavior.
As you review your work pace and the patient experience you will create, evaluate the layout and size that will be right for you. But remember: improvements can be made over time and walls can be constructed!
Marketing Strategy. Chances are that you are tech-savvy and fluent in social media! Pay-per-click advertising, a Twitter educational campaign and a Facebook success stories page are options you have to expand your next practice. These are options that dentists twenty years ago didn’t yet know about! You might find your practice’s advertising and marketing strategy is limited to referrals and the phonebook, but don’t be alarmed.
Ask yourself when you look at active versus total patient files: Where is there an opportunity for marketing? Is this practice using only ‘old school’ techniques and outlets? You may see that you could increase patients by a basic online strategy. Or perhaps the social media and online presence is established. Are you willing to create a new marketing strategy or would you like it ready-made in your ideal practice?
Location & Proximity. An often-debated question in dental acquisitions is whether it is ‘smart’ to own or lease the real estate housing your practice. Whether you lease or own, where you are located will impact your marketing and advertising costs, as well as define your competition.
Let’s look first at location. As you look at where a practice is located, research the traffic count. How many drivers will pass by your new practice everyday? The more, the better. But only if you have clear building markings and on-road signage. You can’t alter location but you can improve visibility.
Think about the proximity of the practice. What is the benefit of being located near the local medical center or regional hospital? Are there complimentary specialties nearby with whom you could refer patients, or eventually merge practices?
Updates. If you’ve recently graduated dental school, you bring to your practice knowledge of the most up-to-date procedure as well as proficiency in the latest technical equipment. Just as location and proximity is a personal preference, a dentist’s decision to make equipment updates is financial and personal. Not every practice will have the equipment you were trained on, but this does not mean the practice does not realize significant profits.
As you are making your checklist, determine if you require in your acquisition a practice with new equipment or if you’re willing to plan for this capital expenditure in the coming years. Just as in home ownership, improvements can be planned for and expedited based on increasing your profitability.
As you’re taking the next step, keep asking questions. With each answer, move forward. It’s the New Year and your year for ownership.
Abigail Widynski is enthusiastic about two topics: growth and expansion. In her role at 5th Avenue Acquisitions and Venture Capitalists (www.5thaavc.com), she feels privileged to talk about these two everyday. Abigail is the founder of the online and translation consultancy, Wild West Content Strategy and serves as a board member for two international children’s organizations: Hope4Kids and the U.S. Executive Board of Grain of Wheat International. Abigail is a graduate of American University and Imperial College Business School in London. Abigail invites you to reach out to her at Abigail@5thaavc.com.