So…you graduate from dental school and you want to buy a practice. You know what state you want to practice in, but not much else; they didn’t teach you the business side of dentistry after all! So where do you start? We often speak with new dentists who haven’t worked with a professional team before, but they have found some practices they are interested in purchasing. They might decide on a practice for sale for $750,000 and yet they have not spoken to a banker about financing options. So, what are some of the initial steps that you should take before even thinking about a purchase as big as a dental practice?
- Make sure you have your personal credit score in line. Check your FICO score and make sure that you are paying off student loans and other debt timely. Don’t make any other big purchases right before a practice purchase, as this could affect your personal creditworthiness.
- Contact some bankers. Some banks have professionals who ONLY work in healthcare or dental. These bankers are best equipped to help you, as they are very knowledgeable about financing requirements and special options that might exist to make a deal work. Some local healthcare bankers focus in practice purchases or startups and vice versa. Without knowing what you can afford to pay for a practice, the rest of the negotiations may be moot.
- Find a good accountant who can help you evaluate the purchase price and review tax returns and other financial information of the practice in question. A dental or healthcare accountant can help you identify issues that may be unique to you the dental industry, as they are accustomed to spot these.
- Engage a healthcare real estate or marketing professional who can help evaluate the market in the neighborhood in which you intend to practice.
- Once you find a practice that, based on the above, you can afford and is reasonable, spend a day at the practice, if possible, observing how the office staff works together, how patients respond to the doctor and staff and how practice management software is used. This could give unique insight into the operations of the office that you might not otherwise see.
- Finally, once you are ready to commit, you will thank yourself if you hire a healthcare attorney to get the legal ball rolling…from Letters of Intent to acquisition contracts.
Purchasing a practice may seem daunting as a young dentist, but the process can be made much easier if you pull together a reliable professional team that focuses in your industry. What professionals have you met while in dental school who you plan to stay in touch with after dental school?
~Megan Mathers, J.D., Mathers Law