Buying a dental practice heres your official checklist

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Buying A Dental Practice? Here's Your Official Checklist Posted by Tyson Downs on 9/2/15 12:33 PM If you’re planning to buy a dental practice, you need to make sure you don’t neglect any critical steps so that you ensure a successful sale and transition. Here is our official dental practice transition checklist with 10 crucial steps to guarantee your dental practice purchase goes as smoothly as possible.

When you’re done reading the article, you can download the handy dental practice transition checklist PDF (below) to keep you organized.

Check out the infographic at the bottom of this post.

1. Determine desired practice area.

The first step to buying a dental practice is deciding the area where you want to live and work. There are a lot of considerations that will go into determining this, including the schools and other amenities in the area that impact quality of life for you and your family.

You will also want to know how many competing dentists there are in the area to figure out the level of market saturation. The local Chamber of Commerce might help you obtain this information. Ideally, you will want to find a place where you will enjoy living, but doesn’t already have a lot of dental competition.

Area demographics are also good to know, so you can determine if the services you provide (for example, pediatric dentistry) would be a good fit for the area.

2. Find a practice you want to purchase.

Now that you know the area you want to target, you need to start looking for a practice you want to buy. To find practices for sale, seek the help of a dental practice broker. Hiring a broker is not absolutely necessary, but can be helpful if you don’t want to do all the research yourself. You might also find listings of practices for sale in trade journals or postings at dental schools in the desired area.

If you know any dental professionals in the area where you want to buy, you can reach out to them and enquire if they know of any dentists who are considering retiring or anyone considering taking on an associate/partner who will eventually purchase the practice. If you don’t have many contacts or resources, a dental practice broker is probably a good idea.

3. Hire professional consultant(s).

Now that you’ve found one or more practices to consider purchasing, it’s time to hire your transition team.

In addition to a practice broker, you'll need a few other processionals to help you appraise the practice and facilitate the sale. This will probably include the following: A transition consultant to help you analyze the practice, determine how much to offer, secure financing, and close the sale.

An accountant who specializes in healthcare services to assist in analyzing the practice, as well as advise you on tax considerations.

An attorney to review the sale documents and other agreements.

4. Research the practice’s financial state.

The professionals you hire will help you look into the selling dentist’s cash flow and financial information. Here are some important pieces of financial information you will want to know: Recent profit and loss statements Recent balance sheets Income tax returns going back at least three years Fee schedule (paying attention to fees relative to industry norms, and insurance reimbursements) Percentage of revenues used for overhead A breakdown of employee expenses (salaries, benefits, payroll taxes, retirement, etc.)

Revenues broken down by procedure Production and collections report for each dentist and hygienist Financial factors such as reimbursement structure and number of employees are important for determining the practice's cash flow, or how much money you'll take home at the end of the day.

From our article Buying a Dental Practice: 10 Things I Wish I’d Known , Dr. Daniel R. Whittaker of Whittaker Family Dental says the following about this:

“A $2 million dental practice with one dentist is a big practice. A $2 million Medicaid practice is just a lot of work. The dentist in the second scenario would likely bring home $200,000. The one in the first could take home over $1 million.”

You will also want to know why the dentist is selling the practice — for example, you probably don’t want to buy the practice if the outgoing dentist is losing money on it.

5. Analyze the practice’s patient and treatment information.

Next, you'll need to make sure you know everything there is to know about the practice’s patients and procedures.

This includes …

Number of active patients (that have had appointments in the last 12 to 18 months) Number of new patients each month Patient demographics, including, age, area code, etc.

Most popular procedures Highest-yielding procedures Outgoing dentist's treatment philosophy Once you know about the practice's existing patients and treatments, you’ll have a better idea of whether you can continue to serve them as they are accustomed, and how much revenue the patient-base will bring you.

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6. Appraise the facility.

Besides the practice’s financial health, you also need to know about the practice facility itself. Be sure to do a site visit as well as an equipment valuation, which should be performed by an independent vendor.

Determine whether the space is appropriate, the lease is affordable, and if there is room for expansion in the adjacent space. What are the lease terms? Is there an option to purchase the property? These are all things you will want to know ahead of making the actual offer.

7. Make the offer.

Now that you’ve done all your due diligence and determined that this is the practice for you, it’s time to actually make the offer to purchase it. As mentioned, you will need a knowledgable third party to help determine what the practice is worth and what you should offer, as well as figure out all the legal and financial details. Once both parties agree on a price, the major hurdle is done; the details can be worked out in the Practice Sale Agreement (more on further down the list).

Download Your Printable: Official 'Buying a Dental Practice' Checklist

8. Secure financing.

After you’ve agreed to purchase the practice, it’s time to get financing. Your transition consultant will help you with this, but it’s good to have a little knowhow yourself as well. Dr. Craig Barney of Kennewick Dental recommends the following when it comes to financing/lending:

“Big national banks tend to be easier to get lending INITIALLY, but harder to work with over the long haul. Find a mid-sized regional bank with some experience in working with dentists. Move all personal and business accounts and loans under one roof and you'll find that lending and banking become much easier.”

9. Sign the Practice Sale Agreement and lease.

The practice sale agreement will have all the details of the sale, including: Buyer/Seller warrantees Allocation of sale price for tax purposes Identification of specific assets that are being sold Details on patient record custodianship Details of practice transition (e.g., the selling dentist might stay on for six months to ease the transition) Details of Covenant-not-to-Compete agreement The actual Practice Sale Agreement is not a complicated document, but you will of course need to have your attorney look it over to make sure everything is agreeable. According to this Henry Schein article on buying an existing dental practice, the fee for an attorney to look over the Practice Sale Agreement should not exceed $1,000.

Concurrent with the Practice Sale Agreement, you will also arrange the lease/property purchase for the practice.

10. Complete the purchase and final closing tasks.

The amount of time it takes from when the offer is accepted to when the offer closes can range from one week to a couple months, depending on how complicated the deal is — for example, it will probably take longer if the Buyer, Seller, and Lender are all located in different states. Once the seller receives the money, the deal is done, and the announcement letters are sent.

In addition to sending patient notification letters (the content of which should be agreed on with the selling dentist), some other tasks you should complete around the time of closing include applying for a tax ID number, opening a business checking account, and transferring any insurance policies requiring contractual agreements for preferred provider status (technically you can do these things after you’ve signed the Practice Sale Agreement; you don’t need to wait till the offer closes).

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Conclusion Congratulations! You’ve bought a practice. We hope this dental practice transition checklist has been of use. Now it’s time to proceed with marketing your dental practice online with techniques like search engine optimization to maximize patient growth and get the word out about the new ownership.

Be sure to download our printable pdf , and also read expert tips from dentists about what they wish they'd known prior to buying a dental practice.