Tim Lott-Your Trusted Dental CPA
Tim Lott-Your Trusted Dental CPA
We provide the answers, as well as the practice plans to help you secure your dental goals.
Tim Lott, CPA, CVA

Buying a Dental Practice, There’s More To It Than Price-Part III: Buyins/Buyouts/Mergers & Special Situations

7/11/2018 11:40:00 AM   |   Comments: 0   |   Views: 11

Recap from Townie 2018 Presentation

Blog #2 talked about those “special” situation practices like the fixer-upper, the recent start-up, the refurbished practice and the vacant space practice. I wanted to share two actual case studies with you, one with the recent start-up and the other with the fixer-upper.

CASE STUDY #1

Let’s start with the recent start-up. As some of you know I spend a good bit of time on dentaltown answering a lot of townie questions and providing answers and solutions to topics that townies post. Quite often we’ll see a thread where a buyer is looking at a practice that’s for sale, it’s a recent start-up (maybe in the past 2-5 yrs) that’s doing $400k in collections selling for $400k

Immediately, many townies will post that the price is too high, and they need to walk away or offer some sage advice like “offer $150k, that’s all its worth”. Well, I’m here to tell you that many times this advice is simply just BAD advice. Why? Because they know NOTHING about the practice, the demographics of the area, the reasons the seller is selling, etc. In other words, there’s just not enough information available to provide competent advice.

Here’s an example:

About 5 years ago I had a client look at such a practice in Texas, collecting $500k and selling for $400k. The seller owned another practice about an hour away and saw an opportunity to start a second practice in a brand-new strip shopping center in a developing neighborhood. Unfortunately, the seller learned within a short period of time it takes a lot of work to maintain one practice let alone two practices. They couldn’t devote the time needed to make this practice explode with growth, so they wanted to sell it to focus on their primary practice.

Had the buyer posted this practice on dentaltown, they would have received the type of advice I mentioned above…”No way the practice is worth that much” and “it can’t be any good if its only collection $500k after 3 years…” etc.

Well, the buyer did his due diligence with our assistance and purchased the practice, and today (five years later) the practice is collecting more than $1.8 million. Who wouldn’t want to buy a practice for $400k that collects $1.8 mil.?

CASE STUDY #2

The second actual case study is more of a strategy one of our clients employed….buying the rural fixer-uppers very inexpensively and growing them two & three-fold within 24-36 months with the help of assistants AND the sellers.

The client’s typical target is the rural practice where the seller has been coasting, and they also own the real estate. The practices have reached a point where they’re selling for $150k-$250k, sellers only working 2-3 days per week, refer out a lot of the dentistry my client does and there’s a valuable piece of real estate.

My client is on their 5th location, and the typical result has been converting a practice collecting $300k-$400k into one that’s collecting $600k-$800k+ by merely opening the office back up to 4 days and adding additional procedures that the seller didn’t provide.

Again, if the seller were to post one of these practices on dentaltown with the “should I buy this practice” they’d receive many replies suggesting the practices are too small and/or they need too much work to be worth the small investment. Who wouldn’t pay $150k-$250k for a practice, invest up to $50k in new equipment for a practice that collects $600k-$800k+ within 24-36 months?

The lesson here is DO YOUR HOMEWORK. If you see potential in a practice, don’t be afraid to dive into it and learn as much as you can about it, especially the area demographics to see if the practice can become your perfect practice in a relatively short period of time.

 

About Tim Lott 
Tim Lott, CPA, CVA has decades of experience working with dentists at all stages of their careers. He is a regular speaker at study clubs, societies, and dental schools. Tim is a frequent participant and a moderator on Dentaltown.com. You can reach Tim at tlott@dentalcpas.com or any of the other dental partners/principals at (800) 772-1065 or info@dentalcpas.com
More Like This

Total Blog Activity

731
Total Bloggers
8,216
Total Blog Posts
2,770
Total Podcasts
1,237
Total Videos

Sponsors

Townie Perks

Townie® Poll

Do you rent or own your office space?
  

Site Help

Sally Gross, Member Services
Phone: +1-480-445-9710
Email: sally@farranmedia.com

Follow Dentaltown

Mobile App

WITH DENTALTOWN . . . NO DENTIST WILL EVER HAVE TO PRACTICE SOLO AGAIN®

WWW.DENTALTOWN.COM - WHERE THE DENTAL COMMUNITY LIVES®

9633 S. 48th Street Suite 200 • Phoenix, AZ 85044 · Phone: +1-480-598-0001 · Fax: +1-480-598-3450
©1999-2019 Dentaltown, L.L.C., a division of Farran Media, L.L.C. · All Rights Reserved