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Diligence: How to Successfully Purchase a Dental Practice by Timothy Lott, CPA, CVA

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Header: DILIGENCE: How to successfully purchase a dental practice
by Timothy Lott, CPA, CVA

Are you planning to purchase a dental practice? If so, you're certainly starting at a great place: Dentaltown! You can find a wealth of information about the aspects of practice purchase right on Dentaltown.com.

You'll find posts with real-life examples, and stories of other Townies who are currently going through—and who have gone through—the process. These threads also include feedback from other dental professionals who handle dental-practice transitions every day, providing valuable information from the front lines. You'll find blogs on what to do and what not to do, and invaluable CE courses that also earn you credits. In my opinion, it's truly a one-stop shop.

Getting educated
This article isn't meant to be a promotion for Dentaltown, but as I began to think about what a doctor needs to do before buying a dental practice, I realized that education is the critical first step. I am simply not aware of any other source where one can find this wealth of information.

After you start to educate yourself about the process, you'll want to assemble a team. Sit down with an attorney who routinely handles dental-practice transitions—a "dental attorney," if you will.

Also, look for a dental CPA—not just one who handles ongoing CPA services for dental practices, but who also routinely handles dental-practice transitions. This professional should know the valuation and transition nuances that are unique to the dental industry. The dental CPA also should help you assess the practice's performance, so you really understand exactly what you are buying.

Do some research into the various lenders that fund dental-practice transactions every day. These lenders know what to look for, and they've streamlined their process to make it as smooth and thorough as possible for both buyer and seller.

You might also consider bringing on a knowledgeable lease negotiator who regularly handles leases for dentists, and an equipment repair or sales person who can inspect the dental equipment and furniture. In my opinion, it's not really necessary to have it appraised, but if they offer that service, it can't hurt. It's most important to know that the stuff you're buying will work when you take over the practice. If you are so inclined, you can also have a practice-management consultant or coach on hand who makes it a point of working with new practice owners.

And knowing your numbers
After looking outward and assembling your team, now it's time to look at yourself. You'll want to have an idea of how much you can produce, as this will help you determine the practice size that is ideal for you. As a GP, if you are able to perform certain services that other GPs may not offer, consider seeking a practice where you can add these services and increase the practice's production.

Get a handle on your personal financial condition. Banks will certainly be looking at your financial health as part of their due diligence on you. Sit down and calculate how much you will need to earn before and after income taxes, including how much you will need to pay toward your loans while still having enough to live. This information will help you determine the size and volume of the practice you should seek.

If you can, it's good to have an idea of where you want to live for the next 15 (or more) years. Make sure it's an area where you might want to raise a family, if that's part of your life plan. Ask yourself if you want to practice in the community where you live, or if you prefer to work in a community where you don't know everyone. There are pros and cons to each, and again, you'll find threads on Dentaltown discussing these topics.

Of course, this brings us full circle to the most important thing you need to do when planning to purchase a practice—get educated. An educated buyer will know what traps to avoid, and he or she will have a better understanding of what to look for and what to watch out for. An educated person will know when to seek the help of other professionals, and he or she will likely make much better decisions. There's a reason they say, "Knowledge is power."

So get educated, gather your team, know your production potential, know your personal financial health, and know where you want to live and practice…and you're ready to begin the search for your very own dental practice!

Timothy Lott provides consulting services to health-care professionals and practices. He offers expertise in start-ups, mergers, transitions, tax and retirement planning, financing assistance, and budgeting. Lott has a specific concentration on consulting to the dental professional on associate, partner and shareholder arrangements; practice management; revenue enhancement; practice purchase; sales; buy-ins and buy-outs; and the related tax issues.

His CVA (Certified Valuation Analyst) designation and his experience are an asset to dental professionals who want to know how their practices compare to others in the industry. Lott has spoken at several Townie Meetings and other large industry events. He is a major contributor to the Dental CPA blog and monthly newsletter.





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