BY Ryan Brengman, JD
For many doctors, owning their own practice is the ultimate achievement. Ownership allows them to set their own hours, decide the scope of their practice, and maximize their earning potential. Even with all that to gain, the prospects of buying a practice can still be overwhelming. What can you do now to make your dream a reality?
Unless you are already independently wealthy, you will need to work with a lender to finance a practice purchase.
If you have more than two years of experience, most dentists will find financing readily available from several lenders, even if they have substantial student loan debt, a mortgage, and family expenses. While ultimate approval of financing depends on a variety of factors related to both the buyer and the potential practice, do not let personal debt prevent you from pursuing your dream practice.
Regardless of how much experience you have, if buying a practice one day is important to you, it is worthwhile to establish a relationship with a bank or two now so you can put yourself in the best position to purchase a practice when the right one comes along.
It is common for me to speak with prospective buyers who have a crystal clear vision of their "dream practice" in their mind as they begin their practice search. As important as having an idea of what type of practice interests you, it is equally important to be flexible. Take time to reflect on what practice characteristics are most important. When considering these characteristics, it is a mistake to be so rigid that you immediately eliminate practices that do not fall into those parameters, sight unseen.
One important aspect to consider is the location of the practice. Practices are difficult to move, as there will be patient attrition in virtually any location change. Therefore, the location of the practice needs to be in a place where you will want to work.
Next, consider the patient mix. How many active patients are there? This is the real value in a practice. The number of active patients, along with the type of patients (fee for service) discounted insurance, medical assistance, must be thoroughly evaluated. What procedures are being referred out? The good news is that the majority of sellers are not producing to the capacity of their practice. They are slowing down and are ready to retire. They have made their money, and their days of molar endo or dealing with high anxiety children are over. You may find a tremendous amount of work being referred out that you would be able to keep in the practice, thereby increasing the practice revenue just by taking ownership.
One of the least important characteristics of a practice is the current state of the equipment and furnishings. Yes, updating equipment does cost money, and undoubtedly, additional expenses are the last things you want after spending money on purchasing a practice. However, is it really worth missing out on a practice that generates revenue of $500,000 annually, with over 1,200 active patients, that refers out all specialty work, just because the chairs are older than you? The reality is you will very likely be able to pay for the upgrades as the practice and practice revenues grow under your ownership.
Practice ownership allows you control - control over your earnings, and control over your career. Spending a little time now can go a long way in ensuring that you do not miss out on your true dream practice.
Ryan Brengman, JD, is an associate of Shea Practice Transitions, PA. His geographical area includes Minnesota, North Dakota, South Dakota, northern Iowa, and western Wisconsin. An attorney, Brengman has nearly 14 years of experience in the brokering of practice sales, as well as the representation of buyers for purposes of practice acquisitions. Contact him at 888-419-5590, ext. 877, or [email protected]