Dr. Michael Gradeless
One of the greatest difficulties of writing a column like this is the constraint of 700 words. While most of the concepts of dental business management involved in transitioning to your own practice must be cut down to their bare essentials in order to fit in one page, many important points are not covered because they will not fit into the alloted space. Nevertheless, while some of these points are short on words, they are long on importance.
The "KISS" rule applies to the purchase of a dental practice. Keep it simple and know what you want. In recent years, many interesting and "creative" options have been developed for the sale of dental practices. These creative deals usually involve some form of delayed transition in the practice or a complicated formula for determining practice value and structuring payments. The driving force behind these creative deals is not an effort to make it easier for a new dentist to purchase a practice. The real reason these deals have sprung up has been the search for a method where the selling doctor can realize the equity in the practice to improve the balance in his or her retirement accounts, while continuing to derive income from the practice. By opening up more options for practice sales, practice brokerage businesses also benefit. If you are considering a deal like this, take the time to fully understand all possible ramifications and how they fit in with what you really want. Many years ago, when I was looking at a real-estate deal, my accountant put this concept very succinctly. He said, "This is a fair deal, but think about this: You are going to spend more than a quarter of a million dollars here. You need to ask yourself a question — 'If I am going to spend that much money, is that what I really want to buy with it?'"
When it comes to understanding your deal, the devil is in the details. In this case, the details are in the documents. In the sale of dental practices, it has become the usual procedure that the seller's broker provides the legal documents. According to Dan Boeglin, one of the nation's leading mergers and acquisition lawyers in the business world, the buyer always provides the documents. Dan indicated that this is customary in order to protect the buyer. In the sale of a business, the seller has the money in his or her bank account, the broker's commission is in his or her bank account, and the only protection for the buyer is in the sale documents. It is not vital that the buyer provides the documents. It is vital that the buyer understands the documents. I recently refused a $500,000 deal on the basis that the seller refused to use my documents, and the documents the seller provided indicated that I had seen tax returns that the seller did not, in fact, provide. It probably does not matter who provides the sale documents. What matters is that you completely understand them and agree to them.
Whether you are purchasing a practice, associating, or starting a practice from scratch, your dental education may not have provided you with all the tools you need to succeed. Dental schools teach clinical skills, specifically, fillings and crowns. Today's practice has a significant component of procedures that are not taught in dental schools. Immediately upon graduation, you should begin your continuing education. Are you well-trained in posterior composites, bleaching, veneers, implant restorations, and cosmetic onlays? The most successful dentists market their practices in a specific niche that is not taught in dental schools.
There are an incredible number of tangible and intangible issues that affect your practice success. Whether you buy a practice or start a practice, it is important that any deal you make supports your goals. Either scenario involves a lot of money and many years of your life. Be absolutely certain that what you are buying is what you want. Be absolutely certain that what you think you are buying is contractually what you are buying, and get a huge jump on your competition by starting your continuing education immediately upon graduation.
Dr. Michael Gradeless, a 1980 graduate of Indiana University, practices preventive dentistry in Indianapolis with an emphasis on cosmetics and implants. He is an adjunct faculty member at Indiana University, where he teaches the Pride Institute university curriculum of dental management. He also is the editor for the Indiana Dental Association. Contact him at (317) 841-3130 or e-mail to [email protected].
