At PFG, we hold the view that the multi-practice model doesn’t generally work. This is despite the fact that we could earn a lot more in fees helping doctors pursue their dreams of having 3, 5 or even 10 different locations – all needing bookkeeping and tax services. And it’s time we raised our voices that the multi-practice model is an epidemic. I remember when I had my first exposure to the multi-practice business model – 2008, pre-crash. I was a young associate financial planner and I had spent several days working on the complicated financial plan for this husband and wife team in FL, who owned 3 separate practice locations. When they came in for their consult they acted like they were on top of the world, and I thought they were – Rolex watch, tan skin, designer jeans, good looking couple, they had it all. They were success …
How Much is Your Dental Practice Worth?
When buying or selling a dental practice, one of the key elements of the deal is the ability to accurately answer the question – how much is your dental practice worth? For buyers, specifically, the answer to this question is the second of the three big questions we help them answer when buying a dental practice: Is this a good practice to buy? If yes, what price is fair to pay? If I pay that much, how much should I expect to make? As a seller, the selling price of the practice can feel like the culmination of a career’s worth of effort growing and developing a dental business. When I help buyers consider the price of a practice, I remind them of a key fact: you don’t want to overpay for a practice, BUT wealth in dentistry does not come from buying and selling dental practices. The true value …
Negotiate the Asset Allocation When Buying a Dental Practice
When trying to negotiate buying a dental practice, it’s important to find ways to negotiate beyond just the price. A good negotiation is one where you can avoid simply haggling over one number. In last week’s post, we discussed how a buyer can get real dollars in their pocket by negotiating the purchase of the accounts receivable. Today we’ll discuss another great way to find real value when you negotiate buying a dental practice – the asset allocation. What is the Asset Allocation on a Dental Practice Transition? Asset allocation is an accounting term. Asset allocation is a fancy way to say how much value the accountants in the deal are assigning to the different items being purchased. “But I’m only buying one thing,” you may say, “a dental practice!” Not true, says the IRS. When you buy a pair of shoes in the store you really are only buying …
Negotiate the Accounts Receivable When Buying a Dental Practice
On Friday I experienced a parenting moment that reminded me of trying to negotiate buying a dental practice and how quickly things can go badly. I had promised the kids each a small bag of M&Ms after work. I followed through and delivered. I tallied the dad points in my head. Then, of course, I watched as the 2 year-old ripped open the bag and one single, solitary green M&M escaped and fell, rolling onto the floor. Her 3 year-old sister was fast. She jumped down, snagged it, and popped it in her mouth in full view of the 2 year-old who still had an entire bag of chocolate happiness, minus one escapee. You know what happened next. The 2 year-old dissolved in tears and threw a fit. One escapee M&M made her so angry that the rest of the bag in front of her didn’t even register. It’s the kind of thinking …
Buying a Dental Practice – After the Letter of Intent
When buying a dental practice, how do you know what to do after the letter of intent? Almost always, there is a period of time between when you’ve negotiated the letter of intent and when you walk through the front doors of your new practice, keys in hand, as the brand new owner. Picture the moment: You park the car and start walking toward those front doors you own for the first time! The opening few bars of “Sweet Emotion” by Aerosmith are running through your head. You own your own practice now, you stunning piece of humanity! If there was a confident emoji, it would look like you. But what if you don’t feel confident? What if you show up on your first day, like a pediatric dentist I know in Arizona, and you realize the schedule is only half-full and your front desk can’t bill to insurance yet …
A Letter of Intent Should Include This When Buying a Dental Practice
When buying a dental practice, one of the most important documents in the process is the letter of intent (or LOI, for short). The letter of intent is the legally non-binding document that contains all the elements of the practice transition that you have negotiated with the seller. The letter of intent saves you money by allowing you to negotiate with the seller before you begin paying an attorney for drafting documents or other related services. Getting the Letter of Intent Right is Crucial – But How Do You Know? Getting the letter of intent right is crucial, and typically leads to much smoother transactions where everyone is happy – the buyer, seller, staff and patients. If the letter of intent is so important when buying a dental practice, how do you know what it should contain? How can you be sure that you’ve negotiated the key elements and nothing …
How to Analyze a Dental Practice for Sale – The Qualitative Factors
Have you ever had a friend who wanted so badly to be in a relationship they talked themselves into being with someone who was a horrible match for them? I had a roommate in college who wanted to be married so badly that he talked himself into relationships that were obviously a poor fit. Being the good roommates we were, we’d kindly point out obvious flaws with his latest girlfriend. We’d point out, “Dude. She’s still dating other guys! We just saw her with Brad down the street.” Of course, he would defend the decision, “Her mom told her to not stop dating until she’s serious with someone. I think proposing will make things serious!” Buying a dental practice is a lot like finding someone to be in a serious relationship with. It’s a huge decision. It’s vitally important to get right. And the consequences of choosing well or poorly …
How to Analyze a Dental Practice for Sale – The Quantitative Factors
Recently, I was approached by a dental student with financial papers in hand wanting to know “Is this dental practice I’m thinking of buying a good one?” “It depends,” I replied, “on what you want. Do you have student loans and want to be able to pay them off quickly?” With a touch of “duh” in her voice, she replied “yes” My next question was, “Do you want to retire when the average dentist retires today at 68.8 years old, or would you rather have the freedom to walk away earlier in your 50’s if you wanted to?” Horrified, the student replied “That’s the average retirement age?!” Feeling a little bad about bursting her bubble, I continued, “does this practice collect enough, and have enough profit to support your debt pay down, savings and lifestyle goals?’ “….um….I’m not sure…” was the response. We talked for a few minutes about how …
