For many doctors, owning their own practice is the ultimate achievement. Ownership allows you to set your own hours, decide the scope of your practice and maximize your earning potential. With all that to gain, the prospects of buying a practice can still be both exciting and 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 you have substantial student loan debt, a mortgage and family expenses. While ultimate approval of financing depends on a variety of factors related to both you as the buyer and your potential practice, do not let personal debt prevent you from beginning your pursuit of your dream practice.
Regardless of how much experience you currently have, if buying a practice one day is important to you, it is worthwhile establishing 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 to speak with a prospective buyer who has their “dream practice” crystal clear 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 in those characteristics. Take time to reflect on what practice characteristics are most important. When considering these characteristics, however, it is a mistake to be so rigid in those characteristics 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 a place that 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 the majority of sellers are not producing to the capacity of their practice. They have been slowing down and are ready to retire. They have made their money and the days of molar endo or dealing with high anxiety children are over! You may find a tremendous amount of work being referred out which you would be able to keep in the practice, thereby increasing the practice revenue just by taking ownership.
One of the least important characteristics is the current state of the equipment and furnishings. Yes, updating equipment does cost money and undoubtedly additional expenses are the last thing you want after spending money on buying a practice. However is it really worth missing out on a practice that generates revenue of $500,000 annually, over 1,200 active patient and 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 you desire as the practice (and practice revenues) grow under your ownership.
Practice ownership allows you control…control over your earnings, 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.