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Considerations for Buying a Practice

Originally posted 10/12/07

By Frederic Sherman, D.D.S., Broker

You’ve waited your whole life.  Years of clinical training, years of associating at various clinics, hours of continuing education classes, countless procedures under your belt, and now you are finally ready to buy a practice! Or are you?

Have you made certain determinations and decisions in regard to your career path that would pave the way for a streamlined, thoughtful, well executed and successful process?  You would think that by the time a young professional contacts the broker he/she has a solid grasp on what he/she is truly considering and that careful consideration has been given.  Frankly, I have experienced quite the opposite.  Many buyers call us with randomly selected areas of so-called interest, very little idea of their main criteria of focus on the practice of their dreams and limited knowledge of market conditions.  My purpose in this article is to provide you some guidelines that I have developed, based opon my 25+ years as a practicing dentist, experience as State Board Examiner, and now over 20 years of appraising and brokering of healthcare practices.

First, determine the “type” of practice that is most suited to your interpersonal skills.  Note the phrase that I have used.  I am not recommending that you select the practice style that you want; instead, consider your personal strengths, and then (1) select a practice type that fits YOU!  By practice type we mean either “clinic” or “private” practice.  Remember a private practice requires more interpersonal skills, more fluency in the language, a more sophisticated approach to presenting your treatment plan, etc.  The clinic on the other hand, relies more on location, advertising, and management of a higher volume of patients.  Select a practice in which you feel that you can be most successful.  This selection should be based upon whether or not you feel that the practice is one in which you can utilize your strengths and minimize your weaknesses.

Once you have determined the practice type that best suits your personal attributes, the location of the practice now seems to be a clearer decision.  For instance, if you have decided for a clinic style practice, in which DentiCal and lower fee PPO’s are accepted, you would not typically find that practice in, say, Beverly Hills or any other higher income area.  So you can see that one decision not only leads to another, but also simplifies the selection of the area you would consider.  And this is in fact, your second consideration. (2) Choose an area that is right for you !

Naturally, family consideration comes into the decision in the area selection as well.  Need for proximity to home, driving distance, willingness to commute, area safety, etc.  Research various areas before starting your search.  Some flexibility is recommended, but a selected group of cities is encouraged. To say that any area is acceptable is simply foolish; like it or not, there is a substantial difference in the delivery of healthcare in Newport Beach as compared to East Los Angeles.  And the requirements for the success of the healthcare practitioner vary as much.  On the contrary, selecting one city alone simply does not provide you with enough choices, and does not help you to achieve your goal.

Now that you have made choices on the type of practice and areas you would consider, your next decision is to (3) determine the sale price range for the practice you would consider.  This choice sometimes plays havoc with prospective buyers; ego, eagerness, naivete, stubbornness and stinginess are all factors I have experienced over the years in dealing with buyers.  Don’t let this happen to you!  A price range acceptable to you should be determined by (a) your ability to borrow the funds; (b) your personal spending mindset (some of us can more readily accept paying a half million dollars or more for a business while others cannot); (c) the income level of the practice you wish to acquire and finally, (d) your willingness to get yourself into sizeable debt.

So, you’ve decided on the type of practice, some areas of choice and a certain price range that you can both afford and mentally deal with – what’s next?  Call us!

We will test your commitment to this process…help you to consider the soundness of your choices…provide you with other parameters to consider…give you up to date market conditions in the areas of your choice…and expose you to the practice that matches YOUR criteria…all while providing you with our personal attention.

I sincerely hope that this article has provided you with some direction.  We look forward to hearing from you.  Best wishes in all your career decisions and endeavors.

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