Owning a dental practice is a rewarding and fulfilling enterprise.
Before making the decision to own a practice, however, it’s important to think about major financial considerations at play.
If you’re passionate about patient dental care and dream of owning your own practice, here are five questions to have answered so you can maximize your return on investment and enjoy continued success as your practice grows.
How many patients are receiving treatment?
Total number of patients that you will inherit isn’t as important as the number of active dental patients.
Too often, dental professionals move forward with the acquisition of a dental practice only to learn that the number of active patients isn’t what they had expected. That’s why it’s important to look at dental records and see how many patients are active within a 12-18 month window.
What is the status of Accounts Receivable and Insurance?
Be aware of the status of accounts receivable and insurance of the practice. The key question to ask is: How much of it is over 90 days old? History shows that accounts that are 90 days delinquent are extremely difficult to collect on. Establishing an agreement in the contract about accounts receivable is important.
In addition, insurance contracts should be considered. The key question to ask here is: Is the seller in contract with a carrier that is unlikely to pass the same fees on to a newly credentialed provider? This can have a significant impact on the ongoing value of the practice depending on the insurance mix of active patients.
Is the seller staying on to help with transition?
Patients deserve proper notice and a smooth transition between dental ownerships. Make sure to talk about the long-term plans of the selling dental professional.
The number of patients will help determine whether the selling dentist should stay on board awhile. At the very least, plan on some overlap time so you can get properly introduced to your new patients before the official hand-off.
How much is the dental equipment worth?
Depending on the selling dentist’s approach and size of business, this answer will vary. Nevertheless, make sure to run a fair market value analysis for the dental equipment by using a reputable appraisal service.
Depreciation methods that account for the assets’ lifetime usefulness are also available on tax returns. Make sure to take a look.
Where is the dental office located?
In real estate, of course location matters. The same is true about buying a dental practice because visibility matters.
If you’re not buying real estate, review the lease carefully so you’re aware of renewal options.
The demographics of the dental practice you’re thinking of buying should also align with your vision. And, don’t forget to scope out the potential dental competition in your area of choice.
What are details of the dental re-dos?
If a patient must come back for re-do dental work, who’s responsible?
You can write in your contract that the responsibility must fall upon the selling dentist. They must pay for the work and any lab fees.
Consider setting up an escrow account from which funds can be pulled on an as-needed basis so you can be reimbursed for any re-do dental work that’s done on your newly acquired patients.