Tuesday, June 19, 2012

Should Dentist Purchase this Practice?

The dentist is willing to take $335,000 down and lease equipment for $50,000. The practice broker is not very happy and he demands the seller to pay commission on total $385,000. The seller is backing out.

The office has 5 ops, paperless, digital, gross production of $515,000, equipment is 5-7 years old. The dentist had this practice for 12 years. It is an FFS/PPO office.

If the doctor has had the practice for 12 years, how is it the equipment is only 5-7 years old.

The dentist says he was out of the office for 21/2 months last year due to health issues.

What does that mean? Was office closed for 2 months? What has production been over the past three years?

The practice has approx 1,100 patients 

Not with $515k in revenue; maybe two-thirds of 1,100.

The practice generates 12-15 new patients every month. 

That's weak.

The dentist works 3 days only. The fourth day is booked when it is really busy. I currently work at a busier office and would like to work five days initially to pay all the debt.

Find out the breakdown between dentistry and hygiene.

What would be a good price range to place an offer? 

Not enough information to know.

The dentist is expecting $385,000. Does this sound reasonable?

Not enough information to know.

Does the allocation of the practice price play a role in any way ?

Yes, though it's way too early to even worry about that now.

You need to gather all the necessary information to do a proper assessment of the asking price and the performance of the practice. THEN you can get into structure of the deal, allocation, and all the other finer details of a practice transition.

This first appeared on Dentaltown.

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