Wednesday, December 3, 2008

Dental Practice Operated by Parent

Hi. I'm currently a second year dental student, and I am also the son of a currently practicing dentist.

I have had the burning question in my mind about whether when I graduate if I should try to hook up with another dentist in the area that is retiring. My thought is that since I will have a guaranteed practice coming my way from my mom, that I would be able to learn the ropes from a dentist that operates things differently (perhaps better) than her. By the time they both retire (in a couple of years) I would be managing both practices then.

What are some thoughts on this? I've gotten mixed messages about "it's not something you need to worry about" or "you have a practice coming to you, why worry about it?" I love my mom very much, and she's provided well over the years, but I’m not sure she ran things to their greatest productivity. She's a solo practitioner, no hygienists, produces about 500K, 40% overhead. My guess is about 10 new patients a month, but no clue on the active patient base. She works 4 days a week about 8 hrs a day.

I just want to know if there was some way to determine her productivity versus another's. I think it would be great to run 2 great practices, but I really have no idea what that all means.


So it sounds like you have a really good idea how your mom operates her practice (by the way, I would not say it's better or worse than any others, just her style, her choice, her design) so I’d say there may be a benefit to you to see how other practices are operated. You can then decide what is right for you.

This is similar to what I’m going through with my 13 yr old son, I’ve coached a lot of his baseball and basketball teams. Over the past year I’ve started to focus more on my 11 year old and I’m letting my 13 year old experience different coaches. I think it'll be good for him to see how others do it, the same applies in this case.

Maybe after a couple of years there would be an opportunity for you to purchase an existing practice near you mom, share office space with your mom and when she's ready to retire mold her practice into yours. I’m not suggesting you compete, simply share office space and cover each others backs during time off, etc. When she's ready to retire, there you are.

I’m not sure what you mean by "determining" her production to others, do you want to know how her practice compares to others like hers or other solo practices with a hygienist and the doctor working 4 days/week? I can provide comparisons for the latter.

Good luck

This post first appeared on NewDocs.

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Monday, November 24, 2008

Dental Practice Purchase Evaluation


I’m new to this and have no clue as to which way to go. I’m currently interested in this practice and spoke with the owner of the practice. Some guidance with this would be appreciated!

Collection for 2008 will be about 400k, 2007 was 410k, 2006 was 390k. Production is about 600-700k per year but not FFS practice, only collecting what HMO insurance pays.Accounts Receivable and collection averages around 30-40k per month.

Owner works 3.5 days a week. 1 day a week goes to anesthesiologist for consults (does not contribute to collections, also was previous owner of practice 4 years ago). Periodontist comes in when implant are scheduled to be placed (collects 50%).

Patient lists - 2500. About 200-300 pts not active either moved, scheduled but didn’t show, or not seen for 2 years. Anesthesiologist about 200 active patients, 500 nonactive (but does not contribute to practice). Existing dentist grew practice from 500-600 pts 4 years ago to 2500 pts. No advertising only word of mouth. 20-25 new patients schedule per month. 120-150 recalls completed per month. 15 patient no shows or cancellations a month. Implants, 3rd molar ext, S/RP, Ortho referred out.

6 years left on lease with annual increase 4%. Owner of lease is previous owner of practice whom also plans to sell building (currently out on market).

Owner of practice 2-4 year ago upgraded office. Gendex 765, kept sieman xray, 3 ops (really just uses 1 op majority of time), electric handpiece, intraoral cam, fiber optic handpiece, nitrous, networked.

Overhead is 12000 per month. Owner will pick up existing matsco and patterson loan.

Asking price 400k.What do you think?? What’s the next step?? Walk away or talk?? Thanks for your input!!

Can’t get my hands around those numbers. $650k gross producing office with only $144k in overhead ??? That’s 22% and certainly an award winning practice manager keeping overhead that low.

Lab and supplies alone on $650k gross production is at least $60k, if not $75k, which is nearly half the $144k. One full time employee at an average of $17/hr is approximately $25k-$30k BEFORE payroll taxes, now we're up to $85k-$105k in overhead. What’s the monthly rent? See where I’m going with this? $12k month in overhead just doesn't seem right.

$650k gross production is less than 1,000 active patients, based on comment about 120-150 recalls/month it's about 800 active patients.

Write off 40% for insurance.

How many ops, what’s the square footage, what is the rent per month, what is rent per square foot? What does rent include? Do they have a hygienist, assistant or a front desk person?

Seller ALWAYS assumes debt, that's not unusual.

So many questions......

Sorry, it was PPO. Actually looking at the papers he gave me, it's a mix of PPO and some HMO. I want to get away from insurance all together, but I think it’s very difficult being in NYC. Maybe I should move out??!!

There's actually only one dentist working there about 25 hours a week. There is a dental anesthesiologist who does consults to take patients to the operating room. He's there only 1 day a week but does not contribute at all to the practice. There's 1 front desk/office manager and 1 assistant. No hygienist.

The owner knows he’s asking for too much, but he said that’s b/c he recently upgraded the equipment. It was not professionally appraised.

I thought of acquiring the building, but being a new grad with no income, I can’t afford it. Additionally, the asking price for the building, IMO is not worth it at all.

Square Footage is 2508. 3 Operatory.

List of OH: Rent 2340

Wow, that's approximately $10/square foot in NYC, isn't that really LOW? Here north of Baltimore city we pay $24 plus per square foot.

Electric/Gas/RE Tax 350, Phone and Internet 150, Dental and Office Supplies 400,

Dental supplies generally run 4-7% of gross production, so even at 4% of $650k production that's at least $25k and it's only $4,800? WOW, this doctor must really know how to stretch their supplies.

Workers Comp and Small Business Ins 150, Lab Fee 1500,

Labs usually run 5-8%, so even at 5% that's at least $30k and only $18k spent? Is this basically a hygiene only with an occasional crown practice?

Malpractice Ins 380, DEA and NYS License Fee 20, Acct 320, Stamps 100, Credit Card Merchant Fee 50, ADP Payroll 70, Waste Management 50, Staff including Bonuses 5500,

So that's $66k per year, approx. 2 to 2.5 employees, are they assistants or front desk helpers? $66k is about 10% of production, about 15% of collections, again, WOW.

IRA Employee 120, Health Ins 440.

After the excitement phase... I agree, a lot of things doesn't make sense!!

Very unusual practice indeed.....

This post first appeared on DentalTown.

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Wednesday, November 19, 2008

Dental Scratch Start Up Questions

I'm currently working to hone my clinical skills, which no doubt have grown tremendously in the last year. I'm also living well below my means and saving my money for a potential future practice. I'm thinking about a startup, which will be financed a lot through my earnings and the rest on loans. I plan to work for a couple more years.

1) What can I expect to pay for a startup?

I assume you mean how much money will it take to create a practice from scratch, that's a wide range driven by size, location, type of equipment, buildout, number of ops to begin, etc. That said I’d say no less then $250k and as much as $500k. In your area I’d have to offer a guess of approximately $300k-$350k as a good target.

2) How much of the practice should be purchased in cash?

As little as possible, especially with the low interest rates today. Cash is king, try to preserve your cash which means if you can find a lender willing to lend 100%, take it. There are lenders that will do that.

3) Should the entire practice be purchased in cash?
4) What does my cash flow need to be for a startup? (Assuming 1-2 op, one assistant and possibly a hygienist to start)

I’m not sure what you're asking? Are you asking what to expect in terms of initial monthly overhead expenses which drives what you need to collect to break even? If so, again, it's a wide range, however, based on 1-2 ops, 1 assistant I’d have to say no less than $10k a month, probably closer to $15k plus per month. That includes the rent, debt service, labor, insurance, supplies, utilities, marketing\advertising, etc.

5) How far ahead should I start planning?

It’s NEVER to early to start planning. start finding out what it cost per square feet to build out, what it cost to equip a room, technology, labor rates, rent per square feet in the area you want to practice, etc. There's so much you can do a year or two before you begin to help the process go that much smoother. In fact, it wouldn't hurt to begin building your business plan along with creating a forecast of your future practice NOW even though you may not need it for another year or two. You’ll always be tweaking it, even when you're in the heat of it.
Good luck!

So it wouldn't be a good idea to put in more cash to possibly lower the debt service and cash flow requirement?

Not necessarily. You’re usually better of keeping your excess cash available for emergencies, funding ret plans, saving, etc.

Imagine using most of your cash simply to reduce your monthly debt service, things don't go so well and you need more cash, do you think a lender will be eager to lend you more? Usually not, not nearly as eager as they can be at the beginning, I’ve seen it many times. If things don't go as planned and you've stashed some cash away you have more options.

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Friday, November 14, 2008

Dental Practice Purchase Question - Is the Practice Worth It?

I've been contemplating starting a brand-new practice from scratch or buying an existing practice. Here is a summary of the practice that is for sale:

What was your budget for a start-up?

-selling doctor is female and selling because she will be working for the state

why did she decide to become an employee?

-office is currently open 24 hours/wk (Mon-Wed) and has been for the past 5 years.

Sounds like it's been hobby, has it been? Is she married? Does her significant other work?

She only has 2 full hygiene days per week.

So that's approximately 400 "active" patients going through hygiene (16 x 25 weeks = 400) assuming the majority are seen twice each year. Is that the case? Is there any hygiene on the docs schedule?

-patient count is approximately 2000 patients (1500 were seen in 2007)

Is this a tourist location where patients are seen once for emergencies? Of the 1,500 patients supposedly seen in 2007, how was that determined? Are these 1,500 DIFFERENT patients or simply 1,500 "visits”?

-roughly 8-10 new patients/month (mainly internal marketing)

Again, sounds like a hobby, no interest in working more than 3 days per week, no desire to market and grow the practice?

-selling doctor refers all ortho and endo, and some dentures and some pedo

Do you perform any of these procedures? Any other procedures you do that she doesn't and vice versa?

-practice is 60% FFS and 40% PPO (only 2 PPO plan accepted - metlife and delta dental)

Decent mix.

-2008 gross through Oct (10 months) is $245,000 and net is $85,000
-2007 gross was $323,000 and net was $110,000
-2006 gross was $335,000 and net was $120,000

What's the breakdown between hygiene and dentistry? Hygiene should be around $80k based upon the 16 hours per week which puts her production at $240k for a total of $320k, is that about right?

The asking price is $285,000 and is negotiable. There seems to be a lot of potential to grow this office:

What’s the population to dentist ratio? Is the lease renewable? Have you had the lease looked at yet?

-accept more PPO plans-implement more external marketing (direct mailers, etc.)
-open more days and hours
-keep a lot of procedures that were referred out in house

Ok, you answered one question...

In addition to the potential, some red flags about the office I see are:

-why are there only 2 full hygiene days/ wk when the office has been established for 6 years with 2000 patients? Probably has poor recall and STM program.

This isn't necessarily a red flag, again, if the income wasn't "needed" by the doc who only wanted to work 24 hours per week, why would you want more patients you can handle?

-only 2 equipped OPS after 6 years!!!! WHY!!!

See above....hobby....heck, doctor only worked 1 chair 2 days per week...tells me a lot about her motivation, which is not intended to be negative, I’m just guessing her motivation for this specific practice wasn't the same as someone else’s.

What do you think???

See if you can answer the questions and tell me more.

How much do you think this office is worth?

Depends upon the buyer. If the byer was looking to start from scratch and looking to spend $250k for a 1,500 square ft space with 2 equipped ops and I compared this to spending $250k for the same space WITH an immediate patient base of $300k.....well, I’d be working TOMORROW instead of waiting 90-150 days for my space to be ready!

What price would you negotiate?

That’s for the buyer to decide.

Any suggestions??? Do you need any additional information???

Yep, dig a little more. I agree with you, sounds like it has potential though you need to find out more about the demographics and look into some of the issues I raised.

Don’t get hooked into the price versus revenue ratio in this case, it's irrelevant in this case. Think about what I said above:

1. how much would it cost you to build out 1,500 sqr ft ? $100k-$125k with landlord allowances?

2. how much would you spend to equip 2 rooms & have everything else they list? $100k ?That’s $200k to $225k right there. So lets discount it because it's 6 years old, $150k ? $125k?

Now the kicker:

3. how much would you be willing to pay for an immediate patient base of $300k ? $150k? $100k?

$285k doesn't look to bad to me compared to opening from scratch in 90-150 days for about the same cost and with NO patient guarantees!

This post first appeared on DentalTown.

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Tuesday, November 11, 2008

Evaluate Three Dental Practices for Purchase Potential

Practice #1: Town of about 25,000
Asking price: $218,700
Practice Gross: $312,461
Hygiene: $56,300

Based on hygiene alone, typical doc production would be approximately $170k for gross of $226k, and doc refers out a lot. Will there be any real dentistry left for you to do?

Older dentist working 3.5 days a week/ Been at office for 10yrs- just wants to retire completely
5 hygiene days

Problem. Assume average hourly hygiene production is $100. $100 x 40 hours per week x 48 weeks is $192,000 in hygiene production, you say it's only $56k above and that number looks more realistic. It can’t be 5 days of hygiene. With $56k can’t be more than 1.5 days of hygiene.

Number of Active Patients (Seen in last 24months by this report): It list 3744 (I think this must be total pts), 1080 also listed (thinking active) (20 new per month)

If $56k is hygiene that's approximately 300 "active" patients at best, 1,080 MAY be patient visits for 1 year and are the different patients?

Dentist referring Pedo, Endo, Full dentures, 3rd Molar and difficult extractions18% Hygiene/ 5% Surgery/ 36% Restorative/ 41% Crown/Bridge

These numbers just aren't jiving, need to dig deeper.

Practice #2: Same town as #1
Asking price: $249,900
Practice Gross: $431,736
Hygiene: $120,886
Husband and Wife set up second office here (other office about 40minutes away) and now want out after 4 yrs
4 Dr days/ 4 hygiene days

Ok, these numbers look a little cleaner, still, if average hygiene production per hour is $100 I get approximate hygiene production of $150k. So either my average per hour is high for your area OR the hygiene days have some holes. Also, based on hygiene production, dentistry seems a little low.

Monthly Rent: $2500
4 operatories equipped
Practice was about 60% Medicaid- now trying to change to FFS and get rid of Medicaid
# of Pts seen in last 24 months: 3000 (28 new per month)

"Active" patients can't be much more than 600 plus or minus 100 or so.

Referring most endo, all ortho, impactions, implant placement
11% hygiene/ 12% Surgery/ 20% Pedo/ 19% Restorative/ 25% Crown Bridge/ 3% Perio/ 5% Endo/ 5% Denture

11% hygiene? That’s approximately $47,000 of the gross, 120k of 431k is 27%, which is more realistic. So some strange "facts" here as well, though closer to reality than the first practice.

Practice #3: Town of about 4000 (1 of 2 dentists there)
Asking Price: $367,000
Practice Gross: $539,600
Hygiene: $167,277
Older dentist retiring been at location over 30 yrs
4 Dr days (Older DMD working 3 days and associate 1 day)/ 5.5 hygiene days

Hmmm, my average hygiene production per hour of $100 must be high for your area, I get approximately $210k in hygiene for this one, still pretty close to $167k. Doc production also looks real low based on hygiene production, might be some nice untapped dentistry in this practice.

Monthly rent: $900/ Will sell building- price $125,000
4 Operatories
30% Cash/ 10% Medicaid/ 60% Insurance
# of Pts seen last 24 months: 1200 (20-30 new per month)

See, this makes sense. I’m guessing "active" is around 800 so 1,200 may very well be different patients seen as the others are listing patient visits which many are the same patients.

Referring some surgery and some endo
20% Hygiene/ 20% Oral Surgery/ 5% Pedo/ 35% Restorative/ 10% Crown Bridge/ 5% Denture

Makes me wonder if using 24 months of patients is too mislead potential buyers into thinking there's more patients there than there really are.Can’t assess asking price without knowing true profit, sorry.

Can you tell me what you think a decent practice numbers should run?

I’m not sure what you mean by "decent", can you narrow the question?

What should I be looking for in hygiene production: doctor production?

In an average general dentist practice, doctor production runs about 3 times hygiene production, OR doctor production is approximately 75% of gross production and hygiene is 25%, you might also here 2/3 doctor, 1/3 hygiene of gross production, the stats are close enough to be comparable.

Therefore, if you’re looking at a practice where confirmed hygiene is 15-20% and doctor production is 80-85% plus you have to find out why. Is the hygiene under producing, or doctor over producing? By the same token, if the hygiene is 40% plus and doctor is 60% less, chances are the doctor is under-producing which might make the practice under-valued, or said another way, a bargain.

On average, the typical 4-5 day per week "mature" practice will have approximately 1,000 patients which is approximately 4-5 days of hygiene per week. This should produce approximately $800k give or take of gross revenue each year, doctor doing $600k, hygiene doing $200k.

And what questions do you think I should be asking the broker?

That depends on what you find as you go through the due diligence process. That begins by gathering the pertinent information about the practice and analyzing it. Going through that initial process will generate many additional questions for the broker and each case generates the some of the same questions and many different questions. If you don't have a practice purchase checklist you can go to and find it in their download section for "new doctors" or email me and I can send it to you.

I do need to follow up with practice 1 to check on those hygiene numbers. It lists $56K in hygiene production but then the report I got says they have 5 hygiene days with 3 different hygienists working part time and the hygienist salaries add up to about $53K so something doesn't add up. Don't know if they are trying to cover up doctor's lack of production or if is a typo. Dentist has had the practice on the market for a while with no luck so maybe there's more to the story here.

Practice #1 has no computers/no digital so would need some working capital to make some upgrades.

See, it's this kind of info that might hint at a diamond in the rough. If hygiene wages were $53k and hygiene production usually averages about 3 times their compensation, then hygiene production is closer to $160k, which would put doctor production at approximately $160k as well, indicating a grossly under producing practice. If dentistry is usually a 3 to1 ratio of hygiene as well, doctor production should be closer to $450k for a practice grossing $600k and what's the asking price?

The only way you'll know for sure is to verify the production numbers than visit the office and pull 50-100 charts and see what's been going on with the treatment planning. It's very, very possible that the seller has been winding down without cutting back on the hygiene, hence the 50/50 split of production between doctor and hygiene when it should be 752/25.

This post first appeared on DentalTown.

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Tuesday, November 4, 2008

Contemplating PPO to Get New Dental Patients

SO, my new OM suggested signing up for a new insurance. I am worried about the office income and I am thinking about her proposal, especially with this economy. I can try it, I know that some PPOs are awful I belong to a few already, but a business decision needs to be made now. Based upon the office income needed, I’m coming up short by about 3 grand a week. I can’t really lower the overhead anymore unless I fire an employee!! I’m not going to do that!! And when things improve, I could drop the plans again, I would appreciate some feedback and opinions on this.

With a shortfall of $15k per month it's not an overhead issue, it's a revenue issue first and foremost. I don't disagree with shaving a few hundred dollars in overhead, however, I’d be focusing on what could generate a few thousand dollars first and after getting that in gear, taking the next step and evaluating the excess overhead IF there is any.

Sounds like you need patients in the door and in the chairs. The fact is much of your overhead is now fixed, meaning, other than lab and supplies, all of your expenses are likely to be the same whether you have 4 patients in a chair or 8 on a given day. What you need to do is get the additional 4 patients in the chair.

PPO's will help you get patients in the door and in the chair, maybe more quickly than any other option, with NO upfront costs. The "cost" will be paid on a per patient basis (reduced fee). That doesn't mean you have to stick with PPOs, you're using them to boost your patient count, it'll be up to you to keep the patients, even after you drop the PPOs.

Good luck.

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Not Depositing dental Insurance Checks to Avoid Taxes

For the months of October, November and December I am planning not to deposit any cash and insurance checks (provided they are valid for 120 days) into my business accounts. This is to deplete the accounts so I can avoid taxes.

Does the term "constructive receipt" mean anything to you? The IRS says if you received it, whether you deposit it or not, it's income. Talk about a HUGE risk, audit wise.

Firstly, is it legal?

It’s legal not to deposit it, there's no law that says you must deposit it. Reporting it? See above in red.

Secondly, is it worth the trouble?

Absolutely not. It’s different if you're away the last week of December, office is closed, and you cancel your mail. When you receive your mail the first week of January you deposit the checks you received. Now, if you're going away for 3 months, closing the office for 3 months.....yea right!

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Dental Capitation Compensation Question

We do a doctor's salary pool that is based on collections. The only problem is if you post production and collections to a RDH. We split the week so we just split the hygiene collections 50/50. Remember the owner takes collections and then pays overhead, then pays himself. By the way I would gladly pay a "worker dentist employee' his production if I did all the treatment plans and financial arrangements. I have heard of this being done in various offices, with good success.

Not counting the cap checks is wrong in my opinion. I’d be looking to change that real quick.

I agree paying on production is a much easier task, however, with software systems today, why do folks seem to have problems tracking collections on specific production?

We get monthly reports from many of our practices showing gross production, adjustments and collections, by provider, including hygiene. Now, allocating the capitation checks in those few practices that still participate can be challenging I will admit.

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Wednesday, October 29, 2008

Saving for Dental Building Purpose

I am set up as an S Corp. Is there any way that I can "save up" for the purchase of the building without having to pay taxes on that money?

No, that "money" represents s-corp profit which will be taxable. There is just no way around that.

I need to save about 160k for the down payment, but as I get close, the year ends and I have to pay personal income taxes on that since the "profit" from the S corp turns into "income" on my personal return.

Yep, taxes will be due. If you receive gifts or loans as part of your $160k needs those are not taxable. However, lenders may not count that towards your down payment requirement either.

I just want to save the money up without having to pay personal income taxes on it since it's a purchase for the practice by the practice.

If the generation of these moneys is from a taxable activity you'll pay taxes on it.

Why do I have to pay it with my personal money?

Because those are the rules of being an S-corp., any profits remaining in the entity are taxed on your personal return.

Is there anyway to place this money into a certain type of business account so that it isn't taxed?

You could create a retirement plan and fund it with some of those dollars, not $160k though and you'll probably have to share it with your employees. I’ve been hearing of folks using their ret plan assets to invest in real estate though I don't know the details.

The bottom line is you'll need to pay the tax, there's just no magic way to avoid it.

Tim, slightly different version of the same question. We have the dental practice as an S corp also but we do own our building which is held separately in an LLC. We pay rent each month from the practice to the LLC. Could we bump our rent by, let's say $1000 a month, and leave it in the LLC without being taxed? So a pool of money for future repairs would be accumulating but in the LLC instead of the S Corp?

Depends on the expenses of the LLC. the $1,000/month IS additional income to the LLC and if it adds to the LLC's taxable income, it will be taxable to someone. IF the LLC has taxable losses in excess of $12,000/yr then theoretically you could "shift" income to the LLC of $12k and NOT create a tax liability.

Just be sure the monthly rent remains reasonable for the area and the services covered in the rent. And make sure the lease allows the LLC to increase the rent by $1,000 to the s-corp...

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Monday, October 20, 2008

Dental Practice Purchase Scenario

The practice that I want to buy is in a metropolitan area in Northern Virginia (roughly about 400K) with a 3 chair ops. The gross production is around 450K for 2 days - fee for service. Patient pool is about 600 active patients (fee for service).

I know the area & the area has grown tremendously over the past 10-20 years & continues to grow, maybe not at the same pace, it's still growing though. Also, having a ffs practice in that general area is an achievement in itself as the demogrpahics of the area trend towards insurance participation by many residents.

The gross prod & patient count seem about right for a 2-2.5 per week practice.

This practice is one of two locations that I am associating right now since 06.

Let's dive into a little more about who the patients WANT to see. You've been there since 2006, it's now 2008 so you've been there 2+ years. Were you doing the 2 days per week in this location or was the owner sharing the time with you? If you were there by yourself then the concern about who the patients will want might be moot. If you split the days, it would be interesting to know how the prod broke down for 2007 & year-to-date 2008.

It is owned by the senior doctor. It is 5 miles from the other practice.

My concern is about the 5 miles IF you were splitting the 2 days with the owner, if not, these patients clearly have chosen this office & you & the 5 miles would be less of a concern with me and you can work the agreements in such a way that the owner can't soloict those patients and if any do move to the other lcoation they could compensate you for them.

Originally we were going to do a 50/50 partnership but after going through some negotiations we decide that I better off buy one location straight out.

Let me know your thoughts.

Thanks in advance.

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Dental Practice Purchase Offer.

I have been negotiating with a local dentist for a couple of months and recently, we came to what I feel to be very fair terms for an associateship opportunity with a delayed sale. Associate for 2 years, paid 40% of production. I pay my own lab fees. CE $$ as well. After 2 years, it would have been a 100% buy-out. That was the original plan.

Tonight, he brought up a unique structure of a transition. He said his CPA and attorney formulated the plan trying to improve the tax advantages for all involved. I need your advice on what tax advantages are present for both the buyer and the seller.

Asking price $840K

He is most interested in me having a "vested interest" in the practice. An interest so strong that he will not be caught in two years with me leaving and he having to begin the whole process all over again. I completely understand this. He'd like me to buy 25% of the stock of the business when I begin (210K) creating this vested interest. However, the associateship lasting 2 years would still apply. He then went on to say that he believes, based on his CPA and attorney's advice, that me, the buyer, would be able to borrow money from the corporation at year 2, paying for the final 80% of the practice. By doing this, am I able to pay the debt service pre-tax? And I assume I'd still be able to deduct my interest.

I told him I am obviously interested in owning 25% of the stock, but with that means that I'd be paying back the debt to that borrowed $$$. Because I'd own 25%, wouldn't that warrant that I receive 25% of the hygiene production? From the way he understood it, I would still only make my associateship compensation with no hygiene production. I am not educated in taxes and many of these matters, but to me, I don't understand how this can work. I understand that he wants a commitment and I'm willing to give that commitment to him, but I cannot borrow $210K without a means to pay it back.

This doc is a very generous and honest man and I know he is not trying to put me in a bad spot. I need your thoughts. Thanks in advance.

What they APPEAR to be suggesting is a buy-in\buy-out that is done with a combined stock purchase\earnings shift\deferment\differential method. The fact is this is a VERY common method and while I generally agree that an asset purchase may be preferable in most cases, buying stock isn't the devil that some make it out to be in reality.

That said, IF they continue to have you buy the other 75% in year two then you should stick to your guns and make it an asset purchase and DO NOT buy stock now. There's NO WAY to buy the other 75% as a stock purchase and do so with pre-tax dollars, can't happen and I think I'm missing part of the proposal simply based on that part of your post.

It almost sounds like they want you to pay 25% of the purchase price now for stock (or maybe a deposit against 100% of the stock to be held in escrow) and potentially pay him out over 5 years beginning in 2 years as some form of severance, deferred comp or mgmnt type compensation that the corporation can deduct.

Again, THAT's what it sounds like.

If they want you to have a vested interest, an approach would be that you DEPOSIT $25k now and in two years do the deal. If you walk within the two years, you lose the $25k or a portion of it depending on when you walk. If they terminate you within 2 years they give it back PLUS some add'l severance payment equivalent to approx. $2k per month you stay there (so if they terminate you in month 23 for no good reason, they give you back the $25k AND they pay you another $22k over a year). Of course there would be conditions placed on termination.

Now, is that a good deal for you? Who knows, I don't know you OR the situation.

The bottom line is that it's time for you to make a nominal investment (in the grand scheme of things) NOW (if you truly see this as your future) and hire a professional who handles transitions to represent you.

If you're buying 50% why consider an asset purchase? You purchase a 50% interest in the assets of the C-corp & maybe a 50% interest in the owner docs personal goodwill (that needs to be addressed by his advisers). There is an added level of complexity to this approach, however, for the buyer(s), who in theory will ultimately own the practice, they aren't stuck with an old c-corp they don't want or need and you use an entity that allows for more flexibility in future sales\purchases of interests in the business.

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Monday, October 13, 2008

Dental Practice Purchase Question

Gross average: 1.5 million
Net: a little over 800k
Patient active 12 months: 1800
NP/month: approximately 12
Building owned and for sale separately
8 chair practice
95% C&B, Implant and removable
FFS+ Delta premier only
Hygiene only generates 280k/year. I believe 8 hygiene days. Very little soft tissue management.
Dentist takes a month off a year.
Sale price: 1.05 million

I’ll start the list of questions:

1. How many docs? If one, can you produce $1.2mill/yr?

2. 8 hygiene days equates to approx. 1,500 patients going through hygiene recall with a good recall system and approximately 6 weeks off. How was the 1,800 arrived at, any idea? Hygiene gross of $280k is about right for 1,500 patients.

3. Average doc prod should be about $900k, here its $1.2million. Any procedures being done that you won't\can't do?

4. Selling doc staying on board? Leaving ASAP?

5. How’s the equipment? Facilities? Any major investments that need to be done?

6. Location good for future growth or at least maintaining of existing patient base?

7. Must real estate be sold with practice? If not, what's the lease arrangement? First right of refusal an option?


1. If net is accurate, looks fantastic

2.If net is accurate, price seems good

3. How much due diligence have you done so far?

Go to either or and grab the checklist for a practice purchase. From a financial perspective it provides a good bit of the initial documents you'll want\need to see and once you've analyzed that info it usually generates more questions. also has other checklists for this type of project you'll find helpful.

So specifically, there's nothing more I can add w/o seeing a lot more specifics.....

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Tuesday, October 7, 2008

Is An Associate Dentist Paying Electrical Bills Typical?

I have been an associate for over 3 years, happy where I am- we have a good relationship. Business wise, I receive 40% collections and the lab fees are split 50/50. Recently, the owner dentist has been taking half of the electric bill out of my paycheck (stating that the bill is high (about 320/per month)). Also, the half of the monthly bill for nitrous and oxygen tanks have been getting taken out of my paycheck.

Now, I am just curious- is this common? It seems unfair to me, just wanted to know if anyone else does this.

Thanks for input.

It’s pretty simple, what is allowed to be deducted under your employment agreement?

To answer the question, no, these are not typical deductions to associates compensation.

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Increased Compensation Models for Dentist in Office

I have purchased a practice a couple years ago, and the previous owner (who I get along with great and couldn't be happier that he is still around) is now requesting that he increase from 30% production to 40% production. The reasoning is fairly deep, but I'll give somewhat of an explanation.......

He does regret that he sold the practice, and now we want to expand the practice and really put a lot of energy into it. He states that he feels that in order for him to be able to do all of this, he feels that he should have an increase in his pay. Any thoughts would be appreciated.

The overhead for him will NOT be 60%, it will be less. To find out how much less, run the numbers, it's not that tough. I suspect at MOST, as a percent, the additional cost for his production is somewhere between 30-40%, lets say 40%, he gets 35%, that's a total of 75%, so you're still getting 25%. Meet him in the middle and move on.

If in fact the OH for his production IS 60% you have bigger issues then his compensation.

This may generate some lively debate, here it goes. Lets play with some real #'s:

Lets start off with a typical one doctor practice, hygienist does $200k, doctor does $600k, total is $800k with overhead at 60% that's $480k. Of that overhead, generally, somewhere between 25%-30% is FIXED, which means, 30%-35% is variable, or driven by production.

Let’s assume we add another practice on top of this IN THE SAME FACILITY AND we don't have to add space or equipment. You simply schedule the use of the facilities accordingly. So you add another doctor that does $600k and an additional hygienist that does $200k for a total of $800k. The total practice revenue is now $1.6 million. What ADDITIONAL overhead costs have you added? Generally it's just the variable piece between 30%-35%, in my response above I suggested as high as 40% ADDITIONAL overhead by adding another doctor. So on the ADDITIONAL $800k, the ADDITIONAL overhead is $320k, giving you total overhead of $800k (original $480k+add'l $320k=$800k). $800k overhead on a $1.6 million practice is 50% overhead. This is NOT uncommon with multi-doctor practices. IF overhead with one doctor is 60%, you SHOULD see an improvement in overhead percentage when adding an additional doctor or adding additional revenue.

First, that's why I suggested that if the ADDITIONAL overhead being added for the 2nd doc is 60% (not 40% at most) then you’ll have bigger problems.

So, if that additional doctor (with hygienist mind you) is generating $800k AND the additional overhead is $320k that leaves $480k on the table to use towards the doctor's compensation. If you are paying 30% of $600k, that's $180k, you are left with $300k as the profit, not a bad deal. If you bump it to 40% of $600k, that's $240k leaving you with ONLY $240k. Heck, now you're EQUAL in compensation to that doctor. So even if you settle for 35%, you can still earn MORE off that additional doctor than what the other doctor is making.

If you want to play with percentages only, the additional overhead to add the additional doctor might be 40%, you pay them 40% of THEIR revenue (which equates to 30% of the $800k in additional revenue) that leaves 30% of the total additional revenue falling to the bottom line.

Now, I’ve tried to keep it simple, certainly there may be additional payroll taxes IF the doctor is an employee, maybe they negotiated additional professional expenses that YOU agreed to pay (insurance, dues, CE, licenses, etc.) however, those won't come close $240k or $300k.

By the way, the additional overhead items as I see them?

Lab and Supplies - 15%
Assistants, Hygienists and FD - 20% (many times the additional labor cost falls below the typical labor cost as a percentage of overhead)
Other Miscellaneous Expenses - 5%T
otal additional Overhead - 40%S

o even if you believe the additional overhead is 50% and you agree to pay the doctor 40% (of his revenue, or 30% of the total) still that leaves 20% of $800k or $160k. Still making money.

Anyway, that's how I see it and I’ll say it again, you can analyze your specific situation and determine what the additional costs are by having that doctor there and calculate what their contribution is to the bottom line to help you determine what impact an increase from 30% will have.

I believe the impact to your bottom line by this additional doctor, who you're currently paying 30%, is greater than the 10% that some believe.

Good luck.

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Monday, September 29, 2008

Dental Office Front Desk Fraud? Ask More Questions.

My husband and I practice together. We recently hired a new FD person who came highly recommended from a couple of references provided on her resume. Things have been going well thus far. I recently got a call from someone who stated they worked with her in the late 90's and that she was fired from her position due to embezzlement.

Highly recommended by MORE THAN ONE reference and only ONE call from "someone".

According to this source, the dentist had proof that was in fact the case, but did not prosecute...just fired her.

The "dentist" had proof. Find out who the dentist is and call them.

I know that people can change. However, I now have a sick feeling and can't help but feel differently toward her.

That’s a shame after one call that hasn't been confirmed.

I have read many ways for safeguarding against embezzlement, and I am very hands on with reviewing adjustments, pt accounts, FD person knows this. My concern is that I will be out very soon with the birth of our first child while my husband will still be practicing. (We also just moved our existing 2yr. old practice to a brand new office space). There are obviously lots of changes going on. I worry that she may see this as a prime opportunity to possibly try and "resort to her old ways".

So from this one call you've already made up your mind that she's a thief.

Maybe her previous 2 employers were taken for a ride by her but didn't know it.

True, maybe she stole from everyone in those offices and no one ever knew, maybe she knocked over a couple of banks too. You’re letting your mind wander...make the call to the dentist and find out!!!!!

Again, maybe she learned her lesson and wouldn't even think of going down that road again.

Again, one call and you're convinced that the story is true. Sorry, if it were me I’d be looking for third party confirmation before jumping to conclusions, maybe that's just me though. I do tend to give people the benefit of the doubt until THEY show that I shouldn't.

"Recently got a call from someone who stated they worked with her in the late 90's and that she was fired from her position due to embezzlement. According to this source, the dentist had proof that was in fact the case, but did not prosecute...just fired her."

I have to go back to this statement, call the doc & confirm this. What if this caller was simply sharing a story that was told to her 3 times over, you know how stories grow?

My brother recently quit a job he got through a head hunter. He tells me that about 2 weeks later he was talking to one of the folks he used to work with and the story the company told the headhunter was that they had to let him go because he wasn't qualified.

He knows why they told them this, they want a credit for some of the money they paid the headhunter. My brother calls the headhunter and tells them his side of the story. The result? His ex-employer won't be getting leads from this headhunter anymore.

Heck, maybe there was something going on between the dentist & your employee, she was fired & this is the story the dentist gave his other employees. My mind can wander too.

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Tuesday, September 2, 2008

100% Dental Practice Buy-Out Question

I need some help on figuring out if this 100% buy-out is a good deal or not. Really, I just need a little guidance from a 3rd party as I am in a dual representation situation. Here's the info:

I started temping for a Dr. in Arizona who became ill (stroke w/paralysis). He was only supposed to be out for a few weeks, but he has become worse. He is close to retirement, has worked a busy practice for 30 years and has decided just to sell out. The office manager begged me to look into buying the practice and so the conversation began with the seller's broker.

Here are some of the details:

2006 - $950K
2007 - $1.2 Million
2008 - On pace to do $1.4 million

Overhead is around 65%
He has a large marketing budget
Collection rate is superior at 99%
Active Patients - 3500
Refers out all endo ($240K worth in 2007), most surgery and most pedo (pedo portion of the practice has increased tremendously from 2006 to 2008, but he doesn't do any of the restorative work. I certainly would). I would also do most of the endo and surgery.

Purchase Price is $770K
The seller wants a short transition period.

I have a unique opportunity because I am seeing all of this from the inside. We are on pace to do $125K (me and 2 hygienists) this month despite him being gone for the past month. I have had no problem working the busy schedule and I can even turn it up a notch (and plan to). The staff is begging me to stay on and buy the practice. All the patients have seemed very open to me being there.

The negatives that I see are the overhead and size of the practice (only 4 ops with 1000 sq feet). The staff is way overpaid. I would like to increase to 6 ops and I am told that the lease company will allow an increase on the build out.

Please, let me know what you think. Also, what are some of the things that I should ask the broker? I certainly feel as though the broker is one-sided. I don't have an attorney who knows about this stuff. Any help would be great!

You're right, it does sound like a great opportunity for you. It sounds as though you can maintain & even continue to grow the practice which is fantastic. Based on the revenue #'s you stated and your ability to produce some work that was being referred out the price seems reasonable. Even the negatives you mention appear to be things you can change\control over time.

How's the equipment\technology? Anything substantial you'll have to replace within the 1st 5 years?

What's the breakdown of the revenues from 2005, 2006, 2007 between doctor & hygiene? Based on the revenues you state I doubt 3,500 active patnts is accurate, although still a healthy # with those revenues.

Will the seller take back a note? If so, over how many years?

You mention OH figures so I assume you've analyzed their financials for the past 3 years, if not you should.

Get details about the space lease and begin looking at the details & options now.

As you continue to do your due diligence you'll have more questions to ask. Sounds like you're headed in the right direction.

It's usually a 3 to 1 ratio - you're a little less than that which could indicate underproducing of dentistry, which is good for the buyer IF they can pick it up with add'l hours, speed or procedures.

Doc's exams are usually NOT counted towards hyg prod, radiographs are IF they take them.

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Dental Payroll Question

I've got a small practice with 5 employees, and I've been doing the payroll and taxes myself with Quickbooks. I'm tired of doing it and thinking of having a service do it for me. I've talked with Paychex and they sound good for about 100 bucks a month I get full service tax and payroll. Anyone have any other recommendations? Anyone have any experience using Paychex?

As a dental CPA in a dental CPA firm I have a lot of experience comparing Paychex & ADP.

Back in the late 80's when we decided as a firm that handling payroll processing was NOT in our best interest as a service we started researching which payroll firms we would want to refer our clients to.

Paychex was our choice & they received nearly all of our referrals for many years.

Occasionally clients have issues with them & sometimes it's the clients fault, sometimes it's the dedicated payroll specialists fault.

We'd then refer to ADP or some of the other local services, like Primepay.

Most can do a decent job, however, it does seem to me that we get more client complaints about ADP when compared to Paychex & MORE of our clients use Paychex.

We also found that ADP's reporting after each payroll was too cumbersome for our clients, simply too much paper work which 75% wasn't even used\looked at.

Paychex reporting was much more streamlined & easier to read for most clients.

As a firm we used Paychex, switched to another local service, ADP bought them out so we wound up with ADP.

I wasn't involved in the selection process, however, I do understand that the reasons why our firm initially changed was cost & issues with our payroll specialist.

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Monday, August 25, 2008

What Rent Should a Subletting Dentist Pay?

I have a dentist who sublets space in my office. We share the days equally and we share disposables but nothing else. I'm not sure what a reasonable rent for this type of arrangement should be. Does anyone have experience with this?

5% of revenue may be the benchmark for space rent, however, it sounds like you own all the equipment, furniture, computers, etc., therefore the 5% will not cover the use of all those items.

You need to start with what it is you pay for the space that would be equally shared: rent, utilities, cleaning & maintenance, security, condo fees, water, cable\internet, etc.

Then consider any other expenses for either the facility & equipment\furniture\computers that you also pay. things like property insurance, premises liability insurance, property taxes, equipment repairs & maint, etc.

You should be able to come with a pretty accurate annual number.

This is YOUR annual operating cost to rent that space & own that equipment.

That's the baseline.

Here's a question, should you add a premium to this amount since you're the one on the hook for the lease? I say yes, maybe 10-20% more...

Here's the difficult part, determining an amount that covers the rent for the hard assets they use like the equipment\furniture\computers and one method I've seen is to simply take the total purchase cost of those items & divide by 10 to arrive at an annual rental rate.

Let's say the cost of those assets is $200,000, divide by 10 givens you $20,000 per year, or approx. $1,500.month. Is it a perfect method? No, lets face it, it's all negotiable. Maybe 15 years is a better divisor.

Don't sell yourself short whatever you do.

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Is $650,000 a Good Price for a Dental Practice?

We have come across a 6-year established office in a shopping strip whose GD and Endodontist are relocating to a professional medical building by the end of this year. They want to sell the current location for $650,000. For the price, all we are getting is the location and the equipment/fixtures. They are taking the patients with them.

They have 3 years remaining on their current lease. The total rent is nearly $3200. The approximate square footage is 2000. It has 5 operatories with ADEC chairs, digital x-ray, digital panoramas, 9 computers, new compressors, nitrous oxide tanks and plumbing (no idea of exactly how old). Number of patients and production information was not offered. The office's location is very good. It is nearby a major grocery chain. There are between 5-10 other dentist offices within a 2-mile radius.

Essentially, what my wife and I asking ourselves (and hope to get advice for) is: IS THE $650,000 WORTH IT FOR JUST THE EQUIPMENT AND LOCATION? (The price includes the GD's costs for renovating the office) OR should we just look for an empty location and start - literally - from scratch?

Since my wife is sill working for a group practice, this is our first experience. Can you advise us of how to proceed or how to negotiate with the GD seller?

$650k is the ASKING price, I doubt it'll be the AGREED UPON price.

You MIGHT be able to duplicate that office for approx. half of that, maybe not depending on the build-out cost.

The fact that you're considering this leads me to believe you'd consider a scratch start-up & if that's the case, the question is, how much are you willing to spend on a scratch start-up that comes with NO patients? THAT number may be the number that your willing to offer at MOST, probably less since you're buying USED equipment\improvements.

Don't be insulted by the asking price, it is what it is, nothing more. Make an offer & plan on sticking very close to it. The WORST that can happen is they say no & you're in the exact SAME position you are now, nothing lost.

Good luck.

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Monday, August 11, 2008

Dental Associate Buying Out Older Dentist

I have a 'hypothetical' question on behalf of an associate friend of mine. In his situation, the owner is ready (sort of) to sell the entire practice, with the condition that he can still be some part of it. Basically, he doesn't have a golf course or anything else to retire to due to his disability, but realizes that it is time to sell the practice.

Then he should sell & get out of the picture. Would you buy a house & let the seller "hang out" from time to time? Well, maybe some would.....

The associate does NOT want to buy in. He only wants to buy OUT. He is perfectly happy to have the owner come into the practice as much as he wants to. He is a great asset in talking to patients, motivating the staff, and for general advice.

Buyer can always consult with the seller whenever they need to, make it on an as needed basis, DON'T put anything into a contract giving the seller the RIGHT to "hang out".

There is vast room for improvement that the associate believes can turn this classic car into a finely tuned machine.

That'll be easier to do without the seller "hanging out" telling buyer what they disagree with & potentially sabotaging any planned changes.....

This certain associate wants some opinions. When is it a good deal to buy a very large practice?

When it's a good deal AND the buyer can manage it.

Does it make more sense to start small and get big in a few years, or to just buy big?


More importantly, how would you structure a deal to keep the owner at the practice?

I wouldn't, in my opinion that's simply asking for trouble....

What are the advantages/tax implications to making the purchase price significantly less and keeping the owner on salary as a "consultant" or something?

Man, keep it simple, let your CPA advise you on price allocation that benefits you, don't worry about that now.

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Unique Dental Practice Purchase Offer

Senior Doc opening a new practice 7 miles away from the old office and offers to go 50/50 on the cost of the startup and the net profits at the end of every year + 55/hr (goes up if production gets pumped) + no management responsibility - the senior doc will NOT work at the practice and will continue working in the old office.

What do you say?

1. What if the total cost is $300k, will he LEND you $150k & you can borrow the other $150k from a dental lender & simply pay him interest as you would the dental lender? The senior doc may have to stand in line behind the other lender which they may not like unless you can get the other lender to take the same position on the assets.

2. If you MUST be EQUITY partners, I suggest you work out the specifics as to how you get compensated for your dental services (I guess that's the $55/hour) although I'd suggest at least 35% of collections and for your management services, maybe an annual salary of $50k per year and the remaining profits are split based on equity.

3. The other thing you could to is work it so YOU get paid for your dental & management services and the remaining profits have two tiers, the first being that each EQUITY partner gets a 10-15% return on their INVESTMENT first, then the 2nd tier goes to you as the PROFIT partner.

Just be sure you're clear on the difference between a return on equity (partner profits) vs. being compensated for services.

An example: if the CEO of Disney and I own the same # of shares of stock, we get the same dividend as "owners".

However, because he's the CEO, he gets a trillion in compensation BEFORE those dividends are paid.

Point being, if he's managing (which I'm still confused about since he's not working there), pay him a fair compensation for those services, you get a fair compensation for your services & any remaining "profits" are the dividends. In your case (the dentist generating the revenue) you might want certain levels of compensation based upon certain revenue thresholds.

Good luck.

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Thursday, August 7, 2008

Dental Practice - Should I Sell, Merge or Stay?

I'm 42 and I'm two years away from completely owning my practice.

At that point my income increases substantially.

I was poor and in debt when I bought the practice (which was overpriced and underperforming.) Now, it's productive but I'm questioning whether I want to stay. Right now I feel tired, burnt out, and not motivated to keep the leadership energy flowing. My question is - are group practices better?

For instance, I'd like to take a real vacation before I retire. (2 weeks would be nice) I'd like to discuss complex treatment plans, I'd like to share overhead, I'd like some company (an office manager would be nice.)

Yes, I've got a good staff but I'm their boss. Some have suggested finding a consultant - I'm burnt out on those. I've had three - and they really didn't help much. (One was a mentor, one was getting started in the business and one was way overpriced) I'm still paying off the last one. I feel like I could sell this practice and make a profit. Then, I could work as an associate as I find a group to become partnered with. Have people done this? What are some pros and cons?

Not knowing you (personally anyway), it's difficult to give any real advice, so I have to use assumptions.

Assuming you still want to own & work, it sounds like you want to have more time off, share the call (i.e. better quality of life) and hopefully maintain some ownership so you can maintain a share of the profits.

If those are some fair assumptions you could:

1. Look around for a younger dentist who currently owns their practice & wants to grow their practice, maybe with deferred payments & you could merge your practice into theirs & work out some type of deferred sale. For example, become 50/50 partners in one bigger practice, this way you'll have some security knowing if something happens & you need to retire or sell, your partner will buy your half. Keep in mind you'll have to buy theirs if something happens to them first. They can come into your space, or you there’s, whichever is a better location.

2. Find a young doctor looking to own a practice, hire them as an associate with the opportunity to buy-in.

I have 6 partners & have never worked alone, so I can only comment based on my experience. I was out of the office all last week and my other partners were able to handle any calls that came in for me that NEEDED attention. I can go away & not have to worry about a client’s ability to be serviced, just as my partners can do. If I were solo, last week would have been more stressful knowing that IF something came up that needed partner\owner attention the client would have to wait.

I doubt you really want to sell, that's just a guess though.

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Dental Practice Purchase Question? Which Dental Practice is Best?

I have a couple of opportunities presenting themselves to me and I need help deciding whether anything is good for us. We are located in a suburb of Philly.

Option 1: Purchase brand new brick free-standing building on busy road (40,000+ cars/day) for 425K. 1700+ sq ft inside, one floor. It is just a shell now so I would need to fit it out. Does anyone know how much that would cost? We were thinking around 250K? This would be a start up. There is another dentist about 200ft from this property, but not directly on road. I would market this practice as a "dental spa" since there are none in the area. The dental demographic consists of several older docs not ready to retire just yet.

Just some very quick math: $425k x 1.05 (closing costs) = 446k + $200k improvements + $150k equipped & ready to go + $60k working capital = $856k with no real patients from the get go AND you say money will be tight, doesn't seem like your first choice.

Option 2: Purchase existing practice from doc. This practice has about 600 active patients, 1 doc op, 1 hyg op. Current doc/hyg is working 3 days. Producing 400K+, 5 new patients per month (no marketing done). Practice is small 700+ sq ft and attached to the house. Potential to expand but limited. Located on street with steady traffic all day in upper middle class suburb. He is looking to sell the home as well. The home is roughly 2700 sq ft. with nice size yard. Everything is maintained immaculately (house & practice). He is asking 175K for the practice and 510K for the house.

I've seen this somewhere before. If 2 ops in 700 sqr ft attached to your home is your idea of the perfect practice this might be heaven for you, if not, it's not even a consideration. You need to think about how you want to practice for the next 10+ years.

Option 3: Purchase practice from 77 y.o. doc looking to finally retire. He has been practicing at this location for 25 years and hasn't updated anything since. He is currently only treating patients on a emergency basis. This would essentially be a start-up as well. 1700+sq ft office that would need to be completely redone. Located on a busy road in a middle class area. Also looking to sell home upstairs (1700+sq ft). Doc is looking to get 355K.

This seems like the best of the 3 and you've provided NO info. There must be a patient base, what is it? 1,700 sqr ft is the average size practice, especially for starters. redone can mean alot of things; if you mean the layout is good & simply needs redecorating that might be less than $25k, if everything needs to be ripped out and REALLY redone you might be looking at well over $100k. Updated equipment for 2-3 ops might be $50kish depending on what you get.

So again, some quick math on the high end: $355k (is this for practice AND house or just practice or just house? You’re unclear) + $100k for improvements + $100k on equipment + $60k working capital = $615k AND AT LEAST YOU'LL HAVE PATIENTS FROM DAY ONE.

I don't know which route would be best for us. My husband just started his third year of dental school and would like to be a pedodontist so his lack of income is also playing into this. What do you think???

Again, very limited info provided, so if you really want to know which direction to take you're going to have to hire a consultant to help you analyze the numbers of the options.

Good luck!

This post first appeared on DentalTown.

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Monday, August 4, 2008

Need Dental Practice Purchase Checklist

I have only been out for 2 years now and an opportunity has come up for me to purchase my own practice...

I am so excited but also scared!

Ok.... I have no clue about what to look for, questions to ask, what I am purchasing into or getting myself into....

Can you please please help and just briefly give me ideas/opinions/advice on what I should be looking into, checking, asking, researching, investigating - before I go ahead and buy?

Thank you sooooooooo much!

Too much to write. Click here for a comprehensive checklist on a new practice purchase and other items you may want to learn more about.

This post first appeared on DentalTown.

Send your questions to Tim Lott, CPA, CVA at

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