If you’re at the point in your career when you are ready to purchase a dental practice and don’t know where to start, here are nine questions to ask yourself. The answers to these questions will greatly impact your future as you get ready to make the most important decision of your professional career.
- What is the prospective dental practice really worth? Just because a seller is asking for a certain price doesn’t mean that is the value of the practice. Contact a dental CPA right away to have a business valuation done. You could easily overpay for your dental practice without it.
- Can you afford the deal? Have a dental CPA calculate future cash flows based on the price of the practice, the financing terms, and your projected salary amongst other things.
- Is the seller willing to be a resource for you? They have probably been with the practice for a long time and would be happy to share information and advice with you. The seller also has a patient base they are leaving behind that they don’t want to let down. Make sure they are willing to help you get adjusted and start this new venture as a success.
- Are you going to purchase the building the practice is in or rent it out? The seller may own the building and not want to include that in the deal. If that’s the case, be sure you have a lease agreement in place so you can continue to use the building as a dental practice space.
- What are you going to do for financing? There are a lot of banks and financing options out there. Be sure to compare interest rates and terms to get the best option available to you. Also keep in mind that it’s important to use a bank that you are comfortable with and know you will be serviced properly. If you want to get really creative, consider asking the seller of his or her practice to finance the deal. The advantage to this option is that the seller will have a vested interest in your success.
- What will the purchasing terms be? Again, you have a lot of options here. Are you going to purchase 100 percent of the practice in the first year, or are you going to buy a smaller percentage each year over time. These important factors need to be negotiated. A dental CPA can walk you through your options and what the implications could be on you and your dental practice.
- Is the current dentist going to stay onboard? As part of the deal, you want to define the length of time the former owner is going to stay on to help with transitioning. The last thing you want is a dentist that sells the practice and is out the door the next day never to be seen again. However, you wouldn’t want a dentist who sells their practice and then sticks around too long. Find a balance and agree to it. Your patients will be better off, and so will you.
- What is the alternative? If you don’t purchase a dental practice from an existing owner, what are your other options? Are there other practices for sale that you would consider? Would you consider starting a practice from scratch? Similarly, look at the seller’s options. Are you the only prospective buyer, or does he or she have other options? The more options you have, the more negotiating power you have.
- How is the deal going to be structured to maximize tax savings? How much of the sales price will be allocated toward goodwill and how much will be allocated toward assets? This question will greatly impact your tax liabilities, be sure to have a dental CPA assist you in the negotiations.
You have made the initial decision to purchase your own dental practice, now you have to decide which practice is right for you. Before saying yes, make sure you can answer these nine questions and are happy with your answers.
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