STARTING OR BUYING A PRACTICE
As with any business, it is often said that the three most important aspects are location, location, location. Everyone enjoys convenience and easy accessibility when taking care of life’s needs; that includes going to the dentist. The location, whether you are buying a practice or starting a new practice, should have good visibility, be easily accessible, and have ample parking. Once leases have been signed and the equipment purchased, a bad location is hard to overcome. There should also be a good understanding of what signage is available to show where the practice is located.
TRUE CASE 38: Do you see me now?
A new dentist decided to start his own practice in an office building that had space available on the second floor. He signed the lease, constructed the office, purchased the equipment, and was ready to place a small professional sign on the outside. On questioning the owner of the property, he was told there was no signage available and he would not have access to the building’s sign in the front of the building. Signage rights were not included in the lease!
Therefore, be sure not only to seek legal and tax advice but also to confer with a practice management consultant familiar with dentistry to start your career on a great first step.
To find the right location, the first and foremost thought is, Where do you want to live? This does not mean that you have to live right next door to the practice, but consider your commute time. Consider rural, suburban, or city environments as to where you want to live and what type of practice you would prefer. Rural and suburban areas lend themselves to a greater involvement of the dentist in the community and closer personal ties to the patients. In such areas the dentist will normally work, live, play, and pray in the same or a nearby community, whereas the larger the city, the lesser the community involvement and personal ties with the patients. You may also find demographic studies helpful in locating the right community. Demographic studies may be found at the local chamber of commerce, real estate offices, and possibly the local dental society. The studies should show generalized information regarding the area’s population, such as average income, average cost of housing, and average age. Then consider the type of practice you want and whether you want to buy a practice, start a practice, or work as an associate.
TRUE CASE 39: You can run but you can’t hide
A dentist decided to open a practice in a small village after selling his previous practice in a large city location. He did not realize that living in the village in which he practiced had some pluses and minuses. On the plus side, almost everyone knew who he was, even if they were not patients. This meant that every time he was in the village to buy groceries or go to the local pharmacy, he would see some patients. He had to be aware of his professional behavior at all times. On the minus side, he would have to accommodate intrusions into his personal time. While in line at the local bank, a patient confronted him regarding a statement that the patient thought was wrong, thinking he was charged twice for the same thing. This was quite a different situation from the dentist’s previous large city practice, where he had a 45-minute commute.
Besides location, there are many other facets to consider in the transfer of a practice. The details of the various types of transfer and factors involved are beyond the scope of this book, but there are some common concerns. In the consideration of whether to buy a practice, major concerns may include:
1. Whether all state and local code requirements and regulations have been met
2. The condition of the equipment
3. The condition of the office design and interior
4. Whether the staff will stay
5. Whether the income of the practice will cover the purchase payments, personal income, and any needed renovation
6. Whether the lease can be transferred and/or renewed.
Depending on the location of the practice, some of the codes that must be met are sanitation, health department, fire safety, and federal handicap access codes. Failure to fulfill any of the codes may cause not only fines and penalties, but possibly closure of the office. With the change in ownership, a surprise inspection may uncover the necessity of costly changes.
The equipment of an existing practice must be evaluated by a trained repair person or other person capable of determining its condition and longevity. If you are not already working in the practice, it is highly advisable to work there a few days to determine whether you are able to use the existing equipment, to check the operatory layout and available dental supplies, and to observe the staff interaction.
Many times when a practice is being sold, the selling dentist has not renovated the office for several years. Depending on the size of the office, painting and reflooring can be very costly. The need to renovate and the costs involved must be determined before any purchase price can be agreed on.
When a new dentist purchases the practice, the staff often becomes a critical factor. If the staff has been working there awhile and knows many of the patients on a more personal level, it is highly advisable to try and keep as many of them as possible. Try not to change office policies or staffing for at least 6 months so as to allow the patients to become adjusted to the new dentist. The typical introduction letter that you should send to the patients is usually not enough to convince patients to stay with the practice. The transition is much easier with a familiar staff supporting the transfer of the practice to the new dentist. As time progresses, adjustments to staffing may be achieved slowly without much impact on the practice.
As with any major purchase of a business, the buyer must have enough capital to allow for income and unexpected needs. So when applying for a loan, be sure to request enough money not only to cover the cost of the purchase but also to act as working capital to start you in the right direction.
Last and perhaps most important is to obtain a copy of the practice’s existing lease to make sure it is transferable and renewable. If the selling dentist is owner of the building, there should also be consideration of possibly buying the building in the future. This issue needs to be addressed for future wealth building.
TRUE CASE 40: Poof! You’re moving
An endodontist had a practice at the same location for over 20 years. It was in a great location in a small building that had three other small professional offices. The owner of the building decided to sell the building. The tenants were not notified until after the sale was completed. The new owner then said that all tenants must find new locations because he was going to use the entire building for his business. />