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I DID IT GUYS. Free Dental Practice Aquisition Contract on Docracy.

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briansle

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Okay Guys. Practice ownership is tough. But the hardest part is getting off the ground. Starting with how to buy a practice or startup a practice.

I will code some sort of website in the future describing how I did a startup and the things I believe are important that they don't teach you in school. First and foremost is location. You gotta find a good place and get a good lease from the landlord. This is tough itself. Once you find the place then there is like a network of contacts you need to do a buildup. And basically your the guy linking all those contacts together because your the one taking the money from the bank and distributing to each of the guys you hired to build the place. I'll have pics showing this whole thing. Like my loan agreement with the bank, all my contracts with my vendors, including my lease. The contacts are:
  • The bank to finance the whole thing
  • A contractor to build out the place ie pumbling, cabinets, walls, etc. He has to go to the city to also get the permits.
  • A dental equipment guy to supply you with chair, compressor, vacuum, xray machine, handpieces, etc..
  • A digital guy to setup all the tv, computers, and practice management software.
I can go on and on. Its too large of a topic. I don't want to digress.

This thread is about the role contracts play in dental practice transitions. You need to understand what goes into these contracts as I am learning about them myself. I find that there's not much out there to educate us. And all we have are lawyers and vultures who want to charge you thousands to use basically a generic template they made to broker a deal which if you know the seller really well, you don't need them. They just make way to much money playing the "middleman". And if there's one thing the internet hates: Its middlemen who make a living off access to proprietary information.

So I went on dentaltown.com and asked if anybody had sample contracts I could see to learn about what constitutes a dental practice aquisition contract in case I want to buy a practice down the line. A leasing consultant flat out told me I'd be foolish if I did anything else but hire a dental practice sales lawyer. Another old dentist tells me he paid alot of money for his contract and finds it sleazy that I'm asking him to share.

So what do I do? I go on the 2011 TechCrunch Hackathon winner http://www.docracy.com
And I looked up samples of "Asset Purchase Agreement". I took that contract and modified it for Dental Practice Aquisitions. Here it is:

https://www.docracy.com/0x1ha52vbch/dental-practice-purchase-agreement

This is absolutely free. Open-Source. Like the Github for Legal Contracts. Read it to understand what goes into these contracts. Then share to whoever might need one.
 

Greg_Jones

Dental Practice Acquisition Expert
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I couldn't agree any less. Lawyers and dental lawyers in particular can cost on average 3k to 7k but you are viewing it all wrong. They SAVE you money and headaches. Please please please don't try and do this yourself. Let me give you some examples OP and you try and answer them yourself. I am not trying to beat you up but rather prove a point. No one likes to pay a broker or lawyer but if you find the right people with a good reputation, you will see the value in such. Most buyers don't pay brokers by the way.

1. Allocation of assets. You mess this up and it can cost you thousands in tax dollars right off the bat. How much of a practice is generally allocated towards goodwill? Equipment?

2. Who pays for redos?

3. How long should you be able to use the sellers name for advertising?

4. What contracts are and should be assumed as a standard?

5. What is a fair and reasonable non compete?

6. What reps and warranties should the seller provide?

7. Work in progress? How is this structured?

The list goes on...
 

briansle

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I agree with you Greg. The dental practice transition is extremely complicated. In some ways its far more complicated and difficult than a straight startup. I'm not a attorney and nor do I recommend anyone actually use the contract I branched off on Docracy.com. But I do feel dental students and dentists in general have very little knowledge in the science of a dental practice transition. It's amazing how dental schools don't even approach the subject as this is one of the main paths we can take to practice ownership. There are so many variables involved for the new doctor to take over and actually succeed, that unless the buyer was an associate or have a long standing relationship with the seller, it can get ugly. Hence we have to consult with brokers & attorneys etc... But new grads can be naive to the reality there are consultants out there who are not interested in the long term success of the practice transition, but rather just completing a sale, and collecting a commission. (And by no means am I directing this towards you. As I respect you, and are an honest broker who is genuinely interested in setting up successful transitions, as you take the time to answer questions on this forum and provide education. But in truth Not all brokers are as helpful as you.) Ultimately in the end, a bad consultant can inflate the valuation of a practice to serve their own needs, and this is not good for the buyer, seller, or patients.

The current valuation model for practices I believe is creating a bubble, due to the "Goodwill" factor. The seller obviously wants to cash in on the goodwill of a practice he put his heart and soul into for decades. But goodwill is an intangible asset and it's really quite subjective to actually place an objective valuation on. Frankly stated, the goodwill asset of a practice is the Seller him/herself. It's the character, skill, and personality of the old doctor that patients grew to trust. It's quite strange to put a price point on that, and expect it to hold the same value to the young buying doctor who may have a completely different skill set and personality. Thus unless, the buyer and seller have the same practice philosophy, the goodwill of a practice only has real value if the right seller and buyer match. And if a naive buyer straight out of school; who doesn't understand the nature of dental practices with all its intangible variables; and is only looking at the production numbers for the past 3 years; takes out a 300k loan to purchase a practice he can't handle... Not only did the young doctor just effectively double his/her already ridiculous student loans, he/she is going to fail at providing the type of care the patients trusted in the original doctor, and the seller is going to go to his grave with alot of regrets. There needs to be a change.

There are two major parties comprising dentists currently (baby boomers & millenials). The current state of dentistry is in a flux right now. 60% of all practicing dentists are babyboomers. 2009 made it much more difficult for these guys to call it quits. Not only did retirement become out of reach, alot of these guys have the mentality that they will work until they drop dead with an explorer in their right hand and a hand-mirror in their left. They don't know anything else. And the stunning reality is, the high suicide rate associated with dentists is actually after they retire. These guys are used to talking to patients everyday, when they don't have that social interaction, they decide to end it all. The babyboomer gen I feel are sort of holding dentistry back. They are not tech savy, and getting these guys to upgrade to digital is a big deal. The millenial gen dentists are very different. First off we may see 50% of the profession be women in addition to a much more diverse demographic - ethnically, religiously, lifestyle, etc... This group is very tech savy, is big on efficiency, more DIY, and has a healthy distrust of pretty much everything. The way millenial dentists will transact when it comes to selling their practices in the future will be entirely online. And they will do it Peer-2-Peer. This means no independent middleman. 3rd parties will not have as much influence as they do now in the practice transition, as doctors will be able to network more effectively online to find the right seller-buyer match, with the broker more as an arbiter. I liken it to the Redfin model. Redfin pays its agents with an annual salary, rather than commissions, and ties bonuses to customer reviews of their performance. This is how brokers should be structured. All someone needs to do is build the right web platform. Right now the search fxn for practicing listings, leaseholds, partnerships, associateships, etc... is pretty pathetic. Simple online ad boards, broker listings in your spam box, forums, local dental newsletters, word of mouth. This model is pretty ripe for disruption. If it's not me, a dentist who knows how to code will create a type of facebook/craigslist type of platform with added tools such as khan academy type videos on practice management, contracts, escrow, listing of local vendors, etc... on a highly visual dynamic platform. Just anything, to help new graduates make better decisions and get their careers started off much easier than it was for us. ---------
 
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Greg_Jones

Dental Practice Acquisition Expert
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Good thoughts and comments...

There are a lot of shady dental brokers out there that are aggressive and pushy. It is unfortunate when these people get a listing that a buyer really wants and you have to deal with them and depend on their guidance. We try and get in front and students in Florida to start giving them some basic knowledge but we feel they don't take it all in as they have other things to worry about like passing the boards. Anytime you get a bad feeling about the broker I advise that you get another broker involved to help with due diligence. I've seen brokers inflate their evaluation to make an extra buck, no doubt about it. In short, you have to use your best judgement or use a broker that has a good reputation to either represent you or broker a practice through. If anyone on here is buying a practice, I know the "good guys" throughout the United States that can help you with your acquisition.

When we value practices the main overview is: the lower the risk for a buyer, the higher the price. This all translates along side with goodwill; for instance a seller with a practice of 5 years isn't going to be as valuable as a seller with a practice of 25 years. You guys and gals have to make sure that you and the seller has somewhat compatible personalities and philosophies otherwise as mentioned it can be a recipe for disaster.

They keep telling everyone that the baby boomers will have an effect on practice values as it will create a buyers market with more sellers than buyers. I think this theory could be true in rural areas and less desirable places to live but shouldn't take effect in a state like Florida as we always have a heap of buyers and people that want to be here. Time will tell...Dental brokers will always be around as there is with residential real estate agents. With the internet, we may see more for sale by owners but in reality it wont matter as these deal rarely get done. I see it happen all the time where these deals fall apart on issues that shouldn't be an issue. I was speaking to a buyer who had a deal fall through due to not being able to obtain a lease because the owner of the practice and building didn't think he sell the building fully occupied. I was just like WHAT!? This actually makes his building more valuable for an investor to come in and buy it if so be it. Little things like this kill a deal all the time and doctors just dont know any better as this isn't what you do for a living. There are already FSBO websites like DDS Match and Dental Practice MLS. I'm not worried! Haha. Lastly, sellers are so weary about confidentiality and it makes it harder when trying to put it up on these websites by yourself.
 
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