You do have a point about buying property, trust me I have thought about it. I am just a bit weary about putting in another 300-400k into debt, but yeah if I mortgage correctly the monthly mortgage payments may actually be cheaper than my rent. We shall see, for now I am just working hard to get my office going. It's in a good location, patient flow should be good, I bought it because in my opinion he previous owner was deficient in some aspects, both clinical and business, that could have greatly improved the office. I have a decent existing cash flow to cover my expenses so any growth will contribute to my own income.
Let's Buy a Dental Practice
- Thread starter The Hammer
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You do have a point about buying property, trust me I have thought about it. I am just a bit weary about putting in another 300-400k into debt, but yeah if I mortgage correctly the monthly mortgage payments may actually be cheaper than my rent. We shall see, for now I am just working hard to get my office going. It's in a good location, patient flow should be good, I bought it because in my opinion he previous owner was deficient in some aspects, both clinical and business, that could have greatly improved the office. I have a decent existing cash flow to cover my expenses so any growth will contribute to my own income.
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I live in 1. Parents 1. Rent 1 (I picked it up through bank ROE/foreclosed).
Would you suggest buying foreclosed homes?
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Your practice will thrive if its in a good location. Have efficient recall system and focus on connecting with existing patients, so they can internally refer you more patients. I always encourage my adult patients to schedule their families.
There are 4 core items every practice should have to be successful:
1. Effective treatment planning.
2. Effective scheduling.
3. How quickly patients are seated from the time they check-in, and how soon they get out of the office. (Patients remember this).
4. How effective financial staff explain to patients about their treatment costs and options.
If you do well on those, you will have a thriving practice.
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Well, the one I bought was originally bought for $200k by previous owner, and was only a year old when it foreclosed, I placed a bid for $124k, and the bank accepted it. This was in 2011, the market was really depressed in this part of the country back then than it is today. The property is now back to almost its original value, and I'm confident it will be worth more in few years.
So yes if you fully understand the concept, risks and potential.
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interested in hearing how you secured financing doing this.
not too long ago i spoke to a couple banks (bofa, suntrust) about practice loans. without actually saying the words, they both said it was near impossible to obtain financing as a fresh grad for the acquisition of a practice. they wanted at least a year of income before seriously considering a client. on the bright side, they don't flinch when practitioners come in with upwards of half a mil in student loans.
I spoke with a rep from Wells Fargo who specializes in practice loans and she said the moment you graduate dental school, you are eligible for up to $400k for a practice loan. After a year of experience, that number jumps up to $500k. Not all banks are like this, but I'm sure if a new grad is anxious enough he/she will find a bank that will gladly finance the practice.
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Bank of America denied me from day 1 (ironically they consolidated my 3 practice loans to 1 now). The only lender that gave me the chance then was Matsco, now under Walls Fargo bank. They simply asked me to fill out some financial sheets, and a day later I was approved. I had an associate position at the time, was only working for a month, and it was enough to show income. That was the spark I needed, or I would have waited a year or 2 minimum like other doctors.
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Do you ever have to be involved in these financial discussions or do you leave it completely up to staff members? Are there ever negotiations or internal financing in your practices? Was it hard for you to trust staff members to have these important conversations?
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My front desk are responsible for providing; patient insurance coverage information, copayment, fee 1 schedules, care credit, and making payment arrangers for all our patients. It's not really complicated process, there are staff incentives in place for patient treatment acceptance, so staff will work with patients and secure the necessary payments. Doctors are not involved in the patient insurance/financial discussions.
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Sorry, I've been away working.
Typically 10 days from closing (funding) to date of possession works. During that time there are many things to do including getting credentialed with the insurance providers. The new staff can handle that.
Keep the phone number forever. Your agreement should allow you to use the seller's name to answer the phone for a year. After that, answer "dental office".
There should be two letters that go to all practice patients in one envelope. One from seller thanking patients and announcing retirement, relocation, or new dentist joining the practice, and giving clinical recommendation of buyer. Second letter from buyer telling about the personal side, hobbies, dad a dentist, whatever your story. The cost of this mailing to patients of last 36 months should be shared 50/50 buyer and seller.
Banks are lending around 5% with good credit. Terms are 7,10, and 15 years depending on the amount. Over $500k can get you 15 years. 15 is good because the term matches the depreciation and amortization schedule. I don't recommend paying off early. Put that extra cash into growing your practice.
Don't buy your house before you buy your practice. Get a good handle on your practice, then buy a modest home. You don't need a "doctor" home yet. It's okay to start modest, then turn that into a rental when your cash flow allows you to move up without breaking the bank. Just because the mortgage company says you qualify, doesn't mean you should buy that much house. Way too many doctors never save a dime. They get into a spending habit early and can never back it off. So don't start spending too much and you won't have to back it off.
Typically 10 days from closing (funding) to date of possession works. During that time there are many things to do including getting credentialed with the insurance providers. The new staff can handle that.
Keep the phone number forever. Your agreement should allow you to use the seller's name to answer the phone for a year. After that, answer "dental office".
There should be two letters that go to all practice patients in one envelope. One from seller thanking patients and announcing retirement, relocation, or new dentist joining the practice, and giving clinical recommendation of buyer. Second letter from buyer telling about the personal side, hobbies, dad a dentist, whatever your story. The cost of this mailing to patients of last 36 months should be shared 50/50 buyer and seller.
Banks are lending around 5% with good credit. Terms are 7,10, and 15 years depending on the amount. Over $500k can get you 15 years. 15 is good because the term matches the depreciation and amortization schedule. I don't recommend paying off early. Put that extra cash into growing your practice.
Don't buy your house before you buy your practice. Get a good handle on your practice, then buy a modest home. You don't need a "doctor" home yet. It's okay to start modest, then turn that into a rental when your cash flow allows you to move up without breaking the bank. Just because the mortgage company says you qualify, doesn't mean you should buy that much house. Way too many doctors never save a dime. They get into a spending habit early and can never back it off. So don't start spending too much and you won't have to back it off.
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This is by far my most favorite thread of all times. I actually just graduated dental school and, mostly because I have been reading this thread for the last two years, I decided I will go ahead and buy an existing practice. I have been talking to brokers for about a month now. I spoke to two local companies and found that initially they were very reluctant as this is not a common thing anymore. The amazing thing is that I tried contacting AFTCO and they blew me off right off the back. The analyst they assignment me to never called and when I called him he said he transferred my case to another analyst that works under him. I called that analyst and left him a message but he never called either. A week later, I got an email from a secretary saying that the company only works with dentists after they have been out of dental school for two years and had the nerve to offer me periodic spam emails to "educate me" about buying a practice. I thought that was amazing since they have many articles on their website encouraging new graduates to buy right out of dental school. It's not even the policy that bothers me but the way they didn't even want to waste 15 minutes talking to me and seeing what I was about. Definitely disgusted with this experience and never dealing with them again.
The other two brokers were reluctant at first as I said but they found out that I have actually been studying this for a while they came around. They had me speak to some of the banks first though and basically while it's not easy, you can still get financing as a new grad. The only problem I am having though is that there are not that many offices in the area I am looking at (although it's a big metropolitan area with its surrounding suburbs). May be a total of 10 between both brokers and only 2 of those are within the size that I can afford to buy and to manage.
The other two brokers were reluctant at first as I said but they found out that I have actually been studying this for a while they came around. They had me speak to some of the banks first though and basically while it's not easy, you can still get financing as a new grad. The only problem I am having though is that there are not that many offices in the area I am looking at (although it's a big metropolitan area with its surrounding suburbs). May be a total of 10 between both brokers and only 2 of those are within the size that I can afford to buy and to manage.
I didn't have a good experience either with AFTCO, the guy I spoke to also didn't follow up and could not be reached for inquiries. Not that it mattered in the end as there are plenty of other brokers and I got a good practice with someone else. I also don't like AFTCO because of its dual representation--to put it simply, you really can't serve two masters at once.
Having said that, I don't recommend a new grad to get a practice right out of school. There are too many things you don't know, you aren't up to speed, you haven't handled multiple chairs, been under pressure, very little actual business knowledge, you don't know your boundaries, and so on. It's much better to get your feet wet first, and go for a loan after two years. Banks will be much more open to lending and you can get better rates anyway.
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Let me share a couple of thoughts here. Would you agree that not all dentists are alike with the same skills, personalities, dedication, etc? Well, this may surprise you, but not all brokers or analysts are alike with the same skills, dedication, etc. either. It is unfortunate that you had a bad experience with an AFTCO office. I apologize.
In a sellers market, which is what we have in most desirable areas, it is likely that a new grad is just not competitive enough to purchase most practices. There are other more experienced and credit worthy purchasers in front of you, ready, willing, and more easily financed to buy a practice. The banks tend to tell D4s and new grads that they want to loan them funds, but those are the sales guys telling you that. When you get to the underwriting stage, they are not as friendly and accommodating. As a result, there are individuals in this business that will not take the time to educate you and help you prepare for ownership. I certainly don't agree with that philosophy, or I wouldn't be sharing my knowledge with you with little hope of financial gain.
Now let's examine dual representation.
First the "seller". Would you agree that each "seller" has a goal? The means to that goal may be to retire, relocate, sell and stay on as your associate, bring on a partner, bring on an associate with the aim of becoming a successor, etc. That practice is unique. There are no two practices alike. That "seller" has put years of sweat into that practice, and whether you like it or not, is probably proud of it on some level. Probably very proud. He may choose to sell or not sell, for whatever price he chooses, and to whoever he chooses. Of course reality suggests that if the price is higher than fair market, it could take a very long time to find the successor that just has to have that practice and is willing to pay a premium.
What exactly is "he" selling? Equipment, furnishings, supplies, goodwill, and his promise to not compete with you (restrictive covenant). Of those, goodwill is about 80% or more of what is being sold. It's easy to convey equipment and hard assets. Conveyance of goodwill requires cooperation. Goodwill is the relationship between doctor and staff, doctor and patients, and staff and patients. You will want total cooperation from the "seller" to gain that goodwill.
Now, you, the purchaser. There are no two purchasers alike. You have varied skills, personalities, families, knowledge, financial situations, and opinions. Most know very little about what to look for in a practice or even what kind of practice situation best meets your needs. They don't teach it in school and until you fully understand the mechanics of evaluating an opportunity, you need help. Do you agree? In unilateral representation, where the broker just represents the seller, who's job is it to tell you everything about that practice? Who's working for you? Your attorney?
Who says the transition of a dental practice must be adversarial? Why can't it be crafted so that both parties get exactly what they want? The seller has needs, and the purchaser has needs. Why can't a match be made and a transition be crafted where both parties have their needs met? Put yourself in the shoes of the seller for a minute. You busted your behind for decades building this practice. You have been thinking about your successor for a couple of years. You have a picture in your head what this person will be like who takes over your "baby" and responsibility to your patients. I will guarantee you that the picture is one of a young professional who recognizes what the seller has built and who appreciates the opportunity. That doesn't mean you don't intend to change it to be your own, just that you show appreciation and recognize experience. He is not looking for a young kid who looks down on the "old guy" and who doesn't believe the practice has that value, no matter how it is priced.
When the seller's attorney writes up the contract, he is representing only the seller and is required to draft language that only favors the seller. He would be doing his seller a disservice by drafting language that actually protected you. Consequently, you must hire an attorney to include language that protects you, and you need a great deal of protection. That means you need the right attorney, and they are out there. But now you have two adversarial attorneys, doing what they do best, representing only their client. They may each tell their client that the other's demands are unreasonable and the ensuing negotiations may tear whatever you have apart. At the very least, it can seriously erode the relationship you've tried to establish (I hope you tried) with the seller to get help with the goodwill.
Imagine this scenario: The "seller" offers an opportunity, whatever it may be, in a way that meets the seller's needs. A purchaser is located who recognizes the value of that opportunity just as it is presented. The purchaser is educated in how to evaluate a practice, is provided detailed information on the practice, and examines it thoroughly to ensure it's exactly what he/she wants. The cash flow is evaluated and it meets the purchasers needs, even if the practice does not grow. Now because of the purchaser's learned understanding of practice metrics, he/she believes the practice will grow significantly, but cash flow is satisfactory even if it did not grow. The purchaser understands the fragility of goodwill and agrees to purchase the practice as it is offered. A knowledgeable third party who's brought you together drafts an agreement that fully protects you from each other and covers every possible post sale contingency. In fact, since you are paying that third party a fee for their service, they have a fiduciary responsibility to inform and protect you to the best of their ability. That third party helps you gain financing, keeps both parties working together to reach different but mutual goals, and closes the transition. The seller cooperates fully to transfer goodwill and you off on an adventure of your own.
Dual representation is not a conflict of interest. B. Franklin said it best, "a conflict of interest exists when an adviser has a financial interest in conflict". In unilateral representation, more conflict means more billable hours. A poorly written agreement can lead to litigation, which leads to more billable hours. I believe you can serve two masters. They need to be compatible masters, but isn't that the job presented? Find a successor who recognizes the value of an opportunity and builds on the foundation in place. If you don't match up well with the opportunity, don't force the seller to change to accommodate you, find another opportunity where cooperation will be the common thread.
In a sellers market, which is what we have in most desirable areas, it is likely that a new grad is just not competitive enough to purchase most practices. There are other more experienced and credit worthy purchasers in front of you, ready, willing, and more easily financed to buy a practice. The banks tend to tell D4s and new grads that they want to loan them funds, but those are the sales guys telling you that. When you get to the underwriting stage, they are not as friendly and accommodating. As a result, there are individuals in this business that will not take the time to educate you and help you prepare for ownership. I certainly don't agree with that philosophy, or I wouldn't be sharing my knowledge with you with little hope of financial gain.
Now let's examine dual representation.
First the "seller". Would you agree that each "seller" has a goal? The means to that goal may be to retire, relocate, sell and stay on as your associate, bring on a partner, bring on an associate with the aim of becoming a successor, etc. That practice is unique. There are no two practices alike. That "seller" has put years of sweat into that practice, and whether you like it or not, is probably proud of it on some level. Probably very proud. He may choose to sell or not sell, for whatever price he chooses, and to whoever he chooses. Of course reality suggests that if the price is higher than fair market, it could take a very long time to find the successor that just has to have that practice and is willing to pay a premium.
What exactly is "he" selling? Equipment, furnishings, supplies, goodwill, and his promise to not compete with you (restrictive covenant). Of those, goodwill is about 80% or more of what is being sold. It's easy to convey equipment and hard assets. Conveyance of goodwill requires cooperation. Goodwill is the relationship between doctor and staff, doctor and patients, and staff and patients. You will want total cooperation from the "seller" to gain that goodwill.
Now, you, the purchaser. There are no two purchasers alike. You have varied skills, personalities, families, knowledge, financial situations, and opinions. Most know very little about what to look for in a practice or even what kind of practice situation best meets your needs. They don't teach it in school and until you fully understand the mechanics of evaluating an opportunity, you need help. Do you agree? In unilateral representation, where the broker just represents the seller, who's job is it to tell you everything about that practice? Who's working for you? Your attorney?
Who says the transition of a dental practice must be adversarial? Why can't it be crafted so that both parties get exactly what they want? The seller has needs, and the purchaser has needs. Why can't a match be made and a transition be crafted where both parties have their needs met? Put yourself in the shoes of the seller for a minute. You busted your behind for decades building this practice. You have been thinking about your successor for a couple of years. You have a picture in your head what this person will be like who takes over your "baby" and responsibility to your patients. I will guarantee you that the picture is one of a young professional who recognizes what the seller has built and who appreciates the opportunity. That doesn't mean you don't intend to change it to be your own, just that you show appreciation and recognize experience. He is not looking for a young kid who looks down on the "old guy" and who doesn't believe the practice has that value, no matter how it is priced.
When the seller's attorney writes up the contract, he is representing only the seller and is required to draft language that only favors the seller. He would be doing his seller a disservice by drafting language that actually protected you. Consequently, you must hire an attorney to include language that protects you, and you need a great deal of protection. That means you need the right attorney, and they are out there. But now you have two adversarial attorneys, doing what they do best, representing only their client. They may each tell their client that the other's demands are unreasonable and the ensuing negotiations may tear whatever you have apart. At the very least, it can seriously erode the relationship you've tried to establish (I hope you tried) with the seller to get help with the goodwill.
Imagine this scenario: The "seller" offers an opportunity, whatever it may be, in a way that meets the seller's needs. A purchaser is located who recognizes the value of that opportunity just as it is presented. The purchaser is educated in how to evaluate a practice, is provided detailed information on the practice, and examines it thoroughly to ensure it's exactly what he/she wants. The cash flow is evaluated and it meets the purchasers needs, even if the practice does not grow. Now because of the purchaser's learned understanding of practice metrics, he/she believes the practice will grow significantly, but cash flow is satisfactory even if it did not grow. The purchaser understands the fragility of goodwill and agrees to purchase the practice as it is offered. A knowledgeable third party who's brought you together drafts an agreement that fully protects you from each other and covers every possible post sale contingency. In fact, since you are paying that third party a fee for their service, they have a fiduciary responsibility to inform and protect you to the best of their ability. That third party helps you gain financing, keeps both parties working together to reach different but mutual goals, and closes the transition. The seller cooperates fully to transfer goodwill and you off on an adventure of your own.
Dual representation is not a conflict of interest. B. Franklin said it best, "a conflict of interest exists when an adviser has a financial interest in conflict". In unilateral representation, more conflict means more billable hours. A poorly written agreement can lead to litigation, which leads to more billable hours. I believe you can serve two masters. They need to be compatible masters, but isn't that the job presented? Find a successor who recognizes the value of an opportunity and builds on the foundation in place. If you don't match up well with the opportunity, don't force the seller to change to accommodate you, find another opportunity where cooperation will be the common thread.
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So what would you recomend: I'm looking into possibly buying this small practice from a retiring dentist...he doesnt have a single computer in the office. He still uses paper ledgers for patient accounts. He has a broker thats is looking into his practice right now to determine "the numbers" so he can sell it. When he shows me the numbers for active patients, cash flow, gross production, overhead, etc...Should I just take his word for it? Or should i hire someone to check it for me?
Hello all! Love this thread and would like some advice on my scenario...
I am one year out of dental school with very substantial (>$350,000) debt, my husband is also a dentist one year out with the same debt. I work for my dad (also a dentist) as an associate and my hubby works for a group/corporate practice. I love my dad's practice but he is relatively young and not looking to retire or sell anytime soon. Not enough room for all 3 of us in there anyway!
What sort of practice models are there out there for a husband and wife dental team, especially with the debt we are carrying? We want to purchase a practice in the next year or two in a new city but I am assuming it will be difficult to find a practice out there for sale with enough room for 2 dentists right off the bat. I guess I'm having trouble figuring out our transition to ownership, as in should we purchase a practice and then have one of us associate somewhere else to pay the bills while we build the practice up? (But then you could run into competition clauses in the associate contract once you try to make the move back...) Or just try to go it the 2 of us right away?
My hubs is a big producer whereas my dad's practice that I am in is a little more high-end, cash and a few PPOs only, so I prefer a more laid-back pace. My dream would be to let my husband do most the restorative/crown/bridge and I'd do more specialized procedures (Botox, implant placement, overdentures, ect). He's on board with that idea too. Is this feasible?
I am one year out of dental school with very substantial (>$350,000) debt, my husband is also a dentist one year out with the same debt. I work for my dad (also a dentist) as an associate and my hubby works for a group/corporate practice. I love my dad's practice but he is relatively young and not looking to retire or sell anytime soon. Not enough room for all 3 of us in there anyway!
What sort of practice models are there out there for a husband and wife dental team, especially with the debt we are carrying? We want to purchase a practice in the next year or two in a new city but I am assuming it will be difficult to find a practice out there for sale with enough room for 2 dentists right off the bat. I guess I'm having trouble figuring out our transition to ownership, as in should we purchase a practice and then have one of us associate somewhere else to pay the bills while we build the practice up? (But then you could run into competition clauses in the associate contract once you try to make the move back...) Or just try to go it the 2 of us right away?
My hubs is a big producer whereas my dad's practice that I am in is a little more high-end, cash and a few PPOs only, so I prefer a more laid-back pace. My dream would be to let my husband do most the restorative/crown/bridge and I'd do more specialized procedures (Botox, implant placement, overdentures, ect). He's on board with that idea too. Is this feasible?
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The amount of debt is not the issue. It's all about cash flow. If the new dentist(s) can handle the existing workload in the proposed practice, and if the practice creates adequate cash flow to meet all of the purchaser's payment needs, the loan will be approved. Since larger practices generally produce more cash flow, a larger practice should meet your needs better than a smaller practice. You didn't mention if you own a home. If you already do, that's okay, but if you are renting, I suggest you keep renting until after you buy your practice.
If you are willing to relocate, it should not be that difficult to find a larger practice. Especially if you are open to smaller town practices.
You said dad's practice is not big enough. Not enough patients, or not enough operatories? Does dad own the building? If so, is there expansion space? One concept, if you are all open to working together, is for you, hubby, and dad to form a new entity and buy dad's practice and another practice to merge into his. You would locate the combined practice in the larger facility, or a third facility if that makes more sense. That way you can all work together and dad has an exit strategy whenever he wants to do something else. Dad gets his equity out of his practice and can invest it or payoff his mortgage. You get to cherry pick the procedures you like most from the larger patient base.
If you and hubby strike out on your own, I suggest you buy a practice that will allow you to go to a 3 dentist practice eventually. Then when you two are on the beach on Maui, the practice will still be open and generating cash. So you probably need 8-10 operatories eventually. You'll need 4 for hygiene and 4-6 for restorative work.
So you can definitely have your dream, you just need to set your goals, get a little sound advice, and make it happen.
If you are willing to relocate, it should not be that difficult to find a larger practice. Especially if you are open to smaller town practices.
You said dad's practice is not big enough. Not enough patients, or not enough operatories? Does dad own the building? If so, is there expansion space? One concept, if you are all open to working together, is for you, hubby, and dad to form a new entity and buy dad's practice and another practice to merge into his. You would locate the combined practice in the larger facility, or a third facility if that makes more sense. That way you can all work together and dad has an exit strategy whenever he wants to do something else. Dad gets his equity out of his practice and can invest it or payoff his mortgage. You get to cherry pick the procedures you like most from the larger patient base.
If you and hubby strike out on your own, I suggest you buy a practice that will allow you to go to a 3 dentist practice eventually. Then when you two are on the beach on Maui, the practice will still be open and generating cash. So you probably need 8-10 operatories eventually. You'll need 4 for hygiene and 4-6 for restorative work.
So you can definitely have your dream, you just need to set your goals, get a little sound advice, and make it happen.
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You should check it out for yourself! Tax returns will tell you total collections and you'll be able get a look at expenses. Remember, most business owners inflate their expenses, while they will not inflate income. Match up the schedule with the charts at random. That will show you that the patients are real. There should be schedules going back a few years, go back at random and check appointments against the charts.
Do an active patient count. Count all the charts where the patient has been in during the last 24 months (36 months if rural). Divide annual collections by that active patient number to get Collections per patient per year. That number will probably be below the $600-900 average potential. Let's say you get $300 per active patient per year for the last tax year. From that you know the practice should be able to be doubled with the existing patient base. Older dentists generally don't diagnose all of the patients dental needs. They like to "watch" those needs and handle them later. They are busy enough as it is.
Talk to the seller about some recent new patients. Look at the charts and discuss the treatment plan and office procedures. Find out about how new patients are handled. Find out if the hygiene program is sized properly (my earlier post). Most underperforming practices are that way because the hygiene program lacks capacity.
The practice should be priced to reflect the need for computerizing. Don't be afraid to get in there and do some detective work. If it's going to be your practice, you have a right and obligation to know.
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When I was a pre-dent I literally read through this thread religiously, and seems like it still is going strong. The best part is a lot of this information can go inter-disciplinarily and incorporate it in a pod-friendly way. Great read and ColdFront is doing a bad-ass job "hammering" on.
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Talondriver I have a question, I know you say wait until after you buy a practice to buy a house but here's my situation. I am beginning my second year in dental school right now and my fiance has just started her 1 year GPR residency in the same area. She went to a private dental school (I am at a state school) so she is 500k in debt. This year she should save around 20k and thats only making a PGY1 salary. She wants to wait until I am out of dental school though to buy a practice, which is in 3 more years. By then she should hopefully have around 60-90k saved up assuming she is doing an IBR repayment plan (we have been very good about budgeting). Should we then try to buy a practice with 100% financing and then use the money saved up as a down payment on a house, or use the money towards the practice, OR use the money to pay off some of the loan? So many scenarios!!
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Love this thread!
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Csafizadeh,
There are many general right answers, and a few wrong answers. (assumption: you have some money coming in now that you are a dentist).
Wrong answers, don't:
Start living like a "doctor". Of course there are always exceptions, but many doctors choose to live like "doctors". What I mean is that they have the best cars, best homes, best everything, worst savings and investing.
Buy a home before you want to buy a practice. Owning a home gives you added financial responsibilities and may limit your search for the right practice opportunity.
Build up credit card debt. Lenders will be looking for prudent spending and saving.
Payoff your student loans early. Instead of paying down your student loans, sock away some savings. The banks don't care how much you owe, just how much are your payments. They do want to see savings.
Right answers, do:
Spend less than you make.
Save and pay off your credit card balances every month.
Keep your vehicles modest. Buy low mileage used instead of new. Let the other guy eat the new car depreciation.
Rent until you find the right practice opportunity to buy. You will want to be flexible with respect to location.
Plan on saving about 10% of the value of the practice you want to buy. You won't need the savings for the purchase, but the banks will approve you faster and for a larger practice if you have the savings.
Banks want to see:
10% of your purchase in savings. (yes, they will do it with less, but that should be your goal). They don't care where it came from or when, as long as you have it on your latest statement.
No credit card debt.
No revolving credit.
If you own a home, they will want the practice to be within commuting distance from that home. If it's not, they will want you to wait until your home is sold. They don't want it to be easy for you to walk away from their note and go back "home".
Now your specific situation has some opportunities and possible alternative solutions.
She will finish GPR two years ahead of your graduation. Assuming the two of you want to practice together ( not a perfect idea, but doable), you will want a practice large enough for 2-3 dentists. A year after her GPR, she could buy a two dentist practice where the seller wishes to stay on as her associate for a year. Then when you graduate, seller rides into the sunset and you jump in to finally starting pulling your weight. It could be a 3 dentist practice where the seller stays and you replace an associate.
Finding a practice to buy where you can both jump right in at the same time is tough. They don't come up for sale often enough if you are location limited.
She could buy a smaller practice, then buy a second practice at the 9-15 month point and merge it into her facility (if space allows) with the seller coming along for 6-12 months. Practice merger purchases are the absolute best way to grow a practice hands down. Side note: Don't buy any small practice unless there is room for expansion. The bank will want a 5 year lease which will lock you into that location for 5 years. If there is adjacent space or larger space with the same landlord, you have some flexibility to buy and merge in another practice.
Practicing together vs. separately: If you practice together and go on vacation, you need to have a 3+ dentist practice to keep operating in your absence. Ask any owner, vacations are no fun when you are losing money every day you are away. If you are working separately, you are diversifying your dental "investment" and can more easily get away when you want. Probably more important, do you want to be in close proximity every day? If you do, figure out how to practice together. If either of you is the jealous type, practice together. If you can't stand being apart, practice together.
Please let me know if you have a followup for clarification.
There are many general right answers, and a few wrong answers. (assumption: you have some money coming in now that you are a dentist).
Wrong answers, don't:
Start living like a "doctor". Of course there are always exceptions, but many doctors choose to live like "doctors". What I mean is that they have the best cars, best homes, best everything, worst savings and investing.
Buy a home before you want to buy a practice. Owning a home gives you added financial responsibilities and may limit your search for the right practice opportunity.
Build up credit card debt. Lenders will be looking for prudent spending and saving.
Payoff your student loans early. Instead of paying down your student loans, sock away some savings. The banks don't care how much you owe, just how much are your payments. They do want to see savings.
Right answers, do:
Spend less than you make.
Save and pay off your credit card balances every month.
Keep your vehicles modest. Buy low mileage used instead of new. Let the other guy eat the new car depreciation.
Rent until you find the right practice opportunity to buy. You will want to be flexible with respect to location.
Plan on saving about 10% of the value of the practice you want to buy. You won't need the savings for the purchase, but the banks will approve you faster and for a larger practice if you have the savings.
Banks want to see:
10% of your purchase in savings. (yes, they will do it with less, but that should be your goal). They don't care where it came from or when, as long as you have it on your latest statement.
No credit card debt.
No revolving credit.
If you own a home, they will want the practice to be within commuting distance from that home. If it's not, they will want you to wait until your home is sold. They don't want it to be easy for you to walk away from their note and go back "home".
Now your specific situation has some opportunities and possible alternative solutions.
She will finish GPR two years ahead of your graduation. Assuming the two of you want to practice together ( not a perfect idea, but doable), you will want a practice large enough for 2-3 dentists. A year after her GPR, she could buy a two dentist practice where the seller wishes to stay on as her associate for a year. Then when you graduate, seller rides into the sunset and you jump in to finally starting pulling your weight. It could be a 3 dentist practice where the seller stays and you replace an associate.
Finding a practice to buy where you can both jump right in at the same time is tough. They don't come up for sale often enough if you are location limited.
She could buy a smaller practice, then buy a second practice at the 9-15 month point and merge it into her facility (if space allows) with the seller coming along for 6-12 months. Practice merger purchases are the absolute best way to grow a practice hands down. Side note: Don't buy any small practice unless there is room for expansion. The bank will want a 5 year lease which will lock you into that location for 5 years. If there is adjacent space or larger space with the same landlord, you have some flexibility to buy and merge in another practice.
Practicing together vs. separately: If you practice together and go on vacation, you need to have a 3+ dentist practice to keep operating in your absence. Ask any owner, vacations are no fun when you are losing money every day you are away. If you are working separately, you are diversifying your dental "investment" and can more easily get away when you want. Probably more important, do you want to be in close proximity every day? If you do, figure out how to practice together. If either of you is the jealous type, practice together. If you can't stand being apart, practice together.
Please let me know if you have a followup for clarification.
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PS: you won't need the$60-90k for the practice purchase. They will loan 100%. Use it for the house assuming you still have 6 months expenses in cash somewhere.
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Lets start a thread about "Build New Office from Scratch". I think your input will be useful to help grads who have the guts to save money in short term and be highly successful in the long term.
We got enough info about this "let's buy a practice", to the level that you can see it from space.
We got enough info about this "let's buy a practice", to the level that you can see it from space.
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Shunwei,
What do you think of this home?
http://www.trulia.com/property/3134536171-802-Pinemont-Dr-Houston-TX-77018#photo-3
I believe it is in the Oak Forest area. The reason I ask is that it seems like a great value given the size of the home and the land area. I'm wondering if there is something unsavory about the area.
thanx
Yes Yes Yes
A
arkenstone
It's a shame Hammer hasn't followed up recently. The practice he got into is somewhere in my hometown, but the last time I tried to look up the practice based on clues from this thread, I couldn't find anything.
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Please!
Please contact me as I am looking for a dentist husband and wife to take over a practice in Wisconsin.
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Not in dentistry, but tagging from general business standpoint.
Thanks for the knowledge.
Thanks for the knowledge.
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Nice information.
Last edited:
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This thread is incredible. Thank you!
I'm a 4th year DS whose eventual goal is to own a practice (I'm considering after 2 yrs depending on the market and my preparedness) and wanted to get some feedback on what I had in mind. Although I'd like to work as an associate under a senior dentist after graduation, as a newbie, I know I need to build up speed to match the level of the real world clinic demands, so joining corporate dentistry initially doesn't seem like a bad idea.
Here's some background and dilemma...
Ideally after 2 yrs, I would like to buy an existing practice. Financially, I pay off my CCs every month, no car loan, the last I checked, my FICO was in the upper 700s, and the only debts (albeit massive) are my student loans and my home, which I have some equity in. And before DS, I was disciplined in saving and investing, so once I rejoin the workforce, I know I can show the banks cash reserves. Here's my dilemma...
There is a piece of commercial real estate, about ~1400 sf, that used to be a restaurant that may be a good prospect for a dental practice. It's right in front of a busy highway for visibility and in a good location. Drawbacks: no parking/street parking only, plumbing and electricals will likely need to be redone, and a complete interior remodel is needed to remove the kitchen, the bar, and tear down some walls to make room for operatories, front desk, waiting area, small office, and maybe even a mini-lab if sf and the layout permits. Another drawback is that there are a couple of dental clinics within a few mile radius from the spot. And I'm not sure if there are any legal limitations, but I don't believe there are any as far as I know now.
It seems like more trouble than necessary given there are other alternatives available, and if I'm not looking to buy for another 2 yrs, why am I racking my brain over it now? Well, the property has value to me and my family. My parents spent over a decade before I was even born making payments to buy that restaurant before we immigrated to the U.S. My first job technically was at the restaurant when I was 13🙂. The restaurant helped my parents buy our first home, send my eldest brother to college (1st in the family), buy our first "luxury car" which my dad has been driving for well over 2o yrs and we've made a lot of memories there. I have 2 older brothers. My parents never wanted any of us to enter the restaurant business...they didn't want us to work as hard as they had to. The only person who was remotely interested in the restaurant was me. They have since retired and the building had been leased out, until recently.
About 15 yrs ago, I made a deal with my dad. I asked him to sell me the property 10 yrs down the road. He laughed at me, but agreed as long as it was at fair market value and that all tax obligations are paid for by me. There's no free ride with my father🙂. So I wrote a contract, both of us signed, and my mom signed as a witness. Well, it's been 5 year past the contract deadline and I obviously wasn't able to follow through on the deal because my income now is $0 the last I checked...well, $negative.
I recently learned that my parents have been having challenges in managing the properties (there are small attachments to it). They speak very little English and so my eldest brother has been helping them but he's getting busier with work that my parents rather not bother him with it any more. So they told me they're considering selling it soon. But I know deep down, they know they'll regret it. My parents are attached to the restaurant and as am I for aforementioned reasons. So I started thinking...wouldn't it be great to have the youngest, whom my parents didn't really expect to even go to college, become a dentist and purchase what her father started? After all, we sort of have a contract🙂. Why not build a dental practice on it? And perhaps convince them to postpone the sale and I'll take over managing the properties/tenants for 2 yrs until I'm ready.
But this is a huge decision that if I choose to go down that path, it'll require massive planning. How much will all the renovations cost? Is the layout even viable to serve as a dental clinic? Any permitting concerns? Will the bank loan me to buy the real estate AND money to build a practice with only 2 yrs under my belt? What's the potential patient population given the other nearby dental clinics? Will the limited parking be a major deterrent for potential patients? Will the layout allow for 3 operatories (I was thinking 1 dedicated to hygiene and another for potential associate or myself)? Will I generate enough revenue starting out to keep up with the bills? Do I need to go door to door to build my patient pool? These thoughts took seed very recently so I know I have a lot of research to do, but I thought I'd start here. I know there's a wealth of knowledge here, and I welcome all!
Has anyone started their own practice from ground up? Or know of someone who has? What was your or their experience? Major considerations? I know I'm lacking relevant data but overall, does this like a terrible idea at face value? I know times have changed and the variables may not be comparable today, but would like to get some feedback.
I'm a 4th year DS whose eventual goal is to own a practice (I'm considering after 2 yrs depending on the market and my preparedness) and wanted to get some feedback on what I had in mind. Although I'd like to work as an associate under a senior dentist after graduation, as a newbie, I know I need to build up speed to match the level of the real world clinic demands, so joining corporate dentistry initially doesn't seem like a bad idea.
Here's some background and dilemma...
Ideally after 2 yrs, I would like to buy an existing practice. Financially, I pay off my CCs every month, no car loan, the last I checked, my FICO was in the upper 700s, and the only debts (albeit massive) are my student loans and my home, which I have some equity in. And before DS, I was disciplined in saving and investing, so once I rejoin the workforce, I know I can show the banks cash reserves. Here's my dilemma...
There is a piece of commercial real estate, about ~1400 sf, that used to be a restaurant that may be a good prospect for a dental practice. It's right in front of a busy highway for visibility and in a good location. Drawbacks: no parking/street parking only, plumbing and electricals will likely need to be redone, and a complete interior remodel is needed to remove the kitchen, the bar, and tear down some walls to make room for operatories, front desk, waiting area, small office, and maybe even a mini-lab if sf and the layout permits. Another drawback is that there are a couple of dental clinics within a few mile radius from the spot. And I'm not sure if there are any legal limitations, but I don't believe there are any as far as I know now.
It seems like more trouble than necessary given there are other alternatives available, and if I'm not looking to buy for another 2 yrs, why am I racking my brain over it now? Well, the property has value to me and my family. My parents spent over a decade before I was even born making payments to buy that restaurant before we immigrated to the U.S. My first job technically was at the restaurant when I was 13🙂. The restaurant helped my parents buy our first home, send my eldest brother to college (1st in the family), buy our first "luxury car" which my dad has been driving for well over 2o yrs and we've made a lot of memories there. I have 2 older brothers. My parents never wanted any of us to enter the restaurant business...they didn't want us to work as hard as they had to. The only person who was remotely interested in the restaurant was me. They have since retired and the building had been leased out, until recently.
About 15 yrs ago, I made a deal with my dad. I asked him to sell me the property 10 yrs down the road. He laughed at me, but agreed as long as it was at fair market value and that all tax obligations are paid for by me. There's no free ride with my father🙂. So I wrote a contract, both of us signed, and my mom signed as a witness. Well, it's been 5 year past the contract deadline and I obviously wasn't able to follow through on the deal because my income now is $0 the last I checked...well, $negative.
I recently learned that my parents have been having challenges in managing the properties (there are small attachments to it). They speak very little English and so my eldest brother has been helping them but he's getting busier with work that my parents rather not bother him with it any more. So they told me they're considering selling it soon. But I know deep down, they know they'll regret it. My parents are attached to the restaurant and as am I for aforementioned reasons. So I started thinking...wouldn't it be great to have the youngest, whom my parents didn't really expect to even go to college, become a dentist and purchase what her father started? After all, we sort of have a contract🙂. Why not build a dental practice on it? And perhaps convince them to postpone the sale and I'll take over managing the properties/tenants for 2 yrs until I'm ready.
But this is a huge decision that if I choose to go down that path, it'll require massive planning. How much will all the renovations cost? Is the layout even viable to serve as a dental clinic? Any permitting concerns? Will the bank loan me to buy the real estate AND money to build a practice with only 2 yrs under my belt? What's the potential patient population given the other nearby dental clinics? Will the limited parking be a major deterrent for potential patients? Will the layout allow for 3 operatories (I was thinking 1 dedicated to hygiene and another for potential associate or myself)? Will I generate enough revenue starting out to keep up with the bills? Do I need to go door to door to build my patient pool? These thoughts took seed very recently so I know I have a lot of research to do, but I thought I'd start here. I know there's a wealth of knowledge here, and I welcome all!
Has anyone started their own practice from ground up? Or know of someone who has? What was your or their experience? Major considerations? I know I'm lacking relevant data but overall, does this like a terrible idea at face value? I know times have changed and the variables may not be comparable today, but would like to get some feedback.
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Any idea what typical broker fees are to the buyer / seller for a dental practice? I'm sure there are ranges but I was surprised to hear from a broker that charges a per transaction fee to the buyer, I just assumed that only the seller would be paying a fee..
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Amazing thread!
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As a seller 10% of the final sale price plus 2% of the real estate ( assuming building is owned by the seller) if sold to the buyer within 2 years or $17,500 as a minimum.
As a buyer I’ll assume you are going to have fees associated with whatever professionals (attorney,CPA, etc.) you utilize during the purchase process not to mention any financial fees that may be charged by the lending institution.
I've read this thread for years and now that I'm graduating in a few months, I have been doing a little research into locations to begin my practice. Cold Front, do you feel like the rise of DSO's have changed any of the advice you've been sharing with all of us here? I am nervous...
3
321931
DSO have put a dent into owning a practice but I still think it’s profitable and worth it over being an associate. Being your boss has its perks but it’s not easy.... and not for everyone. It does beat associating though.
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I just sold my 2 location ortho practice recently. One location involved commercial Real Estate that I own. On my side were the sales broker, my long time dental accountant, financial planner, attorney that specializes in the APA and lease specialist. The buyer had his own people. As you can see ... there are a lot of people involved in order to have a successful transition and to ensure there is no misunderstandings in the future.
I won't go into numbers, but what it comes down to is TAXES. Buyer wants the assets to be tangible so that he/she can write off this amount as purchased equipment. Seller wants most of the sale price to be goodwill. Goodwill is not taxed. Seller pays taxes on whatever portion of the APA is designated equipment/tangible assets.
The leasing specialists will be especially important. Don't underestimate their importance. Your buying a practice in which someone else owns your space. You need to fully negotiate this with the lessor. The leasing broker is equipped to do this. YOU ARE NOT. There's the usual 3 months free rent and TI's that can be negotiated.
I did not sell my commercial office space to the new Orthodontist. Therefore the leasing specialist worked out a 7 year leasing situation that worked out to my advantage.
I won't go into numbers, but what it comes down to is TAXES. Buyer wants the assets to be tangible so that he/she can write off this amount as purchased equipment. Seller wants most of the sale price to be goodwill. Goodwill is not taxed. Seller pays taxes on whatever portion of the APA is designated equipment/tangible assets.
The leasing specialists will be especially important. Don't underestimate their importance. Your buying a practice in which someone else owns your space. You need to fully negotiate this with the lessor. The leasing broker is equipped to do this. YOU ARE NOT. There's the usual 3 months free rent and TI's that can be negotiated.
I did not sell my commercial office space to the new Orthodontist. Therefore the leasing specialist worked out a 7 year leasing situation that worked out to my advantage.
I'm going to be blunt with you, you have not shown me why this will make a good spot for a dental office. You are thinking of setting up a dental office out of emotion, some sort of sentiment, you want to prove to your parents that you are a success even though you weren't expected to go to college. IMHO these are all the wrong reasons. You need to put all those emotions in check and ask " will this office be successful? will this area support an office." All that other stuff is neither here nor there.
