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pros and cons of taking over a practice

Discussion in 'Dental' started by Stephie3, Dec 5, 2008.

  1. Stephie3

    2+ Year Member

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    hey guys..i will be starting dental school next year and am planning to take over an already existing practice (because the dentist who owns it wants to retire). what do you guys think are some things that are good and bad about this?
    i think it could be good in the fact that i don't have to start up a practice that is lacking an already established patient pool. it'd also be easier because some of the business things have already been set up (i wouldn't have to train staff, too)
    one thing though is that if i marry another dentist (or somebody else..who knows :love:) in dental school, he might not want to go live in the city where i will take over the practice.

    can anyone think of any other pros or cons? i am just curious...
     
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  3. dentist13

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    i would wait out dental school and see where life leads you. you'll change a lot during the course and you may find that where you thought you'd want to be may not be the case in 4 years. i think that you should take it day at a time... anything can happen in 4 years. enjoy it! good luck!
     
  4. Brownstain

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    I'll just say there is WAY more than you could ever imagine. Buying a practice is a huge ordeal, you need to do your homework, hire some consultants, some lawyers, get a really good accountant. Then there is the whole getting personal mixed with business thing. Not to mention you are limiting where you will practice from day one. There are actual books you can order through the ADA and seminars which are FREE that the ADA offers. The ada success seminar was quite possibly the most benefitial 6 hours of lecture of my life. It included everything about graduating including a just a slice of what goes into buying a practice. Almost no one starts a practice from scratch by hanging a slate outside their door anymore. This is a business decision. You need to find out all the details, have accountants breakdown the whole thing (a pre-established patient pool sounds great, but think into it. How many peoople peace out when their dentist does? He's old, how many are actually active in that file cabinent the law says if they've been their in 7 years they are active = not actually active, most of his patietns are probably only in hygiene/maintenance phase of treatment). You have to write up transitions documents with lawyers covering everything from paying your staff's salary to protocols in case something happens like you go crazy or make bad business decisions at the expense of your faculty. And then there are loans which you may/may not actually get. I would sit on it, don't agree to anything. This is a personal matter, those dont mix with business. Learn the in's and out's and don't lock yourself into a situation. Live YOUR life for awhile.
     
  5. Contach

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    I can't understand how someone would think it'd be just that easy.
    "cons and pros"
     
  6. Stephie3

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    there is a dentist that wants me to take over his practice and i just wanted to think about it a little.

    contach, you have a stellar stats:eek:...where all have you gotten in at so far?
     
  7. DMDreaming

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    You should also take some time to consider whether your practice philosophy is similar to the other dentist. Are you forward thinking and comfortable suggesting implants while the other dentist has been telling his/her patients they are very expensive? Or are you a lets wait and see what happens while the other dentist would jump right to a crown?

    Working as a dental assistant, I had the opportunity to be part of a practice that bought another practice. The dentists I worked for failed to take this into consideration. After 1 year, less than 10% of the previous dentist's active patients remained with the practice. Most left because the new dentists were more aggressive in treatment planning (treatment planning root planing, implants, etc) than the previous who preferred to watch 4 and 5mm pockets for 12 months before SRP, etc. The existing patients thought they were being taken advantage of and left the practice. Don't spend the money if the practice isn't a good fit for you. As a previous poster said, you need to look at the business from all angles not just jump on board because it fell into your lap.
     
  8. Stephie3

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    yeah i think my plan is to join the dentist in partnership and slowly ease the transition so patients aren't freaked out
     
  9. DMDreaming

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    That still won't be enough if your practice philosophies aren't similar. The dentist my docs purchased the practice from stayed on for the first 6 months following the transition but the patients still didn't stay because the practice styles were so dissimilar. It wasn't that he just left them abruptly that freaked them out.
     
  10. TonyProMed

    TonyProMed Tony ProMed

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    The pros and cons differ greatly depending on the situation. Its based on the demographics, the practice, experience and personal preference. Some dentist like the idea of a fresh startup and building their vision from scratch and some just want jump right into practicing dentistry.

    Most would agree a 2 year in associate transition period so you can get the "business" experience. This can be reduced greatly if you work at the practice that you will acquire. As you work at this practice you can see the ground-level operation and you can begin your due diligence. You also start acquiring a portion of the goodwill reducing your transition risk.

    Here are a few questions that might help you make your decision on purchasing the practice.

    1.Has the practice reached its production capability based on space and or equipment age?
    2.Are your production capabilities in sync with the sellers?
    3.How long will the equipment last before you need to replace it?
    4.What is the practice procedure breakdown in terms of percentage of collections? (Restorative, Crown, Endo, Perio) Can you produce the procedures at the same degree?
    5.What is being referred out? what can the you keep in house?
    6.Are the practices numbers increasing over the rate of inflation?
    7.How far do you live from the practice?
    8.Is it a Group Practice? Is goodwill lost?
    9.What’s the population to dentist ratio in the surrounding 5 miles?
    10.Does the Seller have another practice? How far is the non-compete?
    11.Is there another associate? If so why didn’t the associate buy the practice?
    12.Does the spouse work at the practice?
    13.What type of payments is the practice accepting PPO, HMO, CAP, Fee for Service
    14.What would a typical fee schedule look like for this practice?
    15.What are the hours worked vs. gross collections

    I have an 2 page excel spreadsheet if you need something to conduct your due diligence.

    let me know if i can help at all
     
  11. pietrodds

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    You have about a million things to think about before you waste a single brain cell more on this dilemma... you can start with focusing on getting through year 1 of dental school... then 3 more years, each one harder than the last.

    These scenerio's are a dime a dozen and the reality is they virtually never work out. It works to your disadvantage to let an owner know the have a definite buyer. I could go further with this but like I said you need to only be concerned with taking things one year at a time.
     
  12. pietrodds

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    Dude, are you serious??? she's not even in dental school yet.
     
  13. atlanta478

    atlanta478 "Open wide"
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    That’s exactly what I was thinking. Let her pass the GA first.
     
  14. TonyProMed

    TonyProMed Tony ProMed

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    My mistake. I misread the post. I was under the impression she was working at the practice and was about to obtain her license then take over. By all means take one year at a time.
     
  15. Theillestill

    Theillestill hold the mustard
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    way too early dude.
     
  16. verticalbite

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    I think that any student who is just starting dental school that has a dentist who wants to sell their practice to them is gettin smoke blown up their ass.

    I would never offer to sell my business to an undergrad student who hasnt even started day 1 of dental school. That seems unprofessional and irresponsible. This dentist has no clue as to what your capabilities will be and if you will even make it through dental school.

    Next time the dentist says this just laugh and go on. Its not going to happen!
     
  17. verticalbite

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    :laugh::laugh::laugh::laugh::laugh::laugh:
    Way to go man, she hasn't even started day 1 of dental school and your talking to her about goodwill!!!!:laugh::laugh::laugh::laugh:
     
  18. skinetic

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    Hmm, I never think it's too early to think about these things. Business is business, and you can't just get out of dental school expecting to know everything there is to know about dental business. Although I personally prefer a de novo practice over practice acquisition, there's a lot of things to consider for the new grad.

    You will have to consider a lot of things such as:

    Production capacity (can you be as fast as your predecessor)
    Non-compete/Non-solicitation agreements (not valid in all states)
    Operating Capital (Do you have enough to sustain a loss for a given period of time. You cannot go out of business before you even start)
    Tax advantages in a given state (allowed business structure in a given state, tax advantages/disadvantages, state income tax)
    Goodwill valuation - how much do you pay for the equipment, the patient pool, etc.
    Target demographic (Is the area insured by mostly one insurer, race, income, age, etc...) - what kind of people are you aiming for

    There's a lot to think about, and it is never too early to start. Plan your business well before graduating because how much you make is not dictated by how great your work is, but your ability to manage your resources and the speed of your staff/yourself. Never let anyone dissuade you into thinking it's too early to think about the financial aspects in dental school. Always keep the big picture in mind.
     
  19. MONKEYBOY

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    Rumor has it that the enormous amount of blue-haired dentists putting their practices is driving the price of a practice down.

    This is good for people buying practices: (1.) lower price, (2.) more options.

    Would rather build a new one personally. Perhaps the high supply of old practices will cause a decrease in demand for new practice materials/equipment?
     
  20. DROCKINDAHOUSE

    DROCKINDAHOUSE UTHSCSA c/o 2013
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    I've noticed several dental students and dentists seem to prefer starting a practice as opposed to buying an existing one. I'm curious as to why that might be?

    Stephie, don't make your plans yet girl I'm sure alot will change in four years. Having the idea of an "instant job" when you graduate sounds great but I'm sure you will have tons of opportunities to do tons of other things by the time you graduate.
     
  21. robhmnt

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    That dentist is either teasing you, or he is out of his mind.
    I can't believe this. People who have not even started dental school are thinking whether they should buy a new practice or start their own. Is this a joke?
     
  22. DrReo

    DrReo "Thread Necromancer"
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    If this motivates them, more power to them. Never hurts to dream once in a while.
     
  23. texas_dds

    texas_dds Senior Member
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    its never too early to have some ideas in mind. time flies my friends!:)
    just dont get your heart set on one thing, your plans will change 45 times before you do what you end up doing.
     
  24. Stephie3

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    ok it's one thing if some guy you met two weeks ago wants you to sell his practice. it's another thing if a close friend of the family that has known your family before you were born and like knew you since you were born.
     
  25. jmick101

    jmick101 Kung Fu DDS
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    I cant resist throwing in my 2 cents here. To the OP, good luck, seriously. If it works out for you that is awesome. To have an old family friend make such an offer doesnt seem that far off from some of my classmates who think they will jump in and buy their folks practice. Differences, yes, but by degrees not by kind.

    What I am seeing, and is really lame, is a bunch of bandwagoners piling on to give the OP a hard time. The one dude who did post something REALLY helpful (and admittedly premature) got piled on as well after he apologized. You guys suck (and you know who you are).
     
  26. STREETRAT

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    Word on the street is that a high number of existing practices are going to be for sale, with the landslide retirement of current dentists (most of which are baby-boomers aged 55+).

    When supply is high, price lowers. The small numbers of dentists graduating now is an insignificant replacement rate to the majority of dentists now with silvery-colored hair.

    It's going to be very interesting to see what effect this ends up having. We'll see in ~3-6 years!

    Also, doctors expecting to sell a practice usually stop replacing things with high-end equipment at about 10 years before the expected sale year. Of course this is not always true, but it is a factor to consider.

    Astronomically expensive notions, but I'd rather have one made new -- as opposed to buying an older one and inevitable disposing of the interior, equipment, and things piece by piece.

    A more extreme analogy is a fixer-upper house. If one does not need to go that route, why buy something you are likely to disassemble and replace so many bits?

    Just my $0.02.
     
  27. TonyProMed

    TonyProMed Tony ProMed

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    Accoriding to the ADA there are 179,550 Dentists. 40% of all Dentist are over the age of 55 = (71,820)

    About 4,800 Graduates per year from 57 accredited schools

    Enrollments rising at a pace of 0.9 annually. Growth Rate of the population is about at 0.97%


    The math is defintley there.
     
  28. capisce?

    capisce? ssc machine
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    Of those dentists over 55 years old a majority probably lost 50% of their portfolio from the economy. You would be remiss to not take that into account. Numbers may say one thing but reality is another. There are many older docs out there who can no longer afford to retire and will be putting off the sale of their practice (whose value is also decreasing during this recession) in order to save more for retirement.

    "They've done studies, you know...60% of the time, it works every time"
     
  29. TonyProMed

    TonyProMed Tony ProMed

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    I definitely see more dentist putting off retirement for a few more years to dampen the losses of their investments. But I also see a few dentist that would like to sell their practice as they think the economy might decrease their gross collations in the near future.

    Meaning, if a practices sells for 65%-75% of 1 year's gross and you have a practice that is grossing 1 million there is a possibility they can sell that practice for $650K.

    If the practice gross collections dip to $750K the $250K loss x 65% =
    $162.5K in opportunity cost. :(
     
  30. capisce?

    capisce? ssc machine
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    From what I've heard from colleagues and on dentaltown, there may be many practices for sale but the terms are usually so shaded towards the sellar it's almost funny. A lot of owners have a hard time realizing that their practice is really only worth depreciated equipment and patient charts. For some reason these senior docs want to get top price AND then stay on and make 45% collection as an employee. There are some great/scary stories over on DT.
     
  31. Theillestill

    Theillestill hold the mustard
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    a lecturer purchased a practice when he was starting out from an older dentist, the guy takes the first vacation in 35 years and dies of a heart attack on the cruise.

    true story.
     
  32. Daurang

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    Source? Link?
     
  33. Thaxil

    Thaxil Senior Member
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    To the OP, I believe it is never too early to think ahead. However, you have to start from very board Idea down to the specific. From the day I was admitted to dental school, I started to think about the next step: Associated/AEG/Army/Specialist or buy my place. Within 18 month I pretty much eliminated the Idea of doing a specialty being absolute sick of school, but kept the option open with high national board scores. I attended an seminar from the ADA about post-graduation option (to own verse associate) and determine in third year I will buy a practice straight out, because I will be worked over with any associate position. During those years, I was also researching my idea location to work and live, which I feel is the most important. You can not have a successful practice if you don't like where you live and work. After that was determine contacted a practice broker and found a location 6 months prior to graduation. I consider myself very fortunate with how everything has worked out. Very few ripples and problems so far. The great key to my success so far is the existing staff that has stayed on. They are very experienced and very motivated to make the transition work. Just my story. That is nice he offered, but buy the time you graduate, you may not be interested.
     
  34. HuyetKiem

    HuyetKiem Senior Member
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    :thumbup::thumbup: great plan and well executed. Anything's possible in this country.
     

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