Important Questions to Ask Before Buying a Dental Practice

It may make more sense for a dentist to purchase an existing dental practice that is being sold rather than starting on your own from the bottom up. Purchasing an existing practice can provide instant cash flow, existing support staff, and other benefits. However, buying an existing practice has its own potential drawbacks and it is very important to choose a dental practice that will bring you success.   Our dental practice purchase attorney outlines the questions to ask to ensure your purchase goes smoothly.

What Is the Right Loan Amount for Your Business Goals? Most dental practice acquisitions are funded through bank financing. The amount of debt you are able to qualify for and are comfortable taking on, should align with the practice’s earnings and your personal financial situation. It is important to carefully evaluate the price range that makes sense for your long-term goals before pursuing a purchase. Because dentistry is generally considered a stable and low-risk profession, lenders are often willing to extend terms that work for most buyers and may finance up to 100% of the purchase price, including working capital and equipment.

What is the Value of the Practice’s Goodwill and Physical Assets?

The goodwill assets of a practice represent the intangible value of the practice, it is essentially what a buyer is willing to pay for the reputation, patient base, location, and earning potential of the practice. The tangible assets make up the fair market value of the physical property involved in the sale, such as equipment, furniture, inventory and supplies. Practices with a higher proportion of goodwill relative to value of physical assets are often stronger, as this typically indicates a more stable and profitable patient base. However, it is still important to carefully assess the condition of the physical assets to identify any items that may require repair or replacement prior to purchase.

How Many New and Active Patients Does the Practice Have?

The number of active patients of a dental practice is an indicator of the size of the practice, the amount of revenue it generates, and is a key factor in determining its goodwill value. A larger, stable patient base provides consistent revenue, reflects patient loyalty, and demonstrates the practice’s reputation in the community.  Buyers often view practices with a strong active patient base as more predictable and profitable. Our dental practice purchase attorney can provide guidance on how to navigate this.

Will the Seller Remain in the Practice?

It is often beneficial for both the buyer and the seller of the dental practice if the seller remains in the practice for a short time after the sale to help with the transition over to the buyer. This can help the buyer understand the processes of the practice, become familiar with patients, and generally make the transition easier. It is often recommended that selling dentists do not remain in the practice longer than one year, but certain circumstances may require such. Having a dental attorney by your side can help you navigate these decisions based upon your circumstance and the practice.

Should You Work with a Dental Practice Purchase Attorney?

Besides the transition of the dental practice from buyer to seller, there are often other legal considerations of the practice.   A dental practice attorney will help you figure out whether you will purchase the underlying real property of the practice or lease it, and negotiate such transaction. A dental practice attorney will also handle drafting and reviewing all purchase documents, give advice as to the structure of your business entity, help with employee contracts and issues, and any other related legal considerations that may arise.

At AGS Law, our dental practice purchase attorney can answer all of your questions, ensure you are properly prepared for the sale, and make the process as easy as possible. Call us now at 801-477-6144 or contact us online to schedule a consultation with our experienced attorney and to learn more about how we can help with your purchase.