Building your team as you prepare for ownership is one of the most important things you can do. You are the CEO of your business/brand and that means you need to be willing to hire and fire when necessary. Too often we see dentists surround themselves with family, friends, or people they "like" vs the ones that are most suitable for the position. See below for the key players as you start this process:
Practice Financing
The first place you will start. No one will take you seriously until you are pre-approved for a practice. Every bank wants to lend to you as dental practice acquisition loans have historically had very high success rates. Most practice loans request no money down. The bank will typically want to see 7-10% of the purchase in a liquid account (checking, savings, taxable inv acct). Do your due diligence and shop with 3 lenders. Be cautious looking just at the rate. Take the efficiency of the loan process, fees, and other available services into the equation.
CPA
Forget what the existing owner or broker tells you. Until the CPA performs a practice valuation to validate their statements, it is hearsay. A dental specific CPA will understand the nuance of the practice you are purchasing and will illustrate this by examining the financials. This will give you confidence when the negotiations take place. Expect to pay $2,500 to $5,000 for this process. Be careful when the owner offers information from their own CPA or a broker evaluation. This is not to say they are being dishonest and most likely they are extremely competent, but you are looking for an independent analysis to give you peace of mind.
Attorney
A dental specific attorney is a must from start to finish. Starting from a review of your existing employer's contract to ensure you are not violating a non-compete to the preparation of the Letter of Intent and purchase documents. A skilled attorney that has done practice deals in the past will give you confidence on the buy side. Prices from start to finish can range from $7,500 to $20,000 with $10,000 being the average. More to come on this in a future newsletter.
Commercial Realtor
An underutilized area as a lot of buyers will just depend on the selling broker to handle this. Most of the time, the seller will pay the fee of your commercial real estate representation. If there is a lease involved, this can be especially useful as they will negotiate the terms of your lease including tenant improvement allowances. A successful dental office can be an anchor in a plaza and are certainly desirable from a landlord perspective allowing you to capitalize on this in your negotiations.
Pitfalls to Avoid
• Rushing a purchase without doing your due diligence on the deal.
• Buying a house before you purchase a practice. What happens if the dream practice is a 90-minute commute from the house you just bought?
• Looking for deals online instead of networking with brokers and potential sellers in your area. The best deals usually don’t hit the market.
• Using your "friend/family member" for one of the above roles because you want to help them out.
• Trying to pay off your loans before purchasing a practice (read previous newsletters on this).
About Virtus Financial Partners
Virtus Financial Partners is a registered investment advisor specializing in comprehensive financial planning for dental professionals. The firm serves clients nationwide from its office in Winter Park, Florida.
Email us at: servicing@virtusfp.com for questions or to book an event for your class
Virtus Financial Partners is an investment advisor registered with the U.S. Securities and Exchange Commission. Any statement of past performance is not indicative of future returns. Virtus does not provide legal or tax advice. You should consult with your attorney or tax professional for any advice pertaining to legal and/or tax questions you have.
