Purchasing a dental practice is often a high-stress, high-confusion time, and it’s very easy to lose sight of the fundamentals. The last thing you want is to look back in a year or two and think, “I wish I’d known about that before I bought this place.”
Fortunately, as long as you’ve taken a good hard look at these four factors, it’s unlikely that you’ll have missed out on any truly crucial information.
1. The Cash Flow
It may seem logical to focus on the sales price, but the most important factor when it comes to finances is actually the practice’s cash flow. After all, cash flow is what you’ll be using to repay any debt you incurred while purchasing, so in many ways it’s even more important than the sales price.
2. The Expenses
After you intimately understand the practice’s cash flow, you need to understand its expenses just as thoroughly. You’ll need to dive deep into the books and question every red entry in the ledger. Is it really necessary to pay three hygienists when at least one of them is often waiting around for patients? Does the practice really need to be spending thousands on office supplies each year?
Recurring expenses have their own momentum—even after becoming unnecessary—so a pre-sale audit (even an informal one) is a great chance to make sure every expense is justified.
3. The Patients
The key to examining a practice’s patients is to draw a distinction between what the patient base looks like now, and what it could potentially look like in the future. The prior owner may have been less interested in finding new patients than you are, or, alternately, advertised much more aggressively than you will. It’s important to get a sense of the community’s actual potential as a source of patients, rather than relying on the current patient load to be an accurate indication.
4. The Facilities and Staff
It’s easy to forget that the “scenery” of a practice isn’t eternal. The faces and buildings and equipment you see when you walk in the door are just a snapshot in time, and any of them can (and maybe should) change or be changed.
If the practice is over- or understaffed, fixing that issue will have an impact on your finances after the sale. Similarly, if the equipment or facilities are aging and in disrepair, your finances will take the impact down the road.