Dental Practice Planning

Buying a Dental Practice

• When buying a dental practice, Doctor de Gomez will retain the present personnel.
• The goodwill of the practice may be affected if the seller is deceased.
• The seller's attitude towards the buyer is crucial, as they will need to recommend the buyer to their patients.
• Factors to evaluate when buying a practice:
  • Age, reputation, and competence of the seller
  • Average monthly or annual gross production
  • Average monthly or annual receipts
  • Amount of accounts receivable
  • Fixed overhead
  • Average monthly or annual overhead
  • Monthly, quarterly or annual reports
  • Fee schedule
  • Present personnel
  • Types of genre or services performed
  • Recall system (quality)

Employee Retention

• Retaining employees, especially the receptionist, is crucial as they are acquainted with the clientele and practice functions.
• Employees usually leave when the practice changes hands.

Leasing

• A lease is a contract providing for temporary occupancy and/or use of property.
• Leases can be tricky, drawn in favor of the lessor (renter), so it's essential to have the lease reviewed by your own lawyer.
• Factors to consider when negotiating a lease:
  • Description of the premises
  • Length and duration of lease
  • Amount of rent, usually calculated on an annual amount per square foot
  • Date and place of payment
  • Options for renewal of lease
  • Insist on a lease for your own protection if you pay for improvements to the property leased.

Evaluating a Practice

• Three major groups of information to evaluate when valuing an existing practice:
  • Actual value of the facility
  • Goodwill
  • Internal management factors
• Actual value of the facility includes:
  • Inventory stock of equipment, furnishings, and supplies
  • Leasehold improvements
• Evaluating supplies can be challenging, but a reasonable estimate of their value should be made.

Written Contract

• Written agreements on practice transfer require legal services of an attorney.
• The contract should specify terms for personal protection.
• Practice transfer can be advantageous to the buyer, allowing the seller to reduce their patient load while the buyer assumes the practice.

Negotiating a Loan

• It's essential to be prepared with a well-developed business plan when negotiating a loan with a lender.
• A CPA can help identify sources of loans and develop a plan tailored toward achieving goals.

Leasing Equipment and Furnishings

• Factors to consider when leasing equipment and furnishings:
  • Length and duration of lease
  • Amount of rent
  • Options for renewal of lease
  • Escalator clause (automatic increase in rental fees)
  • Provisions for resolution of disputes

Advantages and Disadvantages of Leasing

• Advantages of leasing:
  • No capital outlay (no need to borrow)
  • Leasing cost is tax-deductible
  • Leasing cost may be lower than purchasing
  • No investment in equipment that depreciates
  • Protects lines of credit
  • Easier to update equipment as it becomes obsolete
  • Frees capital for more profitable investments
• Disadvantages of leasing:
  • Unless in a high tax bracket, leasing is more costly than purchasing.