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This section is a compilation of questions asked by folks like you. Most potential clients ask the same questions to acquire a knowledge base in order to make better decisions. This is often one of our first chances to prove our promise to simply tell the truth. We have learned over the years that the more our clients know the better we can serve their needs. Another obvious benefit to an educated client is higher quality transitions resulting in better client satisfaction. Look over the two following categories of buyer and seller questions. If you have a question that you don't see the answer then please go to the Contact Us Page and ask anything you desire. We welcome each and every inquiry and often we place those questions in this FAQ section.
- What is a Practice Appraisal?
Appraisal of the practice reduces the time spent on negotiating the price of the practice. It helps the purchaser decide if the price is fair and aids in the buyer acquiring financing. With a well-documented appraisal that incorporates an in-depth analysis of the practice's cash flow, the purchaser can get a 100% loan with only the hard assets of the practice as collateral. Some mortgage companies will pre-approve financing a practice based on a professional valuation.
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- If I work in an office as an associate and later purchase the practice, how can I keep from paying the owner for additional value I personally generated?
An appraisal of the practice prior to working in the office is the only way to adequately determine the value of the practice before your contribution. Without this initial appraisal, there would be no way to determine your contribution to the practice value. This initial practice value at least gives you a starting point that is based on the cash flow and practice value prior to your employment. This appraised value is often used in future negotiations.
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- When should I start looking for a practice to purchase and how long after I find the right practice does it take to close?
That depends on location of the practice and how focused you are on the type of practice you wish to purchase. If you are just graduating, allow about 8 months for locating the practice that fits your ability and style. If you are employee and looking for a practice to purchase, you should be looking at least 3 months prior to termination of employment. If you start your search too soon, you may be unable to purchase the practice you choose due to contractual obligations. If you start your search too late, then you may be unemployed and make a poor decision based only on economic factors. Closing can take from 1 to 3 months depending on the type of financing. Mortgage companies that specialize in dental practice sales often make 100% loans and can complete the closing within a one month time frame. Banks and small mortgage companies not familiar with dental practice acquisitions can take 3 to 4 months to close the sale.
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- How long after I purchase the practice should I have the previous owner work in the office?
It depends on your comfort level with the transition process and having the previous owner work in the office. The cash flow of the practice being purchased dictates to a large extent how long the purchaser can afford to employ the previous owner. SET specializes in assisting buyers in the decision whether the practice can afford to have the previous owner employed at the office and for how long. Although various studies have shown that in most transitions, approximately 95% of the patient base transfer to the new owner dentist. SET guidelines implemented at the time of sale are devised to ensure optimum patient and staff transfer.
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- Is a Practice Appraisal necessary when purchasing?
Frankly, yes. A formal appraisal based on cash flow, marketability, transferability, and various other criteria are needed for a purchaser to make a knowledgeable purchase offer. In the absence of an appraisal, often price becomes the most controversial issue. SET has been providing formal dental practice appraisals since 1997. Items considered in the appraisal include: location, staff transferability, cashflow, included equipment, office procedures and transferability of patient records. Buyers will need this information for purchasing the practice. Mortgage companies and banks routinely require this information to process the loan.
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- What is a fair price for a practice?
Like any other product, a business is worth whatever a willing buyer will pay a willing seller in a free market. However, the value of most practices is determined by what someone can afford to pay for it. If the practice can earn the income you want and make the note payments, then it's worth the price.
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- What is Goodwill?
Every practice has goodwill unless it is closed down or is failing badly. The amount to pay for dental practice goodwill depends on the cash flow of the practice, its general attractiveness, transferability, new patient flow, years in practice, office lease and local economic outlook.
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- Are there tax benefits in buying a practice?
Usually you can take a tax deduction for depreciation on the fair market value of all furniture, fixtures, and equipment at a much faster rate than real estate. In addition, the covenant not to compete, goodwill and the value of training are tax deductible'. Finally, most practices have deductible expenses that add to the owner's cash flow.
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- Why do Practice Brokers not show practice financial statements before I make an offer?
Just as you would not want your personal financial documents made available to the public, practice owners want only serious buyers to have access to such private information. Your Practice Broker will provide you with summary information including gross sales, lease information, and cash flow. He/she will assist you in drafting an offer based on that information and protect you by making the offer contingent on your satisfaction with that data upon your full investigation. A business offer to purchase simply says, "If everything I assume about this practice proves true, this is what I am willing to do." You, the purchaser, then have the right to proceed, withdraw your offer, or make a new offer based on your investigation. The seller, once he/she has accepted your offer, must stand by those terms unless you and you alone choose to alter them.
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- How much do practice brokers charge a purchaser?
Under normal circumstances, a practice broker does not charge a purchaser any fee. Some special situations may require a fee. If you desire the broker to perform a buyer search for you, represent you in negotiations and closing, or assist you in the purchase of a specific practice, there may be a small fee. Otherwise, the seller pays a broker to sell his/her practice.
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- I want to be in practice for myself but have no training in practice operation. Do you know of any school I can attend or course I can take to prepare me to buy my first practice?
In most cases, the former owner agrees to train you in the successful operation of that particular practice. If the seller has not already offered training, you can make it part of your offer to purchase. You do not have to be concerned that you will receive out dated or ineffectual information but rather will learn straight from "the horse's mouth." It is important to remember that any owner who offers seller financing has a vested interest in your success. No better classroom exists.
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