If there’s a constant concern we hear from young dentists it’s that they cannot compete with Dental Service Organizations (DSO’s) for available dental practices for sale. The perception is the DSO’s simply go out and overpay for practices, but the truth is that they are very good buyers. So how can an individual dentist be a good buyer:
Identify the Type of Practice You Want
This seems simple, but you should define the type of Practice you want before beginning the search. How many ops? What level of Production? What location? The reason that this is important is that you’ll avoid looking at a bunch of practices that simply aren’t good fits for you. You’ll save time, but you’ll also avoid getting a reputation for someone who is just out there kicking the tires and can’t close a transaction.
Establish a Relationship with Bankers, Brokers, Attorney and CPA
This needs to be done because once you have identified a practice you’d like to buy it is to your benefit to be able to move quickly and decisively. In my opinion, the biggest advantage the DSO’s have is their ability to quickly move on something they want to buy. A buyer needs to understand that the sale of a dental practice is usually a stressful time for a seller, so sellers appreciate dealing with people who seem firm in their ability to buy. Getting relationships with these people early is helpful because they’ll know what you want and will be able to move quickly ahead instead of trying to figure out what you want.
Nickels and Dimes
No one is suggesting that you go out and overpay for a practice, but many times individual buyers tend to nickel and dime things that are not significant in the scheme of things. This allows other buyers to gain an advantage on you. Remember, sellers are usually stressed out by the process and they simply don’t want some adding to their stress level. Trust your bank on this. If they’re willing to loan you the money there’s a good chance that the practice is properly valued.
How the purchase price is allocated dictates how a seller will pay taxes on their proceeds and how you’ll be able to deduct the purchase. This allocation is more important to a seller as they only get one crack at this and a buyer is simply determining how long it will take to write off the purchase. Don’t let a tax allocation that may be slightly favorable to the seller blow up a deal.
Stay Calm and Firm
It’s not many times in your life that you will make a financial decision as big as buying a practice. I’ve mentioned the seller will be stressed out a bit and it’s natural that you’ll have the same feelings. It is important to stay calm and firm during this time. If you’ve done your job you’ll know what kind of practice you want and you’ll have professionals who will help you carry the deal across the finish line. Things happen during transactions and there always seems a point where it seems the deal may blow up. Stay calm and you won’t give a seller a reason to walk.
With a little bit of work you can go out and buy a dental practice and compete with the DSOs.