After part I, you have now established that you definitely want to and are suited to own your own dental practice. You have looked at what is available and you have found a practice you are interested in. Make sure you do your due diligence. Do not just take the selling doctor’s price at face value; make sure you get an experienced professional, on your side, to help you evaluate the practice.
The due diligence for a dental practice purchase breaks down into two basic components. The first is what your accountant or advisor will need in order to calculate what they think the value of the practice is. The second component is what you will need to do to value the practice. Today we will focus on what your advisor will need.
Fluence has a complete list of the items needed and we can provide that list to you if you need. I’m going to touch on just a few items of that list. The first thing needed is a copy of the appraisal if one has been done. The next items are: tax returns, profit and loss statements and balance sheet reports for the last three years. We will need to dig a little into the business income and expenses for the past three years. We are looking for shifts, changes, fluctuations, irregular expenses, personal expenses, etc. We want to make sure that we can accurately predict the cash flow of the practice after you buy it. At the end of the day, whatever the cost of the practice, you have to be able to collect enough money to pay the staff, pay the rest of the bills, pay the bank the money you owe it and then still have enough to take some money home so you can pay your student loan payments and put food on your table. If the practice doesn’t cash flow, then it is too expensive. You will really need a professional, who has seen many dental transactions, to help you make sure it will cash flow and is a good purchase.
If you have any questions or if you have a dental practice you need help evaluating, do not hesitate to give us a call.