Or do you believe in love at first sight?
I wrote a version of this piece several years ago when I was finding my feet in consultancy and analysis. It is as fundamentally true now as it was then – except the numbers have got bigger.
Caveat emptor is Latin for “Let the buyer beware.” The idea that buyers take responsibility for the condition of the items they purchase and should examine them before purchase. This is especially true for items that are not covered under a strict warranty.
Buying a dental practice is something that few people do more than once. Frequently the purchaser is relatively young and inexperienced. Often they are desperate to get going in their own place, they have seen enough of their friends become practice owners and want some bragging rights of their own. Perhaps they have been associates where the boss doesn’t’t share their ambitions let alone practice management expertise, presuming any exists.
So what do they do? Scour the adverts in the journals, ask the agents to be placed on their mailing lists, smile at the manufacturers’ reps and ask if they have any knowledge. Eventually something turns up; they inspect, get the accounts and show them to their bankers (and lest we forget a banker can sometimes be a person who lends you an umbrella when the sun shines and demands its return when it starts to rain).
Oh, the excitement! This is it; this is love, and this is the one for me. The bank say they will lend me the money – it took them a couple of days to make the decision but obviously that saving for the deposit was worthwhile and the seller’s accounts look good; fantastic let’s get the offer in quickly; we have heard that practices are being snapped up at the moment. Can’t take the risk of losing out now. Go for it.
What, they won’t accept less than the asking price? OK, we can get the new equipment on lease; the rep said that was tax efficient, whatever that means. No need to put up with that old technology. Agree to pay the full whack, hand your notice in, the three months fly by. Oh, the places we’ll go, can’t wait to get going with that facial aesthetic stuff and just wait until you start on those smile makeovers and Invisalign.
Twelve months on and you’re sinking. The reason the accounts were so healthy, and the bank were happy to lend, is because they covered the years when the previous owner had discovered crowns but chosen to forget perio … especially in the plan patients.
The receptionist / practice manager who had been described as the heart of the practice and knows all the patients because they have been there for so long, is busy telling everyone they meet that you’re full of these new-fangled ideas that are OK in London but there’s no call for them round here. You catch her saying to one patient that “she’ll soon knock you into shape”.
The unsmiling nurse has been on the sick for three months and now thinks she “might be” pregnant; she has also told the practice manager that the “risqué” joke you heard on the radio one morning, and repeated to her, was sexist; she was quite offended and didn’t know quite how to take it, especially as you had been alone with her when you said it.
The commute that seemed reasonable seems to take 40 minutes longer than you had anticipated and your partner can’t understand why you have to spend the evening “doing the books”. The visit to the gym on the way home has been replaced by one to the take-away and the off-licence. You hear a rumour that the old owner who said he was heading for the golf course and the beach is back working part-time as an associate 100 yards beyond the distance agreed in the barring out clause.
It seems strange to me that when we buy our first flat or house we will ask our parents, family, friends, the man in the pub, anyone for an opinion, because they have all bought and sold houses. Yet how many dentists jump into practice purchase with hardly a second thought and then end up in the situation described above?
The past decade and a half (or more) have been strange times in dental practice sales with some areas of the market described as being in “feeding frenzy” mode. The sheer enormity of the bureaucratic iceberg, of which CQC/Health Board/HIQA is merely the tip, has persuaded many owners that now is the time to go. Without doubt there are some great practices for sale at present and there are some potential nightmares out there too.
Alun’s Top 10 Tips if you’re looking to buy a practice
- Get the money in place first. The world is full of seemingly nice people with money to lend – the only difference is the price you will have to pay, be prepared to shop around.
- Take your time, don’t be rushed by agents, owners or friends.
- Visit and revisit, take a look at the area during the “normal” working day. Walk the streets around the site.
- Research, research, research. Where are the closest practices? What are they offering? Can you compete or complement their offer?
- Be prepared for the process to take twice as long as you had hoped.
- Look at the “books” – not just the finalised accounts see what’s really happening.
- Examine the clinical records – what’s been going on? What are the treatment patterns – or not.
- Are those patient numbers real or optimistic? 3,000 records does not mean 3,000 regular patients.
- Get your support team in place. Ensure your accountant, solicitor, and business coach are tuned in to what you are doing and what you want to achieve.
- Are you ready to totally immerse yourself in the new venture for at least 12 months? If you and your family don’t want to live, eat and breathe the business whilst you are turning it into yours, then stay as an associate – it’s an honourable way to make a living.