Dr. Michael Gradeless
January is a time of introspection. It is time to evaluate your progress and consider your goals. February is the time for action. The major concern of every recent dental graduate is debt load. According to the ADA, in the year 2000, the average dental school graduate had educational debt of $100,657 and personal debt of $43,681. With more than $144,000 of debt, it is understandable that the majority of dental school graduates seek the comfort of the income offered by an associateship. The reality is that every successful associate is creating profit for his or her employer.
The fastest way to pay off your debt is to look for the opportunity to own your own practice. To determine if the opportunity is right for you, do your homework. Here are eight specific steps that you must complete to make certain that a particular transition opportunity is right for you.
1) Formalize your goals in writing. In dental school, there was a set curriculum with benchmarks to measure progress. For the rest of your life, you must create your own benchmarks for success. Ask yourself, "Where do I want to be in five years, in 10 years, and in 20 years?"
2) Perform a demographic study. If you are going to invest several hundred thousand dollars in a dental business, you need to know the territory. What is the population? What is the average age and income level of the area? How many dentists serve this population and what are their ages?
3) Observe the practice in operation. You may want to spend several days in the practice watching all areas of the operation. This will allow you to observe what the average patient looks like as well as how the staff interacts with them. Look at how the doctor and staff interact. This is especially important if the selling doctor is continuing in the practice for any length of time.
4) Find your team of experts. In a business deal, this is extremely important to your future. Do not try to go it alone. A practice broker can help you locate the best opportunity and put you in touch with a lender. Your lender will be working with you for many years and will be intimately concerned with your on-going success. A good accountant who structures your deal properly will save you much money, and you absolutely must have a lawyer to examine or write the contracts.
5) Develop a good contract. This is one area where the sale of a dental business differs from the normal practice of selling a business. In most businesses, it is usually accepted that the buyer will structure the contracts. The seller's primary protection in the deal is the fact that he or she has the money in the bank. The buyer's protection is the quality of the contract. In dentistry, most practice brokers offer some form of dual representation where they represent both seller and buyer and customarily provide the contracts. I personally believe that the purchaser of a dental business should consider developing the paperwork and should also seek independent representation to confirm the valuation of the practice. The value of a dental practice is rapidly changing because of a demographic shift. Some practices are highly desirable and command a high value while others are virtually worthless. We are in a very volatile time; protect yourself.
6) Seek fairness. One of the fundamental values of our profession is that we respect our colleagues and will create win-win agreements. Some of those on your professional team may look to drive every negotiation in your favor. A non-adversarial relationship between the buying and selling doctor will pay long-term dividends.
7) Every agreement must be in writing. When you consider that this transaction will represent your future and will also represent the selling doctor's career achievements, you must recognize that this is an emotionally charged issue. In this environment, we sometimes say or agree with things that we are unable to fulfill. If it isn't written, it didn't happen.
Too many doctors delay purchasing their own practice because it involves so much money and the process is so complicated. If you take it step by step, you will be successful.
Those of you who are good at math will notice that there are only seven steps here while I promised you eight. The eighth step is the most important. Next month's column will cover "verifying the practice statistics."
Dr. Michael Gradeless, a 1980 graduate of Indiana University, practices preventive dentistry in Indianapolis with an emphasis on cosmetics and implants. He is an adjunct faculty member at Indiana University where he teaches the Pride Institute university curriculum of dental management. He is also the editor for the Indiana Dental Association. Contact him at (317) 841-3130 or email to [email protected].
