If you are considering dental practice ownership, you have likely thought about whether buying a dental practice or starting one from scratch is the right choice for you. Though there is no right answer, buying an existing practice is typically an easier road to ownership because the business is already functioning with employees, procedures and patients.

Buying a dental practice will give you a running start, but there is plenty of work to be done in the months leading up to your acquisition. Whether only considering ownership or already into the acquisition process, join us as we share our eight essential steps to buying a practice.

Step 1: Network, interview & hire a professional team (5-8 months before)

Assembling your team is an essential step as you begin the pursuit of practice ownership. This team will help you review the cash flow, clinical make-up, operations and anything else that you may want to perform further due diligence on with the subject practice. 

To ensure a smooth transition, we recommend the following professionals:

• An attorney to negotiate the terms of your acquisition
• An accountant to prepare your finances and take on the practice’s finances
• A lender to provide financing and guidance
• A practice management consultant to determine what changes need to be made at the existing practice and assist with credentialing
• An insurance consultant or financial advisor to evaluate and advise on business policies, retirement plans of the subject practice, and medical benefits

Other professionals that could add value depending on your circumstances are:

• Commercial real estate brokers
• Business brokers
• Mentors
• Marketing consultants
• Equipment supplier

We recommend hiring professionals experienced in healthcare acquisitions to bring industry-specific expertise to your acquisition process. If you need help finding these industry experts, visit our Build Your Team page to get connected with experienced professionals.

Step 2: Review personal financials & budgets (3-7 months before)

A dental specific CPA, lender and/or financial consultant can support you through preparing financially to purchase a practice.

Analyzing your expenses and debts to determine how much you will need to earn from your practice, reviewing your personal financial statement for assets and liabilities, and helping you with any credit related issues may be some of the various components any financial professional could look at further with you to help you prepare for ownership.

These elements will also help inform what size practice you should look for, as the more personal expenses you may have the more profitable of a practice you may need to find.

Step 3: Find your desired practice (4-6 months before)

Once you have a clear goal and a team to support you, it’s time to locate the practice you will own. Decide on your ideal location(s), network with transition professionals that may list practices,  and tour practices that are in the market in that area. With the help of your team, review the patient demographics, financial statements, staffing and other necessary aspects to ensure the viability of each option.

Once you pick a practice that seems like a great fit for you personally and professionally, work with your team to submit a letter of intent to signify your plans to purchase the business. Once a letter of intent is agreed upon, that typically triggers you to conduct further due diligence to review both clinical and financial aspects of the business. Ensure the existence of patient charts and condition of equipment and review the historical financials one final time. You will also want to sit down with the owner to discuss any questions or concerns you may have.

As your due diligence proceeds with success, work with your team to start to negotiate the terms of the final purchase agreement with allocation of purchase price, contingencies, warranties and representations, and incorporation. Included in this step is lease negotiation or real estate purchase.

Step 4: Create your legal business (2-4 months before)

Once the purchase agreement is completed, you will need to begin setting up the legal structure of your practice. This essential step includes applying for tax and employment identification numbers and creating business-specific banking. This ensures you have personal legal protection. Your CPA and attorney play the largest role with helping you select this structure.

Step 5: Obtain insurance (1-3 months before)

Insurance is essential to protecting you and your practice from potential liability lawsuits and loss of use of equipment. Your insurance consultant can help develop your practice’s insurance plans and assess the types of corporate insurance coverage you may need.

We recommend property, workers’ compensation, disability, overhead, liability, and malpractice insurance policies. Disability insurance is especially necessary as a dentist’s hands’ are your most valuable asset, and any serious injury or ailment would prevent you from working.

Step 6: Credential with insurance companies (3 months before)

Your practice will not be able to function properly and efficiently without being able to transfer the existing practice’s insurance plans to work with patients’ insurance companies.

Insurance credentialing is a critical aspect of preparing your practice for transition. This multi-step process involves deciding which insurance companies to enroll with, completing provider applications and negotiating fees.

A practice management consultant can help with this potentially complicated process. This process will vary state by state and according to the insurances the practice currently accepts.

Step 7: Set up business banking, credit card processing and other business operation services (1 month before)

In the final month leading up to your transition, work with your lender and bank to get ready to operate the business functions of the practice to run efficiently. Elements like setting up bank accounts and methods to pay vendors, take deposits and manage your finances to move money and other basic financial services need to be set up. Being prepared allows you to stay in the chair with patients and work with your new staff from day one as opposed to taking time out of your day to set up these services.

Performing a credit card processing review can benefit your practice in many ways, but it can also be very complex. We recommend to work with your lender or bank to review this in preparation for migrating this service to your new entity that will own the practice.

Step 8: Finalize transition (Within the final month to transition date)

In the final stage of your transition to practice owner, you will want to make decisions about how the practice will change and begin integrating yourself into the practice. This begins with being introduced to the staff and possibly hiring additional staff if needed. Additionally your team will help you prepare a team handbook and/or policies.

You will also need to work with your equipment representative, supplier, and marketing experts to make final decisions about what (if any) changes need to be made. We recommend co-treating with the seller for a period of time if allowed. This will also allow you to build relationships with the current staff members to smooth the transition.

Congratulations, you now own a dental practice!

After completing these steps, you are now a practice owner. It is important to note: this is just a guideline for the acquisition process as each circumstance is different. This is why we highly recommend consulting an experienced team who can help with your unique purchase.

Whatever you do in your pursuit of ownership, we recommend you don’t wait until the last minute to tend to the business details. Delaying work on these details can prevent you from being fully present as you begin patient care.

At Panacea Financial, we are excited for you to take this next step in your career journey. If you are looking for dentist-specific financing options to acquire a dental practice, we are here to help and look forward to the day you step into your new practice as owner.

Panacea Financial, a division of Primis. Member FDIC.