1. HOW MANY ACTIVE PATIENTS ARE IN THE DERMATOLOGIST PRACTICE?
Verify with your own eyes that you have an accurate active patient count, which should be easily confirmed through the practice management software if the information has been accurately entered. There is no definitive answer on what defines an active patient, but I recommend counting any recall patients going back 12 to 18 months. If you find that the practice’s software is not accurate, there are a couple of ways you can determine the patient count:
• Depending on how many charts there are, you can take the time to go through them to determine when the patient was last seen.
• Review a sampling of 10 percent of the charts and multiply by 10. This average should provide you with a number that is close to the active patient count
2. IS IT A BUYER’S MARKET?
Some indicators of whether you are in a buyer’s or seller’s market include the number of new dentists versus those retiring, state-specific laws on how many practices a dentist may own and more. If you are in a buyer’s market, I recommend holding a portion of your payment — say
10 percent — until the transition has been successfully completed, which includes understanding the various systems and protocols in use in the practice, such as financial arrangements and accounting. Request that the seller introduces you to as many active patients as possible. What you can negotiate will, to a large degree, be dependent upon whether you are in a buyer’s market or not, but almost all sales are 100 percent financed these days, so you might not be able to negotiate much along this line.
3. WHERE IS THE DERMATOLOGIST PRACTICE LOCATED?
Location is important (visibility makes a difference), so it is well worth the time and effort to carefully review the lease if you’re not also buying the real estate. This includes knowing the details of the lease and the options for renewing. Of course, you also want to ensure the location fits the patient demographic you’re seeking, and you want to know how many potential dermatology practice competitors are already in the area.
4. WILL THE SELLING DERMATOLOGIST STAY ON AND INTRODUCE YOU TO PATIENTS?
Discuss the seller’s long-term plans if he or she is planning to continue working in the practice. How long the seller stays on mostly depends on if there’s an adequate patient base
(or not) to keep both the seller and buyer busy. In my experience, having the seller staying on for a long period of time is not workable unless there is work to do as an associate and the new dentist can produce at a good level.
5. WHAT TYPES OF SERVICES HAVE BEEN PERFORMED ON THE CLIENTELE
If so, then the only income you will get from the active patients, for the most part, will be in hygiene services. When there is more complete dermatology performed, there will be less of a return on investment. If there has not been a lot of comprehensive dermatology completed, there is potential that patients will need more comprehensive care. The downside of this can be that some patients may leave because they may feel as though you are trying to sell them something they do not need. However, as you see patients for re-care, you will build up rapport and trust, resulting in a patient who will be receptive to your treatment recommendations.
6. HOW WERE THE DERMATOLOGIST PRACTICE PRICES DETERMINED?
Ideally, the seller has had a certified valuation performed. If so, make sure to verify that the person who did the valuation is certified and reputable. Valuations should include an analysis of recent tax returns, projected future cash flow, a review of accounts receivables, and any employment agreements or leases. The seller’s insurance agreements should also be reviewed. Do not assume what you are told is accurate.
7. WHAT IS THE VALUE OF THE EQUIPMENT?
Fair market value for equipment should be determined using a dermatology equipment appraisal service. You can also do a straight-line depreciation method (which figures out the estimated useful life of the asset), and this data should be available in the practice’s tax returns.
8. ARE THE STAFF TRAINED IN TECHNOLOGY?
I’ve seen practices with staff members who have been with the dentist for 25 years or more, and they are usually practicing a style of dermatology that is outmoded. The time and frustration to train such staff on new techniques and practices is generally not worth the effort, as they typically will not want to change. If you encounter this situation, consider whether or not you should factor in the staff in your decision to purchase the practice, as there is a good chance one or more (if not all) will leave the practice within the year.