If you are a reader of the website Dental Town, threads like this which decry the rise of corporate dentistry are common place. In many industries consolidation of companies has become the norm, but there are lessons to be learned in how corporations buy dental practices that any private buyer can use.
Our dental consulting firm has a reputation for selling dental practices, but we also help people buy dental practices almost as often as we help people sell dental practices.
With that experience, here are some of the common mistakes we see buyers make:
Dental Practice Advisors: Waiting too Long to Hire
Look, I get no one wants to spend a lot of money on dental practice accountants and attorneys, but transactions are complicated.
With the rise of certain websites, some buyers figure these things aren’t that hard, and they take a DIY approach to buying a dental practice. The buyer thinks they have put together a good deal and it’s only when they bring in professional dental practice advisors at the end of the process that they find out the great deal they had wasn’t all that great after all. The problem at this point is the seller already thought a deal was in place and now they get spooked because the buyer wants to come back and change the terms.
Dental Practice Advisors: Hiring the Wrong Ones
There are a lot of great dental practice accountants and attorneys out there, but there’s also a lot of them who seem to enjoy blowing up deals by demonstrating how smart they are in the process. Sure, they’ll let you buy a dental practice, but only if they can defeat the other side in the process. Buying and selling a dental practice is an emotional thing.
You need advisors who not only have experience with the business you are buying, you also need dental practice advisors with good temperaments and integrity to spare.
Wait, I Need Financing to Buy a Dental Practice?
In certain businesses a seller would expect to take some of the purchase price back in the form of a note payable, but that’s not always the case.
Make sure you are talking to banks early in the process to know what type of financing you can get and what your limitations are. It’s never a good thing to find out you might be limited after you make an offer on a dental practice that’s for sale.
Nickels and Dimes
I’m not saying the price and tax allocation of a purchase is not important, but we’ve seen buyers walk away from deals over really insignificant sums of money. The business might be perfect for them, but they don’t want to “overpay”.
The House Hunters Effect
There’s a show on HGTV called “House Hunters” that chronicles people going out and buying homes. It’s always striking to watch people walk away from a perfectly good opportunity over something cosmetic that can easily be fixed.
Buyers of businesses do the same thing. Some will obsess over the seller’s expense structure when many of those expenses can easily be fixed or they turn away a perfectly profitable dental practice because it doesn’t have the latest and greatest dental practice technology.
Buyers need to keep in mind that selling a dental practice is usually an emotional process for the seller. They are selling their life’s work and having a happy buyer is sort of a referendum on how well they ran their business. Buyers that exhibit a nervous energy or nitpick little things tend to irritate a seller.
So why do the corporations do a better job of buying? They are decisive. They move fast. They don’t obsess over minor details. Look, most sellers want to sell to a private buyer, so if you treat the transaction the same way a corporation would, you’ll win the deal.