When considering the purchase of a dental practice, the dentist must perform the required due diligence. The dentist, his/her accountant, and lawyer should educate themselves by doing due diligence before ever signing a letter of intent. The potential buyer should always ask for the following reports:
• A detailed description of the office including whether or not the current seller owns the underlying building
• A statement that describes whether the practice owner owns or leases the equipment that is being sold
• A description of any contractual relationships of the patients, employees, or insurance companies
• Profit and loss statements, balance sheets, and income tax returns (for the last 3 years)
• A breakdown of practice expenses (Practice Profit and Loss)
• Percentage of collections
• A production and collections report broken down by each dentist and hygienist
• An accounts receivable and aging report
• The total number of active patients and the number of new patients per month
• A list of referring dentists if the practice is a specialty practice
• A report on how much revenue is based on insurance reimbursements
All of these practices will be particularly important when it comes to buying and running a dental practice. As many business owners will know, organizing the finances can be one of the toughest aspects of this job, so making sure that you have all of the relevant help will be essential to your survival. The points that have been listed above could be considered as a starting point for the person looking to make this purchase and following these step by steps can help to make sure that you have everything in order before making this huge leap in your career. Of course, this work will still have to be continued throughout your daily operations, so taking the time to see what you need to complete should be in your best interest.
Author(s)
Stuart J. Oberman, Esq.
Stuart J. Oberman is the founder and President of Oberman Law Firm. Mr. Oberman graduated from Urbana University and received his law degree from John Marshall Law School. Mr. Oberman has been practicing law for over 30 years, and before going into private practice, Mr. Oberman was in-house counsel for a Fortune 500 Company.
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