When you make a decision to go into private practice as a dentist, the first question you may ask yourself is whether you want to build a practice from scratch or buy one that already exists. While the latter certainly has great benefits, there are actions you must take to ensure the future of the practice. These financial processes help to minimize problems and promote financial security for your practice.
Initial Assessment
As you considered purchasing this particular practice, you likely went through a checklist of concerns to get a sense for the way that the practice is run and how you might fit in as an owner and practicing dentist. This next assessment is a more in-depth version of the same kind of analysis. When you go through the standard operations of the business, ask yourself the following questions:
- What is the condition of existing equipment, and when will it need to be replaced?
- What is the system for billing patients, and is it up to date?
- How does cash flow through the business and do you have enough working capital to get bills paid as you adjust?
- Is the system for payroll and benefits efficient and well-managed?
With the answers to these questions, you can start to build a to-do list of concerns and problems that need to be fixed.
Financing
An existing practice is not the same as a new practice, in that you usually do not have to provide the capital to establish premises and purchase equipment. However, you will need financing to make sure that the practice can stay afloat. There are two areas you should consider related to financing: capital you bring into the practice, and the practice’s current profit centers. Your ability to keep the practice thriving depends largely on your ability to maintain current profit centers or build new ones. For example, if the practice generates a lot of revenue by performing root canals in-house but you would rather outsource this type of service, you will need to replace that revenue with something else. You may consider loans to make up some of the initial shortfall, but you should aim to keep debt to a minimum.
Accounting
The acquisition of the practice is also an excellent opportunity to make sure that the accounting systems are all current and also efficient for the size of the practice. This is a good time to hire an accountant who understands the kinds of obstacles you face working with patients, insurance companies and others. If patient files are out of date, make a plan to get caught up on payments from patients and also to any creditors for the practice. Remember that tax time can offer some unpleasant surprises, so ask your accountant up front about your expected tax liability and whether or not the business is currently on target.
Patient Retention
The best part of taking on a current and thriving practice is that you do not have to build a client base from scratch. However, your ability to keep the existing patients relies heavily on your ability to convince them that switching to your care is an ideal choice. Notify patients directly that the practice is about to change hands. Encourage clients to contact the practice directly for questions. Remind loyal customers that they may still be able to see the same staff members (dental hygienists, assistants), assuming that you are not also facing significant staff changes. Do some research into the types of insurance that most of your prospective patients have, and create preferred provider contracts for those insurance providers.
Revenue Generation and Marketing
Continuing to generate revenue is the best way to ensure that your new practice will survive the initial switchover. Hire a financial advisor who specializes in dental practices to provide you with advice about managing profits and investments. Do not forget about the power of marketing in the media that is most relevant to your patients. With a little initial investment, you can build a marketing strategy to generate new patients to make up for the ones who do not transfer.
Acquiring a current dental practice can be an intimidating prospect. With a plan in place to manage the finances of the business, you can reduce waste, improve efficiency and keep your new organization running for many years to come.
If you have any questions, contact Erick Cutler at ECutler@GPPcpa.com or 214-635-2541. To learn more about Erick, you can visit his bio or Google+ page.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
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