**The Hidden Dangers When Buying a Practice**
A MUST READ FOR ANYONE CONSIDERING PRACTICE PURCHASE
I posted about this topic several years ago but it has become more pertinent in recent times.
So you’ve been looking at buying a practice? Check out a few? Seems like quite a few other dentists are also interested and you have a bit of FOMO?
This is a common scenario playing out right now across Brisbane, Sydney and Melbourne.
However, do you have any idea what you are looking for? What are some issues that may not be obvious but will have a detrimental impact on you post-purchase?
Let me share some examples of things I have seen sellers doing in the practices I’ve analyzed for clients or otherwise seen or heard.
1. The practice for sale is zoned incorrectly. Not only is it important to make sure a Dental practice can exist in the location but to also check the number of Practioners allowed on site at any given time. This is particularly relevant to residential conversions. Recently there was a busy 5 chair practice in NSW for sale that was only zoned for 1 Practioner. These days it is very easy to check the zoning either online or through a phone call to the local council.
2. Seller owns multiple practices and misrepresents income from other practices as income from the practice you are buying. In one case I’ve heard of, someone bought a practice supposedly billing $1,000,000+ and was sitting practically empty a month after purchase with no patients.
3. Seller takes equipment (hand pieces, forceps, rotary machines etc) post sale so you have to spend money buying lots of things that should have been included in the sale price. Basically amounts to stealing.
4. Employment liabilities exist both with auxiliary staff and sham contracting arrangements with long term Dentists. This can be missed by lawyers who don’t have adequate knowledge of workplace laws and liabilities and unfortunately these liabilities are commonly transferred to the buyer.
5. Gross manipulation and fabrication of billings. This is fairly easy to detect if you know what you are looking far. The numbers tell a story and it’s hard to deceive with proper consideration of opening hours and looking at appointment books.
6. Healthfund fraud. There are dentists that exist that will check a patients rebates first and then despite the work they do, will bill through codes that maximize refunds. Basically they have close to 100% acceptance of treatment as they manipulate the healthfunds so there is little gap. This won’t be realistically duplicated by an ethical buyer.
Treatment that shouldn’t be done. Putting through fissure seals as composites. Buccals everywhere. Crowns when not needed etc etc.
7. Hit and run. Beware of practices with a single owner/dentist who has bought a practice that wasn’t billing much and suddenly increased the gross billings rapidly and is looking to exit within a year or two. Chances are they are engaging in one or more of the above things.
8. Lease clauses that allow other dentists to come in. A good friend thought he had an exclusion clause but didn’t. Next thing he knows there is a Pacific Smiles in his Centre offering discounts and patient inducements.
There are many other things to look out for to ensure you do not get ripped off when purchasing a practice. Make sure you do proper due diligence on all legal and accounting aspects too. Engage professionals experienced in commercial deals and don’t try to skimp and save fees.
I analyze many practices and help to detect the above. I also look at opportunities available and strengths/weaknesses of practices. We also give feedback on what price to pay for a practice as we have vast knowledge of practice sales all over Australia. In our ownership seminars we also teach attendees how to analyze practices for sale so they can avoid the above.
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Our next Practice Ownership Seminar is coming up in Sydney on the 2nd and 3rd of March 2019. Please register ASAP as early bird registration ends on the 31st of December 2018. We cover all these topics and more, the Sydney seminar has sold out in previous years so please register ASAP:
We also offer expert guidance in various areas of practice ownership. Please see the below link for more information.