If you are looking to buy a dental practice, there are some important considerations you will want to pay attention to during the process. Buyers and their brokers can easily get distracted by the purchase price and fail to focus on other things that can be equally important or even more important. You are buying a practice and the terms of that purchase will have powerful consequences for the future success of the practice, not to mention your future financial situation. So, if you are planning to buy a dental practice, do your due diligence. Yes, the purchase price will be, of course, important, but do not get so distracted in negotiating the purchase price that you fail to account for other critical terms that will be established during the buying process.
Important Terms When Buying a Dental Practice
The purchase price of the dental practice you are looking to buy is often at the forefront of everyone’s minds. Remember, however, that other terms of the purchase can help you bargain with the seller for a lower price. For instance, payment terms can impact the amount a seller is willing to accept for the purchase of the dental practice. A seller may be much more willing to accept a lower price for a cash buyer. Think about it. Cash up front has some major benefits over being paid in installments over time. Cash purchases also tend to have beneficial tax consequences for the seller. There is also the lowered risk of not being paid in full for the purchase.
In addition to the purchase price and payment terms, you, as a potential buyer of a dental practice, should be thoroughly aware of the liabilities and accounts payable of the practice you are looking to buy. This goes right to the heart of a practice’s value. If there are notable liabilities of a practice, you will likely want to request a decrease in its purchase price to counterbalance them.
The purchase terms pertaining to the practice’s accounts receivable will also be important in the buying of a dental practice. Will you, as the buyer, be purchasing the accounts receivable in the practice along with the practice itself? While trying to calculate the value of the practice’s accounts receivable, it is important to attempt to do so. The seller may have boosted the sale price of the practice to reflect the projected amount of the accounts receivable and so verifying that this price increase was merited will be worthwhile.
Be sure to also check the terms of purchase regarding whether supplies and equipment will be included in the purchase. If yes, double check to see how the seller has valued these practice assets. It is typical for the seller to provide the buyer with such supplies at customary levels. Without such an arrangement, the buyer of a dental practice will need to account for substantial start-up costs as these supplies and equipment are critical to the practice, but costly.
Dental Law Attorneys
Looking to buy a dental practice? Let the trusted legal team at Mahan Dental Law help ensure that the process goes smoothly and that your best interests are protected. Contact us today.
