Episode 113 - How to Find a Dental Practice to Purchase - Brokers: What They Are and What They Aren't
In this episode of The Dental Amigos, Rob and Paul discuss the logistics of finding a dental practice to purchase.
The Amigos start this episode by explaining the importance of bringing a broker onto the buyer’s team as early in the process as possible, and then they focus on how to leverage key networking strategies to help find a dental practice. They propose a realistic timeline for potential buyers to expect when buying a practice and expand on how long buyers should anticipate each step of the process taking. Finally, they caution listeners on different reasons deals can die and ways to prevent it from happening. See below for a full transcription of the episode.
Welcome to The Dental Amigos podcast with Dr. Paul Goodman and attorney Rob Montgomery, taking you behind the scenes of the dental business world. All the things you didn't learn in dental school, but wish you had. Rob is not a dentist and Paul is not a lawyer. But since Rob is a lawyer, we need to tell you that this podcast is for informational purposes only and shouldn't be considered legal advice. listening to this podcast does not and will not create an attorney client relationship. As is always the case, you should formally consult with legal counsel before proceeding with any legal matter. Learn more about the dental amigos at www.thedentalamigos.com. And now here are the dental amigos.
Rob Montgomery 0:40
Hello, everyone and welcome to another episode of The dental Amigos Podcast. I'm Rob Montgomery and I'm joined as always by the head Nacho himself, Dr. Paul Goodman.
Paul Goodman 0:48
Great to be talking Rob.
Rob Montgomery 0:49
Paul, it's always good to be in the room with you. Here we are, in season four, buying a practice episode 2
Paul Goodman 0:58
Yup, helping people make the biggest decision of their career and / or life.
Rob Montgomery 1:02
Yeah, that's right. So you know, we got into some general things to look for and what to avoid in, in episode one of the season and this episode, we're going to talk about what in some respects is a fairly important topic, which is how to find a practice to purchase like you've decided that you're going to buy a practice right now. Now, what how do you find that? Do you just Google you know, dental practice for sale in my town and suddenly all these great options of practices exactly like you want pop up and you have the pick of the litter as to what which one you like.
Paul Goodman 1:36
What I'll kind of jump off and say is it even I was using, you know, I bought into my dad's practice, we bought other practices later. The myth is it's a lot easier than you think. I think it's because the real estate world is so present in everybody's mind from even when I was a kid seeing for sale signs when I was in fourth grade to the MLS is to the people buying houses. And I think one of the things I just want to share in the how to find is there is no real database that you can just click through and see all the practices for sale. It's much more of a old school for our listeners, Oregon Trail, or wild west world, even though there are some good sites and I'm a broker for United Dental Brokers of America, and we have a site and we have the practices listed there. But it's gonna be we're thinking about this for a second Rob, you said, Hey, I'm a dentist, I want to practice in New Jersey, I want to find all the practices for sale in New Jersey, it would be quite a process. Even the broker deals right, you got to find the websites that might exist. So I think kind of the, the two ways, you know, we'll we'll talk about as broker deals and non broker deals in trying to find a practice, but I'll say, dental nachos, mantra is - ABC always be connecting. So if you're listening, and you want to buy a practice, start connecting with people that know about practices as early as possible, because they will look out for you. But if you could show up with you text me and say, Hey, Paul, remember how he like didn't go to any of your CE courses and didn't pay attention or emails, but I need to buy a practice tomorrow. I'm not always willing to just jump into action, for that person. So it's a relationship world, right? And, you know, broker and non broker deal. I think it's key to start developing relationships with people connect people in this world.
Rob Montgomery 3:13
Oh, absolutely ... If I have somebody who is reached out to us in the early stages of the process, and they ask us that question, you know, I'll tell him, these are the four or five brokers in the area that are have have the inventory, you have to get to know them. Don't just search their website, don't just send them an email, get to know them, you know, let them know what you're looking for, find out what they have. And if something becomes available, you want to be at the top of the list for that call. Because as you said, this is not like the real estate world. It's not like there's some central database of all practices for sale like there are for the most part with with homes, you have to really just pound the pavement. And again, here we are in a seller's market. So if you're a buyer and you're looking for something good, you really have to do what you can to make sure that you're the you're getting the first word when something is is available.
Paul Goodman 4:09
People think, if you remember, I mean, I'll share also, just to kind of continue to share how different is and I've never sold real estate, but my assumption as a real estate broker, a real estate agent is not that interested in someone about to buy a house wants to buy a house in the next three years, right? They're kind of living in the moment, I'm sure they would keep them for their database. I'm sure they would think about them. But I know probably three good dentists are going to sell their practice in the next three years. They don't have any listings right now. But if I know someone who I meet at a networking event, and they say, I want to be in Center City, Philadelphia, and they're a nice person, I'll be like, Okay, I'll keep you in mind. Sure. And then I think that's the key point that you know, you have to get your face out there. I was actually saying this for the my job connect world, Rob. But you know, when you're dating to find someone to marry, you got to put yourself out there you gotta go to the things then when you're married. You don't have to go out to the bars as much right for those times you want to say have to go out to the coffee shops as much so when you are a dentist, looking to buy a practice, you got to put yourself out there as much as possible. See events, networking events.
Rob Montgomery 5:08
Yeah. And it's, you know, and it's a challenge. I like a lot of the advice, I'm sure you would give somebody who's looking for a job. It's the same, as you said, same advice you'd give for somebody who's looking to buy a practice even more
Paul Goodman 5:20
important, because it's that magical connection that some supply rep at a conference goes, Oh, you want to be in Conshohocken? One of my clients has told me they're going to be moving to Utah. Right. Right. And let me connect you, Brian, you know, those are, I think, you know, you were kind of start off that way. You're off track, as you know, broker deals, you recommend people looking and connecting with brokers, both as people and virtually? All right, so they're people kept the same up, Rob, it's funny, like, Why didn't you tell me about that practice you had for sale? I go, you think I was gonna remember you on some random day in January? You gotta follow my emails, right? Yeah, unsubscribe from these emails, like, that's where like, never unsubscribe from an email or texting when you're doing these big picture decisions, right, you know, create a Gmail account that's just for these, because that's the only way us brokers can get the word out for this stuff.
Rob Montgomery 6:11
Right? Yeah. Well, I think, you know, too, it's like, I think we're in an age, at least, you know, for now, maybe it'll swing back a little bit, especially, you know, post COVID, you know, where people just aren't wired to be in, you know, one on one in person or in person settings. You know, like, that was very much the case with, you know, with with legal continuing education to like, everybody's like, Well, you do it virtually, like, yeah, you can, there's a lot of things you can do virtually. But this is one thing that if you are a potential practice purchaser, you're in the market, I don't see how you could afford to do it virtually, you know, and I think that there is more, you know, certainly the in person opportunities have come back, they've changed a little bit, but, like the days of walking around a showroom floor, you know, a giant dental meeting, that probably wasn't going to be the thing anyway. I mean, I guess you could meet a few brokers that may have tables with those and, you know, make that the start to that relationship. But I think, you know, what you're talking about are, you know, local, dental societies, you know, county state, you know, those, you know, basically the dental community.
Paul Goodman 7:26
And the reason why those are so great. Rob, I just lectured at this, um, Normandy farms was like lecturing at a Hallmark movie, they had all the nice lighting and everything. And it was like 50 people in the Montgomery Bucks County area. And if I was young dentists that want to live in the Montgomery Bucks County, I would go to that I would take off work because they were people 45 and 55. And I would sit next to him at lunch and just say, what's your practice? Like? Tell me more about it, right? And they keep you in mind for stuff. Because the reason why you local is, yes, it's great to go there. I love the dental Success Summit with Dr. Mark Costas. But if you go to Arizona, and you want to practice in Philadelphia, there's a low chance that there's going to be a bunch of Philadelphia dentists sitting there. But if you go to a local event near Philadelphia, this is not rocket science, you're going to see people who can make it. And then plus, Rob, the sponsors of these are just magical. Because whether it's an implant sponsor, or banking sponsor, or anyone, they also know the local market, and be a real person to say, Hey, I'm been an associate for a few years of next year, I want to buy a practice. Do you know anybody?
Rob Montgomery 8:24
Right? Well, I think that there are two different missions, so to speak, you know, there's the Costas thing for for business reasons and, and maybe clinical reasons. But then, you know, as you say that the local stuff, it's invaluable. And you meet the people, as you said, in a previous episode, that might be a good idea to just go out and see somebody's practice, just how you see different practices, you know, so if you meet three or four dentists, you go out, you look at two or three practices, it gives you a better idea what their practices are like, and you know, the demographic that you're talking about, where you've got a bunch of 45 and 55 year olds, or whatever in the room, these are people that are going to be selling their practices soon, or they're also people who know people who may be selling their practices. So you know, and, you know, as dentists, I think that the challenge that that you guys have professionally is just that. So often you are on you know, Dentist Island, you know, you've got your practice and it's you and your assistants and your hygienist and all your your team, but you're not interacting with dentists in you know, in the course of your day, you know, you're not picking up the phone talking to other dentists, you know, you're not seeing dentist in your office. You know, there aren't opportunities to encounter other dentists unless you really put yourself out there. That's
Paul Goodman 9:43
right. You could visit dentist and you value getting back to the brokers be a real person to brokers and show interest in their practices. I can share just great tips when I have a practice for sale and I know we have one in montgomery county so I know there's many dentists want to know about montgomery county and this is what I this is the way you interact with broker. Oh, hey, Paul, you understand practice for sale, montgomery county, it fits the number of operatories and the revenue that we signed the NDA and connect with the dentist, right? I would love to talk with that dentists on the phone. This is what you don't do. Hey, Paul, could you tell me I knew how many new patients they had of April 2021. And I go, what are you going to do with that information? I don't know. Right? Somebody told me they asked that question, right, show interest and be a real person in meeting these people. Because I don't know how to find a practice to purchase is to give yourself a lot of options in context of different practices, right. And it's frustrating to me, as someone who went around with one of your close friends years ago, and we looked at like 15 dental practices, I spent days driving around, look at these practices, and I learned something every single one, even the ones I wasn't gonna buy. So it doesn't mean you're going to lead on a seller and say, I want to buy their practice if you don't want, but if it's if it's in your location, and it's reasonably close to what you want, show interest in those brokers practices, because the magic Rob, is they're going to show you more practices later. Right, when you do that.
Rob Montgomery 11:03
Right. Right. Yeah, it's not a it's not complicated, right? Well, I think, you know, in terms of just kind of like a little bit of a follow up or a detour, I guess, really more than anything, you know, like, I like, what, what Cliff Moore does to like, it's a cool thing, you know, he sponsors, nights, and yeah, where he gets out and meets people in the in the community, you know, and I think it's just being, being in tune to those things. And if you see those opportunities, you know, on social media, don't just let it exist on your phone, like, you know,
Paul Goodman 11:34
do something, you know, just for the time of this recording, February 16 19th, and chestnut, a totally free networking event. So we will get people together. So when an associate says, I'm too tired after work to go, Paul, I don't really want to go. And then three months later, they say, can I see that practice there? It doesn't mean I won't let them see it. Rob, it's not like I'm spiteful. It's just that I know, the mentality and the mentality of like, what Cliff does, the people come out to those things are usually the ones that are good buyer, candidates. My job is to not is to the success and sanity of the seller. So it's a relationship based world, right? So it's like, you know, come and meet some people. Let me see how you interact. I mean, a lot of times, the broker is protecting the seller from a lot of stress. Right? And, you know, I always want to give the seller as many options as possible. But when it says how to find one, it's to get brokers on your side as people.
Rob Montgomery 12:23
Yeah, yeah. And I think that that's a good segue to our next set of topics, I think, which is, you know, the, for sale by owner, I guess there's really three, there's the broker practice, there's the broker sale practices, the seller, who wants to, you know, for sale by owner. And then there are the unsolicited offers, right, you know, where, you know, there are certain consultants and I think, you know, the share practices, folks are used, I've always been big proponents of this. And that's sometimes that's what you got to do, you know, you have to send out 300 letters to try to find somebody who is interested in selling their practice. The only downside with that now, again, it helps you find these off market deals, which can be good. But you know, in my experience, you just have to be ready for a little bit of pain, possibly with that, because you may be approaching somebody who hasn't seriously thought about selling at that time. Two
Paul Goodman 13:21
things I agree with you there, a hasn't seriously thought, and B is very emotionally attached to that practice, and very hard to ask them the hard questions about their baby. Right? Yeah, it's like, I've seen this through other deals where people say, I thought this non brokered deal was going to be good, but it's just remember, like you had said, if they have the right advisory team, usually they're probably not recommending they sell the practice by themself anyway. So this is a little bit of a chicken and egg thing, right? Sure. You know, your lad, and decayed and Rob Montgomery, they're probably gonna say, Hey, this is a long process. You want to work with a broker who knows what they're doing? Here's three that know what they're doing. Our suggestion is you work with them, it's probably going to make the deal go smoother. It's probably going to make your life he was obliged to say, they don't have a good advisory team, and they're answering all the questions themselves. I'll take dentist, the dentist, I would not say to a practice owner, a lot of things I've said to a broker of that practice owner to get the information I need, because I literally be worried that hurt their feelings.
Rob Montgomery 14:17
Yeah. Well, I mean, it's the same thing again, in the legal world. A lot of times you have lawyers to act as buffers so that the parties don't have to have these difficult conversations that can be relationship changers. Yeah, sure. But even but, I mean, again, some of those talked about a moment ago, though, but it's beyond just like the difference between a broker and not for practice, again, people that haven't even thought about actively offering up their practice for sale who are now for the first time thinking about because they got a letter. I'd say, again, it's not a bad thing, but again, just as far as your expectations. There's sort of like a process here that the seller needs to go through, which includes like, I want to sell my practice, right and I And like they thought about it, they've changed their mind, they've thought about what they want for they thought about what the terms are. And then, you know, as they've kind of worked through that, they finally get to the point where I guess, let's put it out to market. If you know, they haven't thought about it until they received your letter, you you as the buyer, you should kind of get ready for like a bumpy process here, as they kind of go through that, that thought process. And I've seen situations where deals like that, and I've said this to the client, like, unfortunately, what you what you asked for was good, these were reasonable requests in the in the document in the deal, but this person might need this, you know, they have to see this failure before they're ready to do this. And then the next time somebody asked for the same thing, chances are, it's gonna get done, you know, but you had to sort of be the first one in and that's, that's a challenge.
Paul Goodman 15:53
You also had mentioned, we're talking about the deals dragging on which we'll get to in a second hour. This is kind of the, the other side of that coin is the total failure to launch Matthew McConaughey movie from back in the day Failure to Launch. So what I mean by this is, US brokers spend a lot of time being like, can we have your tax returns, we have this, we need this, we need this, we need this. And I think they do better giving it to the broker than they sometimes do this potential buyer. So the failure to launch part could be you know, I do buyer coaching this. So I got a I got a deal on the table. Paul, they want to sell the practice for $700,000. Okay, good, where the tax returns, I haven't gotten them yet, right? I go, I don't know if this thing is ever going to launch. Because if they want a price, and so I just think, I don't know, if I'm being not clear, but like the DIY, sell it yourself, there can be a real information challenge to get across to the other side of the table.
Rob Montgomery 16:44
Absolutely, absolutely. And I think, as you said, and you know, from our perspective, without fail, those deals drag on, they just they take a lot longer. For the reasons we're talking about, you know, you've got a seller that doesn't really have an agent to help, you know, as the facilitator to exchange information. You don't have an advisor who is helping them to set expectations. And you may also still have somebody who hasn't totally committed to selling their practice at this time. And you know, and for us to like when you and then you throw in, like the perfect storm, is they don't have a lawyer and or CPA on their on their team, who has experience in these transactions. So now you've got this seller out there without a broker, without an experienced lawyer or CPA in the dental in the dental space, who's trying to like, figure out what they think is reasonable and not without any context as to what is normal in these transactions and what's normal in the market?
Paul Goodman 17:49
For sure. And I think yes, it's the alcohol, the backout factor, and you remember this, you've helped with so many things, you helped Jephunneh with a deal where the seller just decided not to sell his practice after we'd done a lot of work on this practice. So, you know, if the back out factor, both parties can really back out of deals, right? I mean, there's no there's no laws that say they can't back out, right? But you get a sense of the momentum of the sellers, real desire to sell when he's interacting with a broker a lot and sometimes they can really just trick you along the way by saying hey, we're just stopping this and I've seen you know, one things we can share with don't become laters like Don't quit your job too soon, right? Yeah, I've seen associates messaged me on Facebook. I quit my job. I'm gonna buy this practice. I go oh, did they accept it? Otherwise they go What's that? I go
Rob Montgomery 18:37
you should have quit your job. Yeah, right. Oh, boy. You know,
Paul Goodman 18:40
so I just think that point about finding a practice to purchase broker versus DIY Of course this is your big decision keep all options open just understand what each route looks like.
Rob Montgomery 18:51
Yeah, then lucky and if you know kind of what to expect and you'll know when something's not normal, right? But I mean also you know, when you look at those DIY deals, they do drag on and sometimes it just like any deal, but they seem to me to disproportionately you know, fail any deal that drags on for too long is is now in peril. Yeah, I mean, say this you know, we've clients of ours have heard us say this to Him, but I'll say it here you know, to the audience time is the killer of all deals, you know, and Paul, how many times have you heard me say that you know, so. So anything that any kind of situation that for whatever reason, things are dragging on that will broker no broker, but again, as we talked about the fact that no broker on brokered practices tend to drag on longer. That is, that's a recipe for for a dead deal.
Paul Goodman 19:45
Yeah, it's a I think that um, you know, when you're looking for a practice brokers represent not only just that practice, but also future practices, too. So it's just a key point that the random self force sale by owner, you might connect. And that could be your practice, right? Sometimes you can just go down a rabbit hole of time. And I, you know, and I say this too, it's like you don't really have the bandwidth to look at that many serious deals at the same time. So you want to be cognizant buyers of your own time, right? You're I know, you've worked with people for six months, and then it just didn't go at all six months last of looking at other deals and things like that. So
Rob Montgomery 20:25
well, there's a there's a cost to that, too. I mean, it probably doesn't, it's probably not a legal cost. Certainly not without initial shopping. But, you know, look, you're you should have a CPA, right, helping with the process. And, you know, it's not like you go out and look at 15 different practices and keep coming back. Like, I got another one, you know, like, I guess you could but but
Paul Goodman 20:43
I mean, you see, because you see it basically takes over your life when you're buying a practice. I mean, takes over everything you do you wake up, you think about it. You know, I think that that's why the finding part has to start earlier than most buyers think. Yeah, I think they just think today's the day I'm going to look with some brokers and I'll have some four practices available.
Rob Montgomery 21:03
You're giving too much credit. Yeah, they are Today's the day I'm gonna go online and search, you know, for a practice for sale on a national broker website. And then yes, within three months, I will be the the proud product.
Paul Goodman 21:16
I'm glad wherever you say, like, deal. I have dealt with some very unique brokers, you know, I think, won't say his name for our podcast, but you probably won't by his first name. He tried to sell me a practice that the person didn't want to sell it was it was like a whole, I felt bad for myself. I goes, I go, Oh, there's a million dollar practice, right? Where you want to go? Oh, thanks. Broker, one name guy would start with doctor and then he goes, nobody wasn't for sale. So what I'm sharing is I totally get why brokers get bad rap. I totally get it. But when you work with good brokers just ask trusted people who are good people, because the people who work with good brokers buyer's or seller's don't know how you could do it any other way. Yeah, you know, so yeah, I totally the broker world has some characters, but just look for good people. Yeah. And then if, you know, don't also, you know, what you say, Rob, is, when you're finding a practice tool, representation brokers represent a lot of danger. You know, should you have an attorney? Look at NDAs? The answer is probably yes. Right, just willy nilly start signing NDAs that you're gonna give 3% of purchase prices to people? You know, it's,
Rob Montgomery 22:20
it's cleverly disguised. So realize what you've signed and what you've what you've agreed to. That's a great point.
Paul Goodman 22:25
And I think it's important, it's the time to devote when you want to start looking for a practice as a time to develop relationship with an attorney for two reasons, one to protect you from it. And also, you guys are great connectors to
Rob Montgomery 22:35
Yeah, well, I'd say it's everybody, you know, I think it's just get yourself out there, as you said, you know, you want to get a lawyer on board, you want to get a CPA, you want to network with with people in your community, you want to meet the brokers that are out there. And you know, this is this is not, you know, if you truly want to have, you know, the maximum, you know, a number of options, or put yourself in the position to succeed, you know, in this in this endeavor, I think you really you have to, you have to run down all these these these possibilities, right? I mean, I would say, go if somebody said, What's the best way to do it? Okay, here you go. You go to networking events, and I said, you, you engage with dental focus CPAs, and lawyers, you send out letters, you talk to brokers, right, right. And you search websites, you do all of it, right? And one of those things will hopefully yield,
Paul Goodman 23:35
you know, that start talking to banks to get financing approval, because they're good connectors to one of the bankers. We both know, I was waiting to go into my office with a deal in like, 2018. And it and he's like, What about one of my clients and they bought the practice, just like this. What about this? He goes, Oh, I see have a practice in the Kensington area. I think I have someone who is looking at practice, and he owns that practice now. So yeah, you know, the people who are playing this game every day. And I think, you know, you throw us here, it's like, dental focus. People play this dental focus game of basketball, and you start using advisors outside of it. It's kind of like they came dressed up in a baseball catchers outfit to play this game with everybody else. And you know, it just doesn't fit. It doesn't mean that they don't know, accounting outside of it doesn't mean I'm sure you say they don't know, law. But, you know, I'm just trying to pick an example of I don't know, maybe family laws a whole lot. You just said, Hey, I'm Rob dental focus attorney. I'm here to play with you guys today. Right? Yeah, it's a ROB, you're not breaking in these courts all the time. Right. Rob, you don't know. And I just think there's nuances to all these dental deals, get people who are doing them all the time with it with the added benefit of a they know people in the industry. And B they know what they're doing when you get to the deal.
Rob Montgomery 24:42
Yeah, yeah. And I think that that's a great point, Paul, and I think it sort of raises another another issue, which I think we can talk about before we wrap up, which is, you know, having these people and these relationships lined up so that when you find that practice, especially in a seller's market, like You're ready to, you're ready to move and execute, you know, if, if you find the practice and then you start shopping around for a CPA to get help with, with the due diligence, you start shopping around to find a lawyer to help you submit the loi, and then you're going to start asking for and trying to find banks that are willing to do these loans. By the time you've kind of execute on those three items. The practice has probably been sold, right else, right.
Paul Goodman 25:25
And it's probably you know, the advisors don't really want to jump into a half deal anyway. It's not that they wouldn't, but it's just better when they're there from ground zero managing people's expertise. A lot of times, they could have done things to save you money, time or stress to start with, right, right. No, I actually am going to start doing this route. Because I'm getting I'm getting older in Karachi here. But like, I'm going to like, like for someone to be able to really gauge a practice with us. I'm going to like make them check a few boxes, right? Like, do you have a bank relationship? Do you know what attorney because what happens is somehow we miss this step, then three quarters away through the deal. They go. Do you know what attorney? I go? I knew Rob, like, seven months ago, you could have met it right? Yeah. And I just think they just go out of order. And I think hopefully, these episodes help people kind of get their game plan first foreshores in the right way for this in once again, making the biggest decision of your career.
Rob Montgomery 26:12
Yeah, yeah, absolutely. That's great advice. And I think we can wrap it up with that, Paul. And thanks, as always, for listening folks, and hopefully, got some good information here and some things to think about. And when you're ready to look for a practice, you're going to do it all the right ways. Yeah. And find a practice that you like and be a successful practice, owner. And everyone, thanks for listening. If you'd like the podcast today, please go on Apple podcasts or Google Play or wherever you listen to us and give us a good review, please, and until the next time. Thanks, Paul. Awesome, Rob.
Thanks for listening to another great podcast with The Dental Amigos. And don't forget to tune in next time to have the dental business demystified. If you're looking for more information about today's podcast, you can find it on thedentalamigos.com If you're looking for Paul, you can find Paul at DrPaulgoodman.com. And if you're looking for Rob You can find him at yourdentallawyer.com This podcast has been sponsored by Orange Line Media Group. Helping dentists and other professionals create content people love find out how we can help you take your business to the next level at www.OrangeLinemg.com. Till next time
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