There are several reasons why you might consider buying an existing dental practice.
Obvious ones include you wish to expand your existing dental business, you wish to move from being employed by a dental practice to owning your own, and a dental practice may come on the market for an asking price that is just too good to let pass.
In the vast majority of cases, assuming you have the correct financial and legal advice, the purchase of an existing dental practice should proceed without any major hurdles or setbacks.
However, it is an unfortunate fact that some do hit the buffers, and in some cases costs the buyer no end of wasted time and energy, and in the worst cases, a financial loss.
As for specifics regarding how a dental practice purchase can go wrong, we have researched this and found that seven hidden legal perils seem to cause the most difficulty.
If you read on you will find what those seven hidden legal perils of buying a dental practice are.
Hidden Peril #1 – Incorrect Zoning
You should be aware that when a dental practice is within what was previously a residential property, it will be subject to zoning rules.
This stipulates rules relating to residential properties being used for commercial purposes, such as building size, parking, and how many dental practices are allowed to exist within a specific zone.
Ensure the dental practice you are considering meets all zoning regulations.
Hidden Peril #2 – Misrepresentation Of Income
One of the biggest concerns when buying any business is that the income is misrepresented.
This can be done in many ways apart from simply inflating the total income figure. It can be done by overstating how many patients the dental practice has and what the practice charges for the treatments it performs.
Be especially vigilant if the seller owns more than one practice as they could transfer income between them to make the one you are buying seem more profitable.
Hidden Peril #3 – Transfer Of Unknown Employment Liabilities
Ensure you have full details of all the staff who are employed by the dental practice and be especially keen to check if the dental practice employs any agency staff.
The contracts they all have are with the dental practice and thus become your liability when you purchase it, so you want to be aware of them all.
Hidden Peril #4 – Seller Unscrupulously Takes Dental Equipment
Do not assume that anyone you are purchasing a dental practice from is as honest as you. An example of this is when a dental practice is purchased but the seller removes all the dental equipment before the final transfer.
This can mean an additional cost of tens of thousands of dollars so make sure your contract clearly states whether or not the equipment is included in the purchase.
Hidden Peril #5 – Fraudulent Health Fund Manipulation
Without going into specific details about how, we must make you aware that there are ways in which the seller of a dental practice can manipulate health fund rebates to maximise the amount they receive for each patient.
The problem occurs when you treat those same patients and claim the correct amount, it can massively reduce the income your dental practice receives due to significantly lower rebates.
Hidden Peril #6 – Fabricated Expenses And Costs
We have mentioned already a couple of ways in which income can be misrepresented, but just as big a concern can be false expenses and cost figures.
Given that these will impact the dental practice’s profitability, you must check the claims the buyer makes about the costs and expenses the dental practice incurs.
Hidden Peril #7 – Excessive Outstanding Treatments
The final thing to check is how many outstanding treatments the practice has.
If the buyer has already taken payment for treatments, especially those which incur a significant fee, it can mean you are obliged to carry out those treatments, possibly incurring additional costs, but receiving no income for them.
