Hey guys! This is Justin Goodbread, CERTIFIED FINANCIAL PLANNER™ with Heritage Investors,
bringing you this Client Question of the Week. This question comes from Scott. Scott says,
"So Justin, I saw your video talking to dentists, and I read your blog." By the way, planningisfun
- sweet blog! "You are providing good content for us young dentists. I am interested in
buying my second dental practice," (I like this guy) "as an investment. What steps should
I take?" You know, Scott, this tells me a lot in your question. So I'm gonna make some
assumptions, but you're hitting one of the areas which I love - business planning. Business
is typically one of the largest investments an individual, especially an entrepreneur,
has. And it's a shame that many planners, or wealth managers, don't know how to advise
on business. So, you're asking the question of what steps should you take to buy your
second dental practice. You know, my assumption is this. I'm assuming that you're currently
operating a thriving dental office. I'm assuming you do not need additional income, that your
current practice is providing you the income you need so that you can care for your family.
I'm also assuming that you love and understand business. If you didn't, you wouldn't be looking
at purchasing a second one. With those assumptions, here are four steps that I would consider.
Step NUMBER ONE - Make sure your financial house is in order. You've gotta make sure
at this point that your unsecured debt is gone. You've eliminated it. You're not on
credit card debt. Your cars and notes are pretty much paid for. You've gotta make sure
you've got enough cash in the bank. You know, there's a lot of matrices for that. I have
my personal philosophy on that, but make sure you have enough cash in the bank. Number three
- Make sure your current business is in a position where you can duplicate it. If you're
gonna buy a second office, you wanna take the successes you've had in your current practice
and move it to the second one. You've also got to make sure your current business is
yielding the results you need, that you've reached maturity and that you're not in your
infancy growing in your business. Once you have your financial house in order, go to
NUMBER TWO - Have your team in place. By your team, you're looking for a good CPA, Certified
Public Accountant, a good attorney, typically a business and/or tax attorney. Sometimes
those are one and the same. Number three, you need a good CFP®, CERTIFIED FINANCIAL
PLANNER™. You have your insurance agent involved. When you put your team in place,
you want to make sure you're designating one person as your head coach. You need one player
that can manage all your team members. Think of a football coach. He has a quarterback
coach, a running back coach, etc, but you've got that head coach which works with individual
coaches to make sure the team as a whole moves in the right direction. That's what you need
to have as part number two. Get your financial team in place. NUMBER THREE - Location. Location.
Location. If you're buying a dental practice as an investment, you want to make sure that
dental practice is fit for an investment and not as a traditional bread and butter dental
practice. You're typically going to have an associate in this practice, and you want to
make sure that the market can derive enough content or enough patient flow to that new
associate. So, location, location, location. NUMBER FOUR comes to Negotiation. When you're
buying a dental practice, you can make or break the success of that practice on the
purchase. You want to negotiate favorable terms as far as the purchase agreement. You
want to have good lending in place. Make sure the interest and terms are flexible for you.
You want to have a good associate agreement in place for that associate you're bringing
on. The list goes on and on and on and on. Point number four, make sure that you've negotiated,
that you've put your financial house in order for that fourth point. Look, as a dentist,
you have the opportunity I don't have and many other people. You have a captive niche
that only you can invest in, and that is a dental practice. It's an unbelievable investment
that traditionally has a high cap rate, and it's something that I advise many dentists
to consider when they're ready for it. Hope that answers your question, Scott. This is