Dental Associate Buying Out Older Dentist

I have a ‘hypothetical’ question on behalf of an associate friend of mine. In his situation, the owner is ready (sort of) to sell the entire practice, with the condition that he can still be some part of it. Basically, he doesn’t have a golf course or anything else to retire to due to his disability, but realizes that it is time to sell the practice.

Then he should sell & get out of the picture. Would you buy a house & let the seller “hang out” from time to time? Well, maybe some would…..

The associate does NOT want to buy in. He only wants to buy OUT. He is perfectly happy to have the owner come into the practice as much as he wants to. He is a great asset in talking to patients, motivating the staff, and for general advice.

Buyer can always consult with the seller whenever they need to, make it on an as needed basis, DON’T put anything into a contract giving the seller the RIGHT to “hang out”.

There is vast room for improvement that the associate believes can turn this classic car into a finely tuned machine.

That’ll be easier to do without the seller “hanging out” telling buyer what they disagree with & potentially sabotaging any planned changes…..

This certain associate wants some opinions. When is it a good deal to buy a very large practice?

When it’s a good deal AND the buyer can manage it.

Does it make more sense to start small and get big in a few years, or to just buy big?

Depends

More importantly, how would you structure a deal to keep the owner at the practice?

I wouldn’t, in my opinion that’s simply asking for trouble….

What are the advantages/tax implications to making the purchase price significantly less and keeping the owner on salary as a “consultant” or something?

Man, keep it simple, let your CPA advise you on price allocation that benefits you, don’t worry about that now.

This post first appeared on DentalTown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com
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