02 Oct Adjust your Sights… Not your Goals!
Not everyone can purchase a $1,000,000 practice! We occasionally encounter a young and relatively inexperienced doctor who would like to purchase an extraordinarily large practice! Obviously such young doctors are quite energetic and exude with an abundance of self-confidence. These are indeed admirable qualities and it is likely that such a doctor is capable of handling a large practice… but is the ability to handle the size and the desire to purchase really all that is needed to be able to acquire a $1,000,000 practice? Of course not!
The acquisition of a large practice obviously requires the ability to secure a large amount of financing. And unfortunately, not all of us were born with a “silver spoon” in our mouths. Thus we must face the facts! While lenders have loosened up through the years and sellers are becoming increasingly more receptive to financing larger portions of the purchase price, it is still quite difficult to obtain large amounts of financing for relatively inexperienced young doctors. Most dentists who do not currently own a practice or have not already owned a practice simply can’t obtain the financing necessary to acquire a $1,000,000 practice.
So, should the young, inexperienced buyer who desires to own a $1,000,000 practice forget about his or her practice dreams and goals? Definitely not! But, the ownership of a $1,000,000 practice may require that the young doctor adjust his or her sights just a bit!
A dental career typically lasts about 35 to 40 years. The normal cycle is for the first 10 or so years to be spent finding your way and growing your practice. The middle 20 to 25 years are your income producing years (or as we call it, the “Maturity” stage of your career cycle). You will earn 90% to 95% of your lifetime income in this Maturity stage. And finally, the remaining 5 to 10 years of the cycle is when you will gradually decline into your retirement years. The time spans may vary from doctor to doctor but these three distinct cycles of Growth, Maturity and Decline are a part of every practitioner’s career path.
The single key to early success, great wealth and an early retirement opportunity is to spend less time in the Growth and Decline stages and more time in the Maturity stage of your career cycle. Practitioners who desire to acquire a $1,000,000 practice certainly recognize this point. They want to reach the Maturity stage overnight. There is nothing wrong with this goal, but when faced with the reality of not being able to obtain the funds for the acquisition of a $1,000,000 practice, a decision must be made. This is the time when a well thought out career choice is critical.
This is the time to be prudent and wise. Understand this one single point. The reason that so many doctors spend as much as 10 years in the Growth stage is because they elected to build a practice from scratch. It takes time to build a practice regardless of how good you are. You can obtain equipment, you can obtain a great facility and you can even obtain a fantastic staff BUT no matter how good you are you can’t possibly accumulate the quality patient base without it taking time. Therefore, if your goal is to have a million dollar practice in the shortest time possible, starting a practice from scratch is absolutely the worst mistake you can make!
You just need to “adjust your sights… not your goals!” Acquire a practice you can afford. Not just any practice, but a quality practice with internal growth potential and in the location you desire to live and work. The size of the practice should not be the most important factor. The net cash flow and growth potential are much more important at this stage. You now can use your practice building talents to build on this practice base.
For example, if you think you have what it takes to build a practice from scratch then you already know that you will gross around $150,000 the first year. Is it not better to add this $150,000 to a practice that is already grossing $350,000? Do you not see you would be half way to your $1,000,000 dream practice in just 12 months? If your practice from scratch would be producing $300,000 by the end of the second year, wouldn’t your acquired practice now be producing $650,000? Get the picture? You could never overcome the head start a practice acquisition provides… no matter what you do!
But, here is the real kicker! Once you are a practice owner, you are now in the enviable position of becoming a practice merger candidate. If you now acquire another practice grossing $350,000 and merged it into your existing $650,000 practice, you now have your $1,000,000 dream practice in just 2 years! You also experienced a great net income from day one (it’s a virtual guarantee you will not do this in a practice start-up situation) and you only incurred debt associated with $700,000 of your $1,000,000 practice!