It's important to get an expert economic projection. This is probably one of the most overlooked steps in the buying process, which is disturbing because it is also one of the most important.

It's one thing to examine the documentary evidence to get a sense of how a practice has performed in the past. But that's not necessarily a reasonable estimation of how it will perform in the future. To get that, you need to have an expert perform a comprehensive economic projection – one that takes into account the unique variables of your transition situation.

This is especially true in cases where you have a young dentist taking over from an older, experienced doctor. The new dentist can't be expected to match the exiting doctor's clinical speed, even with a fully appointed schedule, and that difference in revenue production needs to be factored in.

With new partnerships you also need a reliable forecast of how revenue, expenses and profits will be allocated and distributed among the owners. In my opinion, no transition arrangement is complete without an economic projection that takes you at least to the end of the buyer's first year of ownership.

By the way, banks love to have this kind of information when they are considering financing options. It gives them some real numbers to work with, and the fact that you commissioned the report in the first place demonstrates that you have sound business sense.

A transaction as complex as buying a dental practice is going to have a lot of moving parts, and the goal is always to address as many of the "unknowns" as you can. Getting an expert projection is a great way to account for one of the biggest variables. For the smart buyer, it is not merely a good idea, it is essential.


Commenter's Profile Image Taylor
July 24th, 2013
And where would one get one of these projections? I assume it would have to be someone local to give the best local economic projection? Thanks!
Commenter's Profile Image Imtiaz Manji
July 24th, 2013
Thanks for the question, Taylor. You can get an economic projection from a transitions consultant (who is always a great ally to have to help you navigate all the complexities of a purchase) or from a CPA with transitions experience. This person don't necessarily have to be local, as they can get information on economic conditions in the area from your local Chamber of Commerce.
Commenter's Profile Image Tom Cooper
July 24th, 2013
This is the only way that we do our work. If the proper financial projections aren't done, there is no way for a professional to make a sound business purchase decision.
Commenter's Profile Image Leesa Miyasato DDS
July 25th, 2013
Would you be able to recommend a transitions consultant? Or several?
Commenter's Profile Image Russ Russell
July 26th, 2013
Imtiaz, it is good to see your advice here! I have been transitioning practices for three years now and want to let you know that my visits to Scottsdale and the regional seminars provided me with a base to build on in this career. Thanks and I cannot agree with you more regarding the importance of a relationship with a "good" broker that will provide income and economic projections. Hope to cross paths soon.