Wes Read walks through financial due diligence when buying a dental or medical practice. Start the process right after a letter of intent, hire a dental-specific CPA and lawyer, then verify collections against bank statements and tax returns, review corporate taxes, check labor costs, and evaluate facility leases.
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Welcome back, associates. Hopefully you've just wrapped up our course on profitability and asking price review, presented.
By my colleague Wes Reed.
An important prerequisite is an important prerequisite.
For what you and I are going.
To chat about today, which is the next step in the buying process, something we refer to as due diligence. Due diligence is comprised of three three distinct but equally important parts which we define as financial due diligence, clinical due.
Diligence, and legal due diligence.
And today you and I are going to focus our time on financial due diligence.
Financial due diligence is an important aspect.
Of the buying process and one that should be handled by a CPA that has direct experience in the dental or medical space that you're in.
Let's first talk about when you should enter the financial due diligence stage. As a new buyer, you're going to want to start due diligence very soon after the seller has accepted your letter.
Of intent to purchase their practice.
And earlier I mentioned there are three forms of due diligence, from financial to clinical to legal. And all three should virtually be started.
Simultaneously so that each party can work.
Together with the other as they uncover.
And dissect the information of the practice.
At practice CFO over the years, what.
I see way too often is that.
New practice buyers come to me or my colleagues after they've already submitted the letter of intent. And while I just mentioned that due.
Diligence starts after the letter of intent.
There is a lot of work that needs to go into the initial analysis of the practice so you can make.
An informed and educated letter of intent submission. And with that being said, I urge all of you to find a dental specific CPA and a dental specific lawyer.
Before you submit an LOI or discuss price with the seller.
Okay, so let's go over the key.
Components of financial due diligence and then we'll go into a bit more detail around each.
Step one is to verify collections by.
Reviewing bank statements and comparing those bank.
Statements to production reports and tax returns. Step two is to verify corporate tax returns. And step three is to verify labor.
Cost, which is one of your biggest and most important overhead categories as a dentist.
And step four is facility costs.
And we're going to review the lease agreement and all of the lease agreement amendments so that we can put a.
Clear picture into what your future facility.
Costs are going to look like.
Step five, we're going to verify and look at your production reports of the seller. And then step six, we're going to review the impact, if any, that Delta Premier will have on the practice that you're purchasing. So up next, let's take a deeper dive into how we are going to go about verifying collections.
