- A Buyer's Guide to Practice Site Inspections
While almost all buyers will visit a practice before making an offer, there is very little guidance out there on how best to spend your limited time at a site visit.
Buyers are usually only allocated a limited time to visit the practice after hours (so as to not alert the staff and patients or disturb the daily operations of the practice). All too often, buyers waste this short time wanting to discuss financials and ask questions that they could easily ask and get clarity on via emails with the broker or vendor (if there is no broker). Any time that the buyer has on site needs to be used wisely and should be seen as an opportunity for accessing information that is unavailable elsewhere.
How should potential buyers best spend their time when visiting a practice they are interested in?
From the outside of the practice buyers should pay particular attention to:
1. Exposure to both pedestrian and car traffic
Good exposure to pedestrian and car traffic should be looked at as free advertising. It is difficult to get a sense of the exposure from a description or a Google street view. A buyer shouldn’t just look at what is there now – they should look for exposure opportunities that are missed, like signage that is poor, old, dull, dark or missing. Fixing these should be an easy win for the new owner post sale.
2. Neighbouring businesses
There is a degree of cross pollination that occurs in retail businesses, where busy businesses attract foot traffic to the surrounding businesses. A buyer should look at what businesses surround the practice that they’re looking at … do they look busy? What kind of clientele would they attract?
Inside the practice, buyers should pay particular attention to:
3. Appointment book
There is a lot of information that a buyer can gather about a practice from a quick look at the appointment book and this should only be available on site (sending pages of the appointment book is not usually done, because of the difficulty in doing so without including patient names). Buyers will have a very limited time to spend with this and need to be efficient with their analysis. The main things that they should be looking at are:
a. How many patients are the dentists seeing per day? If you are buying the practice to work in yourself, can you replicate the pace of the vendor? A high volume of patients with modest revenue can suggest poor communication skills and/or underdiagnosis.
b. Do the clinical hours match what is being advertised? Sometimes, after-hours services will be advertised on the door and website that are not performed in the practice.
c. Look into the future of the appointment book. Are there appointments six months out? Are they rebooking patients as they leave the practice, or are they just sending “reminders” two weeks out? Or does it “just fill up on the day”? Implementing strong reappointment procedures in a practice that doesn’t have this can be a huge win for the practice.
4. Design, equipment and fit-out
The practice doesn’t need to be perfect when you take it over, but you need to know if its workable on day one and if there is scope to make it into what you need. A site visit is the only way to properly gauge the dimensions, flow and how well maintained the practice is.
Viewing a practice isn’t like looking at a second-hand car… The transaction involves the vendor handing over his patients, staff and project that he has been working on for many years. There is an emotional connection that they have to the practice and they want to know that they will be selling to someone they feel comfortable with.
If a broker is showing you through instead of the vendor – that doesn’t mean that you get a free pass to behave how you like. The vendor will usually ask the broker for their impressions of the buyers.
As such, there is an etiquette that a buyer should keep to when viewing a practice:
- Act professionally. Whoever is showing the practice to you will be making judgements on how serious/compatible you are by the way that you behave at the viewing. Don’t turn up late, straight from the beach or unprepared.
- Respect confidentiality. Don’t look at patient records or ask for reports with patients’ names in them (like printouts of pages of appointment books). Don’t look through drawers without permission. Ask before you take photos or to print reports.
- Respect the vendor’s feelings. Don’t criticise or point out things you don’t like in front of the vendor. It will almost certainly not help you in the negotiations. It will just hurt their feelings. Try to find things to compliment if possible.
A buyer wanting to assess a business for sale will naturally spend a lot of time looking at the prospectus/information memorandum, financials, internet searches and software reports. Their accountants and financiers will do the same when giving their advice. While looking at a practice like this from afar is no doubt important, what is often underappreciated by buyers is the amount of information about the business and its potential that is “off the page” and needs to be seen to be appreciated. Hopefully the above points will assist buyers to realise the depth of understanding a site visit can give them that is unavailable from afar.
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