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But the Practice for Merger is Over-Priced!

Following are some comments made by a dentist ("Dr. B") who was considering buying a practice and merging it into his own practice, until his financial advisor told him the practice was overpriced and he should not buy it. There are some interesting points for consideration if your financial advisor has told you the same thing about a practice you may be considering acquiring. Let's see if Dr. B's comments make sense to you.

Dr. B said “My financial advisor just called me. He looked over the proforma for this practice and he has assured me that, no matter what the financial advantages are to me and the millions of dollars I could make by buying and merging this practice, the practice is overpriced and I should not buy it.”

“Oh yes," Dr. B said, " I understand that by merging a practice, I can look forward to a four to five hundred percent first year return on my actual dollar investment, but my financial advisor told me that practice is overpriced, so I’m better off not getting a four or five hundred percent return on my investment!”

Dr. B went on to say “I understand that buying a practice is not an expense, it is an investment. I understand that my own practice will increase in value by at least the same amount of money as the price I paid for this practice. I also know that when I sell my practice it will be worth a lot more money as a result of buying this practice and merging it, but my financial advisor told me the practice is overpriced!”

“I know if I don’t buy this practice then someone else will, and that doctor will move into my market and compete with me. I'm aware that this buyer might be far more aggressive than the selling doctor and could cut into the existing productivity of my current practice. I could even lose tens or even hundreds of thousands of dollars over the next twenty or thirty years to that new doctor as a result, but I’m not going to buy and merge that practice and prevent that from happening to me because my financial advisor says that practice is overpriced! Besides that, my financial advisor has assured me that competition is good for business.”

Then Dr. B added, “I know that my income can increase by tens and even hundreds of thousands of dollars each year by buying this practice, but my financial advisor has assured me that practice is overpriced so I’m better off without this additional income! I know that this can result in millions of dollars in additional income over my lifetime, but my financial advisor has told me that practice is overpriced, so what’s the big deal about not making an extra few million dollars over my lifetime!”

Dr. B then admitted, “I know that the additional production could allow me to add an associate to my practice. Sure, I’d like to take a vacation and have the office producing income for me while I’m gone year after year. It would be great to take longer vacations too, but I’m not going to do it because my financial advisor says that practice is overpriced! Besides that, I might not like long vacations.”

Dr. B then said “Of course I could use the additional patients! Who couldn’t! I know they could refer other people to my practice and it could grow like crazy. I know buying this practice would give me a greater share of the local market and provide me with future security, but my financial advisor has told me that the practice is overpriced! Who needs financial security anyhow!”

“Would I have my financial advisor sell my practice?" said Dr. B, "Heck no, he wouldn’t be able to sell it for what it’s worth! He would probably tell some young buyer that my practice isn’t worth what I want to sell it for. No, I’m not that foolish, I would never consider him to advise me on selling, he is an expert on buying, not selling!”

Financial advisors don’t sell dental practices; they may be "involved" in a sale from time to time, but they have very limited experience in this area. A dentist knows much more about the value of a practice than a numbers cruncher. After reviewing a proforma and looking at tax returns, it doesn’t take a rocket scientist to understand all the advantages to buying and merging a dental practice.

There are some doctors and advisors who worry more about how much the seller benefits from the sale, and they lose sight of the immediate and long term benefits for the purchaser. Doctors have turned down buying a practice because their advisors told them it was overpriced by as little as ten or twenty thousand dollars, and they lost millions of dollars of income they could have made over the next twenty to thirty years of practice.

Advisors advise, but doctors should make decisions, especially when it is the doctor who is ultimately affected by that decision. Think about it, it's time to call AFTCO at 800-232-3826 or visit our website at www.aftco.net.

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